Why the social safety net matters for female entrepreneurs

by Jane Harkness

The idea of hunkering down in your garage and starting a business from nothing may sound romantic, but for every person who made it work against the odds, there are countless others who never had the opportunity to try because of financial constraints.

What if they knew, if they were to take that leap, that there would be a net to catch them should they fall? More specifically, how many would-be female entrepreneurs are held back from starting innovative businesses because they can’t risk losing benefits from a traditional employer?

Kimberly Allmers Dowd, the owner of Brighton Jewelry and Handbags and Bath, Body and Candle in Manahawkin, New Jersey, was eventually able to leave her full time teaching job to run these family businesses because she strategically held on to her position long enough to retain her benefits package. Without doing so, she says her dream of running a small business would never have become a reality.

“Originally, I worked at the shops over the summers. I knew that eventually, this was what I wanted to do full time,” says Allmers Dowd. “I decided to hold on to the teaching job long enough to secure my pension and health insurance. I do pay for some dental coverage now, but if I didn’t have those other benefits carry over from my old teaching job, there was no way I could have run a small business. It would have been impossible.”

For those who simply could not manage non-remote work—it also means giving up benefits and thus secure and dependable access to services that might be essential to quality of life.

In the modern workforce, an increasing number of people are saying goodbye to the 9-5 to go their own way. Currently, about 15 million people in the American workforce qualify as “self employed”: in other words, independent, contract based work from various clients serves as their main source of income. This could refer to anyone from a full-time wedding photographer to someone running a construction business to an artist using a platform like Etsy to sell jewelry.

But while self employment is becoming more and more common, a demographic breakdown reveals that it’s much easier for some than others.

Women are slightly underrepresented within the independent workforce: men make up about 53 percent of self employed workers. While this disparity may not seem too significant, men and women also have differing views on the advantages of self employment. For example, 54 percent of self employed men say that they earn more working independently than they did for their old employers, while only 43 percent of self employed women can say the same. Furthermore, 52 percent of men say that they feel more secure as independent workers, but only 39 percent of women agree with this sentiment.

What could be the cause of this divide?

For starters, self employed women are more likely to work in lower paying fields, such as caregiving and cleaning, but their line of work isn’t the only factor that could affect their earnings and the potential scale of their businesses. Women also tend to have less money saved than men do: the median savings account balance stands at $7,000 for American men and $2,000 for women. Making strategic investments in the early days of a business often means scaling up faster, and if those investments deliver solid returns, that means bigger profits.

Factoring race into the equation reveals that other systemic barriers also present difficulties. Single women of colour hold an average net worth of $5 during the prime working years between 36 to 49, and approximately half of single black and Latina women have zero to negative wealth due to debt. In comparison, white women in this age range have an average net worth of $42,600. Women of colour are also more likely to use their financial resources to help extended family cover their expenses. If a woman is already stretched thin and using her limited funds to give her relatives a helping hand, covering initial business related expenses is going to be harder to justify.

And for women with disabilities or chronic illnesses who branch out on their own, a lack of social safety net might be felt especially acutely. While self-employed remote work can provide a way to bring in income without the physical demands of in-office work—and in many cases is the only option for those who simply could not manage non-remote work—it also means giving up benefits and thus secure and dependable access to services that might be essential to quality of life.

For anyone, the first few years of working independently are typically quite demanding. When starting a business or leaving a full-time job to take on work as an independent contractors, new entrepreneurs often need to dip into their savings to cover startup costs or pay bills before profits start coming in. From smaller investments like setting up a website or running an ad for a product to bigger splurges like traveling to a major conference for networking or paying for a mentorship program, it’s true that self employed people often have to spend money to make money down the road.

Even women with serious business savvy and budgeting skills might end up staying at a 9-5 instead of choosing the self employment route because of their benefits package. In countries like the United States, vital benefits like health insurance are often provided by traditional employers. Women aren’t alone in their concerns over purchasing their own health insurance after leaving their full-time jobs—men certainly feel the burden of this extra expense, too—but for millions of women, giving up their health insurance also means paying extra out of pocket for birth control or other forms of reproductive healthcare.

Encouraging women to be more confident and assertive in pursuit of their professional goals is a step in the right direction, but all of the encouragement in the world means very little when working women can’t justify the financial risks that come along with striking out on their own.

Furthermore, since North American society still places more responsibility on women for child-rearing, a woman who does plan to have children may be hesitant to forego the possibility of paid maternity leave by leaving her employer. Even the most ambitious professional women need time to physically recover after childbirth, but if the woman in question is self employed, taking time off typically means losing income right when she needs it most.

And the obstacles that self employment presents for many women aren’t limited to those rocky early years: approximately 33 percent of self employed workers say that saving for retirement is their biggest challenge, which has already proven to be difficult with salaried employment and benefits. On average, women outlive men, but they also tend to have less saved for retirement—in addition to bringing home smaller paychecks, they are also more likely to take time off work for childcare or eldercare responsibilities, which means that many simply don’t have the ability to save as much as men. Women may opt to work for an employer with robust retirement benefits rather than trying to save with the fluctuating stream of income that often characterizes self employment.

Photos courtesy of Legacy Community Health •

Encouraging women to be more confident and assertive in pursuit of their professional goals is a step in the right direction, but all of the encouragement in the world means very little when working women can’t justify the financial risks that come along with striking out on their own. However, 52 percent of women say that they don’t feel they can reach their full potential while working for another employer, and this statistic rises to 61 percent for women of colour. This could partially explain why black women actually represent the fastest growing group of entrepreneurs in the US. Clearly, there are countless women who want to pursue self-employment, and many of them are forging ahead with their plans despite the additional obstacles.

The solution might lie in a stronger social safety net that provides support for those who wish to work outside of traditional employment. In the United States, policy proposals like universal healthcare and expanded government retirement benefits for seniors are gaining wider appeal because they would genuinely help millions of people improve their quality of life, regardless of their background—but these programs would also disproportionately benefit women, including those who want to work independently without having to rely on financial support from a spouse, or who don’t want to choose between motherhood and self employment.

Several studies have found that expanding access to affordable health care in the US does encourage entrepreneurship. After fifteen states extended health insurance coverage to children of immigrants, the likelihood that they would become entrepreneurs increased by 20 percent. And when the Affordable Care Act made it possible for young people to stay on their parent’s health insurance until turning 26 rather than purchasing their own, researchers from Texas A&M University studying job mobility lock found that there was a corresponding rise in young, single women starting their own businesses.

Allmers Dowd explained that in the world of entrepreneurship, the security provided by these benefits can mean as much as a steady income. “We’re definitely not making a fortune,” she says, “but just having those benefits made it realistic for me to branch out and follow my real passion. It’s a shame that in some ways, it really dictates what you can do with your life.”

In their annual Global Competitiveness Report, The World Economic Forum currently lists the US as the best country to start a business, based on three major factors: the cost and speed of starting a business, entrepreneurs’ attitudes towards risk, and the corporate world’s acceptance of “disruptive” ideas. But, although the organization didn’t specifically account for it, it seems that for many other countries on the list, having a solid social welfare system could also be a major factor in the cultural and economic conditions that make it feasible for the average person to pursue self employment. Germany, the Netherlands, and Nordic countries like Sweden, Denmark, Norway, and Finland all rank in the top ten.

And perhaps it’s no coincidence that when it comes to gender equality, these countries also earn high rankings.


Jane Harkness is a freelance writer based in New Jersey. Her writing has been published on Thought Catalog, Student Universe, Pink Pangea, and more.