Behind a surge in firms owned by women

The average working woman in the United States makes about 72 cents for every dollar made by her male colleagues.

That's up from about 60 cents two decades ago. The remaining gap, some analysts suspect, may be one reason women are launching their own businesses in grand style. Between 1997 and 2002, the number of women-owned private firms increased to 6.2 million, a gain of 14 percent. This is twice the growth rate for all firms.

But when asked, the new female proprietors or owners don't complain about the salary in their former corporate jobs, says Sharon Hadary, executive director of the Center for Women's Business Research (CWBR) in Washington.

"They see the excitement of an entrepreneurial idea," she says. And they note that other women have started successful businesses. They have role models.

These women-owned firms employ 9.2 million people, a CWBR study finds.

To some extent, the rush into starting their own firms is a catch-up phenomenon. In 1996, 7.1 percent of females in the labor force were self-employed, compared with 11.9 percent for males.

Many new women entrepreneurs do decry a lack of flexibility in their old corporate roles. They hope that with their own businesses, they can take a morning off to go to a child's performance in a school play, and finish work later.

Also, the new bosses welcome the prospect of being in charge of their firms' direction. In their former companies, they often saw themselves as not being part of the leadership.

Dr. Hadary, a trained psychologist, doesn't see much "conscious discrimination" by male executives against women in big companies. On the contrary, most corporations make an effort to level the playing field for women and minorities through their personnel policies – as the law requires.

Nonetheless, she says, there is a natural tendency for people to prefer to do business with those who resemble themselves – white men with white men, and, for that matter, women with women.

"The old-boy network" remains in place, says Judith Hellerstein, an economist at the University of Maryland, College Park.

She's one of four authors of a soon-to-be published academic study indicating that as much as half of the 32 percent female-male wage gap in 1990 could be attributable to gender discrimination. The rest is accounted for by the segregation of women into lower-paying occupations, industries, firms, and occupations within such establishments.

Another expert, Francine Blau at Cornell University in Ithaca, N.Y., estimates 12 to 20 percentage points of the wage gap could be due to gender discrimination. She finds the gender gap did not close much in the 1990s.

"Progress was fitful," she says.

Often by their own choice, women congregate in jobs in retailing, nursing, teaching, and white-collar work, which do not always pay so handsomely. Some of these jobs may permit them to devote more attention to their families.

Ms. Hellerstein expects little change in the gender gap when an analysis of 2000 census data is finished in about two years.

Another study looks at female executives at 1,500 American firms. In the 1992-97 period, the 2.4 percent of the top five women executives earned about 45 percent less than their male colleagues, or a bit less than $900,000 compared with $1.3 million.

About 75 percent of this gap can be explained by the fact that women executives manage smaller companies and are less likely to be CEOs, chairs, or presidents, the study, led by Marianne Bertrand of the University of Chicago, finds. If the relative youth and lower seniority of the female bosses is also taken into account, the unexplained gap is reduced to less than 5 percent.

So these women get "fairly equal treatment in terms of compensation."

During his last year in office, President Clinton endorsed a Paycheck Fairness Act and Democratic candidate Al Gore talked about the bill in his presidential campaign.

"It was a nice political bone to women's groups," says Professor Hallerstein. Both men knew such "comparable worth" legislation had no chance of emerging in Congress.

Comparable-worth laws aim at eliminating discrimination in pay against women and minorities. They may require an evaluation of the level of skills, education, responsibilities, difficulties, and other factors involved in different jobs and then demand equal pay for comparable jobs, whether female- or male-dominated.

Five states have pay-equity programs for their employees. The Canadian province of Ontario passed a pay-equity act in 1987 for firms with more than 10 employees. But the complexity of the issue meant most small firms did not comply. Any positive boost to wages of women in "female" jobs were "very modest," notes a study by two Canadian economists, Michael Baker and Nicole Fortin. And wage growth slowed for women in "male" jobs and for men in "female" jobs.

That would not surprise A. Gary Shilling, a consultant on economics in Springfield, N.J. If women are paid more than they are worth because of equal-pay laws, fewer husbands will earn enough to support a wife at home and their children, he argues.

He expects the gender wage gap to not narrow much, and perhaps even widen.