On March 6, 2019, a new bipartisan Entrepreneurship Caucus was established in the U.S. Senate. The new Caucus is co-chaired by Sens. Amy Klobuchar (D-Minn.) and Tim Scott (R-S.C.), and also includes 14 other senators.
On Sept. 24 the Caucus, in collaboration with the Center for American Entrepreneurship, convened a special roundtable discussion regarding the issues, challenges, and barriers that confront women entrepreneurs in America. Women founders from 22 states traveled to Washington, eager to share their experiences as entrepreneurs. Sens. Klobuchar and Scott co-hosted the discussion, with Wendy Guillies, president and CEO of the Ewing Marion Kauffman Foundation, moderating.
The roundtable showcased the remarkable talent and innovative capacity of America’s women entrepreneurs – and also their unique needs and vulnerabilities. In particular, the discussion revealed the critical importance to women entrepreneurs of four “mobility” issues: health care, childcare, student debt and retirement security.
The importance of entrepreneurship among women – and the unique challenges and barriers they confront – are best considered against the backdrop of the importance of entrepreneurship in general. Recent research has demonstrated that new businesses – “startups” – are disproportionately responsible for the innovations that drive economic growth, and account for virtually all net new job creation. Alarmingly, recent research has also demonstrated that rates of entrepreneurship in America have fallen near a 40-year low, and that this decline is occurring in all 50 states, in all but a handful of 360 metro areas examined, and across a broad range of industry sectors.
Declining rates of entrepreneurship is of particular concern given that the U.S. economy has not grown at 3 percent or better year-over year since 2005 – 15 years ago – and has expanded an at average annual rate of just 2.2 percent since 2009.
At present, entrepreneurship in America is overwhelmingly white and male, with women founders representing less than a fifth of new startups launched in recent years. Research has shown that women entrepreneurs are scrutinized differently by investors and receive a disproportionately small share of total venture capital.
And yet, some research suggests that in recent years women may be launching new businesses at higher rates than men and that, once funded, women entrepreneurs perform at least as well as their male counterparts.
Thriving entrepreneurship is the essential pathway back to the more robust and inclusive economy the American people need and deserve – and reversing the four-decade decline in new business formation rates requires closing the gap between male and female entrepreneurship.
During the Senate Entrepreneurship Caucus roundtable, a number of issues surfaced that are important to all entrepreneurs: access to capital, finding qualified talent, regulatory burden, and a tax system that disadvantages new businesses. But it was with regard to mobility issues that the roundtable broke new and important ground:
Health Care: According to recent data from the Kaiser Family Foundation, 156 million Americans rely on employer-sponsored health insurance. Our roundtable participants explained that employer-provided health care can be a major barrier to entrepreneurship, particularly for women, since leaving a corporate job to launch a new business means walking away from health care. As the nation continues to debate health care, the features of greatest importance to entrepreneurs, according to our roundtable participants, are affordability and “portability” – access to quality health care from sources other than a corporate employer.
Child Care: Unlike many developed countries where childcare and early education are heavily subsidized, the U.S. has no national childcare policy. In 2017, American families spent an average of $9,000 to $9,600 annually for one child’s day care, up 7.5 percent from the previous year. Childcare is more expensive than in-state college tuition in 28 states, and all 50 states and the District of Columbia fail the government’s own definition of affordability.
Our roundtable participants made clear that childcare is a major obstacle to women becoming entrepreneurs. Fortunately, the issue has generated intense debate among Democratic presidential candidates, with ideas ranging from universal pre-K, support for the Child Care for Working Families Act, to government-funded childcare and early education. According to our roundtable participants, meaningful childcare should be affordable, portable and available from the day a new baby comes home.
Student Debt: According to the Federal Reserve, total outstanding student loan debt reached $1.6 trillion as of September, more than tripling from $480 billion in 2006. A particularly dangerous effect of record student debt is its depressive impact on entrepreneurship. An analysis released last May found that “student debt is negatively related to the propensity to start a firm, particularly larger and more successful ventures.” Indeed, the share of Americans under 30 who own a business has plunged to a 25-year low, and according to a 2016 Small Business Administration report, millennials are the least entrepreneurial generation in recent history. Our roundtable participants pointed out that record student debt is not only a barrier to would-be entrepreneurs, but to startups’ ability to attract the talented employees they need.
Retirement Savings: Like health care, most Americas plan for retirement by way of employer-provided savings plans. But many small businesses – and most startups, according to our roundtable participants – can’t afford to provide standard 401(k) retirement plans for their employees. Fortunately, new bipartisan legislation – the Secure Act – would modernize retirement security to enable new and small businesses to band together to provide multiple-employer 401(k)-like retirement savings products to their employees. The bill passed the House overwhelmingly in May, but has been held up in the Senate. On Oct. 15, Sen. Tim Scott (R-S.C.) – co-chair of the Senate Entrepreneurship Caucus – along with Republican Sens. Rob Portman (Ohio), Thom Tillis (N.C.), Joni Ernst (Iowa), Martha McSally (Ariz.), Susan Collins (Maine) and Cory Gardner (Colo.) sent an open letter to Senate Majority Leader Mitch McConnell (R-Ky.) urging passage of the Secure Act this year.
The 22 remarkable women entrepreneurs who traveled to Washington for the Sept. 24 Women’s Entrepreneurship Roundtable would certainly agree. Addressing health care, childcare, student debt, and retirement security would promote much higher rates of entrepreneurship among women and, in turn, promote faster economic growth and job creation.
Indeed, a recent analysis by Boston Consulting Group found that if women entrepreneurs received more support, financially and otherwise, global economic output could be expanded by up to $5 trillion.