DEBATE: Entrepreneurship – the forgotten issue of gender equality

Do you perceive good opportunities to start a business? The proportion of women and men in Sweden today who answer “YES” to this question is about the same. Yet twice as many men as women run businesses. Is the entrepreneurship gap our forgotten gender issue? This is what the Confederation of Swedish Enterprise asks in this debate text.

Sweden is characterized by high employment rates for both women and men. This is a result of our social security and childcare systems, among others. Gender equality in the labor market has been an important issue for a long time and differences in labor market outcomes, such as wages and different types of management positions, have also decreased significantly in the 2000s. Today, we are at the top of both the EU and UN gender equality indices.

Only Slovakia, Malta and Romania have a larger gap in entrepreneurship.

However, the entrepreneurship gap has remained largely unchanged. In the EU, only Slovakia, Malta and Romania have a larger gap in entrepreneurship. The picture does not improve when we look at women entrepreneurs with employees, where we rank second to last among EU countries.

Why do so few women run businesses?

Do women have less ability or less innovative ideas in Sweden in particular? There is no evidence that this is the case. On the contrary, compared to other small European countries, a majority of women in Sweden see good business opportunities. Nearly 8 out of 10 women to be precise, which is on par with Swedish men and well above both women and men in other comparable countries.

Economic and psychological research also finds no major differences between women and men when it comes to entrepreneurial ability. However, there are differences between women and men at group level that may explain why the share of entrepreneurship may be higher among men than women in general. For example, more men than women tend to have higher confidence in their own abilities, less fear of failure and higher risk-taking. However, as these group differences exist in all countries, they cannot explain why the entrepreneurship gap is so large in Sweden.

Women who are fundamentally prepared to expose themselves to the risks of entrepreneurship may refrain because of the policies in place.

The issue is important from a socio-economic perspective. If the entrepreneurship gap is due to direct or indirect obstacles linked to policy, for example, we are missing out on companies and innovations that create jobs and growth in the Swedish economy. In other words, part of the entrepreneurship gap may be due to women who are basically willing to expose themselves to the risks and competition of running a business, but who refrain or lower their ambitions as a result of policies in various areas.

Sectors where many women run businesses

Just over a quarter of entrepreneurs in Sweden are women and the figure is much lower among entrepreneurs with employees, around a fifth. At the same time, there are sectors where women are in the majority. Services, healthcare and education are examples of sectors where more than 50% of entrepreneurs are women. These are sectors where women dominate in terms of educational choices and employment.

Unsurprisingly, entrepreneurship follows the same patterns we see in education and among workers. It is common for both men and women to start and run businesses in sectors where they have prior knowledge and experience. We have been working for a long time to achieve equal opportunities and conditions for women and men in education and employment. But what about women’s entrepreneurship and entrepreneurship in female-dominated sectors?

Examples where opportunities and conditions affect women and men differently

A first insight is that entrepreneurship in female-dominated sectors is not always met with positive cheers. One example is the welfare sector, which has long been the subject of investigation and harsh criticism. After the 2017 Reepalu report, which proposed a profit ceiling in the welfare sector, the number of new businesses dropped drastically and the number of closed businesses increased. The perception of healthcare and education companies is still problematic, which of course has an impact on both the willingness to invest and entrepreneurial decisions in the sector.

With the threat of a profit cap in the welfare sector, the number of new businesses dropped dramatically and the number of closures increased.

A second observation is that it is important to be able to finance your business, especially in the start-up phase. Many people may think that this is done via bank loans, which was also common until the mid-2000s. Today, however, less than 8% of start-ups have bank loans. Tougher regulations and more expensive processes are hampering businesses in general, but especially smaller businesses with few employees and low real capital, which is often the case for businesses in the service sector, where women are mainly active.

A third reflection is that our welfare systems are designed for people who are employed and have a steady flow of income. Several studies have shown that entrepreneurs in particular lack access to social security systems, which increases the risk of being left without support in case of illness, parenthood or unemployment. This is, of course, problematic for all entrepreneurs, men and women, but it hits women harder as it is more common for women to take parental leave or sick leave at some point in their lives. The risk of being an entrepreneur compared to an employee is then automatically higher.

Of course, the issue of entrepreneurship is broader than the examples highlighted here. The point is that we seem to forget an obvious aspect of gender equality when we talk about equal conditions and opportunities for women and men in society. There is no evidence that women are less capable of running a business than men and roughly the same proportion of women and men see good business opportunities. Yet, we seem to let the conditions for running a business differ. It is too costly a mistake for our society, growth and competitiveness to forget about entrepreneurship as a gender equality issue.

Isabelle Galte Schermer, gender equality expert at the Confederation of Swedish Enterprise.

Nikolay Angelov, PhD in economics and quantitative analyst at the Confederation of Swedish Enterprise.