Open for Business

By Rachel Vilsack 
December 2010

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Women own one in four businesses in Minnesota, but the number of women-owned firms in the state grew at a surprisingly slow pace in the five years leading up to the recession.

If you follow business trends, you might already know that Minnesota has some of the hardest-working women in the country. The labor force participation rate of women averaged 67.4 percent in 2009—14 percent higher than the national average.[1] Minnesota women don’t just work in businesses, they own them, too. One in four Minnesota businesses is owned by a woman.

Minnesota’s Women Business Owners

According to U.S. Census Bureau estimates, Minnesota had 133,141 women-owned firms in 2007 (see Table 1).[2] Minnesota’s concentration of women-owned firms (26.8 percent) closely mirrored the national average of 28.7 percent in 2007. Minnesota ranked 19th nationwide in the number of women-owned firms in 2007, behind Midwestern states such as Illinois (343,151 firms) and Michigan (248,351 firms).

About 12 percent of women-owned firms in Minnesota have paid employees. In 2007, these firms generated $16.2 million in sales, employed more than 140,000 people, and paid out $3.6 million in payroll. The majority of women-owned firms in Minnesota have no paid employees. Sometimes called non-employer firms, these businesses file Internal Revenue Service tax forms as proprietorships, partnerships or corporations and have receipts of $1,000 or more. The women who own these firms might rely solely on these businesses for their income, or they might work as paid employees for other firms.

The number of women-owned firms in Minnesota grew just 7.5 percent between 2002 and 2007, with growth exclusively in firms with no paid employees (see Table 2). In fact, Minnesota had the third-smallest growth rate of women-owned firms nationally between 2002 and 2007. Only Iowa (3.9 percent) and Nebraska (6 percent) had slower growth rates during that period. Women-owned firms grew by 20.1 percent on average nationally over the five-year period.

The small growth of women-owned firms in Minnesota between 2002 and 2007 is lower than the 14.3 percent growth in women-owned firms between 1997 and 2002. Time and money are often cited for the rise in entrepreneurship among women. Creating a small business or becoming self-employed might be one solution for women seeking an outlet for their creative talents and abilities while maintaining a work-life balance. These are issues that haven’t necessarily diminished since 2002.

So it is not clear why women-owned firms in Minnesota did not expand as fast as the rest of the country or whether the recession was a factor. The preliminary estimates presented here are from the 2007 Survey of Business Owners, which largely preceded the recession of 2007-2009. Unfortunately, we will need to wait until 2012, when the next large-scale Survey of Business Owners is conducted, to determine the long-term effects of the recession on the gender makeup of business owners in Minnesota.

Types of Women-Owned Businesses in Minnesota

Women-owned businesses are found in every industry sector in Minnesota. Figure 1 displays the industry distribution of women-owned firms in Minnesota in 2007. The health care and social assistance sector accounts for the largest number of women-owned firms for both paid employees (2,168 firms) and nonpaid employees (20,542). This sector includes child day care services, one of the largest types of non-employer firms in health care and social assistance.[3] Large numbers of Minnesota women also owned firms in the professional and technical services (20,966), retail trade (19,115) and other services (18,782) sectors. The other services sector includes personal care services, such as hair and nail salons.

Some industry sectors had high concentrations of businesses owned by women in 2007 (see Figure 2). More than half of health care and social assistance firms (53.2 percent) in Minnesota were women-owned, as were 43.3 percent of educational services businesses. More than one-third of Minnesota firms in other services, retail trade, and administrative and support services were owned by women. On the other hand, the concentration of women-owned companies in construction (6.8 percent), management of companies (4.6 percent) and mining (3.2 percent) is small.

Not surprisingly, the types of firms owned by women are in industries most likely to employ women. In 2007, the highest concentration of women in Minnesota were employed in health care and social assistance (79.8 percent), educational services (64.3 percent), other services (56.6 percent) and retail trade (52.2 percent), which had the highest concentrations of women-owned firms (see Table 3). The biggest disparities between ownership and industries where women are employed are in finance and insurance, where women make up 62 percent of total employment in Minnesota but only 14.5 percent of business owners. Likewise, women account for nearly 50 percent of the employment in management of companies, but less than 5 percent of the companies in that sector are owned by women.

More Than Just Ownership

It is important to note the role that women play in corporate leadership positions. In 2009, none of Minnesota’s 17 Fortune 500 companies was led by a woman.[4] All but one of Minnesota’s Fortune 500 firms, however, had at least one woman corporate director. In all, women hold 15 percent of executive officer positions in Minnesota’s 100 largest publicly held companies, and the majority of these positions are human resources executives. The percentage of women executives has declined slightly from 16 percent in 2008.

Conclusion

The role of women in Minnesota’s economy should not be overlooked. They make up a majority of the state workforce and own one in four businesses. It has been widely reported that women fared better than men during the early part of the 2007-2009 recession. Women dominate employment in education and health care services, the two sectors that grew in Minnesota during the recession. Those two sectors are projected to grow the fastest in the state between 2009 and 2019, adding an estimated 120,500 jobs. Not only will women fill many of those jobs, but they will have a hand in creating them. A national report estimates that women-owned small businesses will be responsible for one-third of new employment by 2018, or 5 million jobs.[5]

[1] Bureau of Labor Statistics, Geographic Profile of Employment and Unemployment, 2009.
[2] Every five years the U.S. Census Bureau conducts a Survey of Business Owners to identify the economic and demographic characteristic of U.S. firms and business owners by gender, race and ethnicity. This data series  – available since 1972 as a part of the economic census – includes businesses with paid employees and those with no paid employees that file Internal Revenue Service tax forms as proprietorships, partnerships or corporations and have receipts of $1,000 or more. Business ownership is defined as having 51 percent or more of the stock or equity in the business. The data presented here were released in July 2010 and are preliminary.
[3] Annual non-employer statistics are available from the U.S. Census Bureau. These data summarize non-employers by geography and detailed industry, but not gender. In 2008, 60 percent of non-employer firms in the health care and social assistance industry were in child day care services.
[4]St. Catherine University and the Minnesota Women’s Economic Roundtable, “Women in Leadership: How Minnesota’s Top Public Companies Rank, 2009.”
[5] The Guardian Life Small Business Research Institute, “Women Small Business Owners Will Create 5+ Million New Jobs by 2018, Transforming the Workplace for Millions of Americans,” December 2009.

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