Welcome to Middle Market Banking Diversity Insights. I’m Judith Goldkrand, National Women’s Segment Leader of Commercial Banking. Today I have the privilege of speaking with Sarah House, Wells Fargo Senior Economist and co-author of a recent report She Means Business. Sarah and her co-authors explored the implications of the pandemic on women-owned businesses and on women in the labor force. I’m excited to have the opportunity to speak with Sarah today. Sarah, I can’t wait to hear some of the insights and things that you learned. Would you mind sharing?
SARAH HOUSE: Sure, thanks so much for having me to discuss this important topic. So we did take a look at the impact of Covid on women-owned businesses and before getting into our finding I think it’s really important to think about where women-owned businesses were prior to the pandemic. So, prior to Covid, we were actually seeing women-owned businesses grow faster. They were seeing their revenues outstrip those of their male-owned counterparts and they were also hiring at a faster clip as well. So, in other words, they were becoming an increasingly important source of growth in the economy. And then when Covid hit we saw that women-owned businesses, they tended to have to close at a higher frequency or reduce operations and, not surprisingly, given these greater disruptions to business, their revenues took a greater hit and they were more likely to experience financial challenges. And with those financial challenges we saw women-owned businesses were more likely to have to downsize operations including cut employment as well as we saw bigger impact on their personal finances that are some- some impacts um, just beyond their- their own business as well.
JUDITH: Interesting. Why do you think that’s so?
SARAH: Well, I think there are really two primary reasons that we’ve seen this disproportionate impact to women-owned businesses. So, one is it tends to relate to the nature of the crisis. So, ultimately this is a public health crisis. We have had to practice social distancing and that has hurt the service sector more than it has the goods producing side of the economy; so areas like manufacturing or- or construction. Women tend to own a higher– a relatively higher share of businesses in the service sector, so they- they still don’t own as many as- as men but their ownership is huge towards areas like um, education or healthcare or uh restaurants and so, the fact that those industries took a bigger hit because of- of the need for social distancing, that led to a- a disproportionate impact on those businesses. But we also saw structural issues be exacerbated by the crisis. So, women-owned businesses, they tend to start with less capital. When they use credit they tend to use higher- higher costs and so, they’re more financially vulnerable when we get into difficult phases of- of the business cycle. So really, Covid just exacerbated some of the existing structural issues that women-owned businesses have in- in terms of- of credit and- and finances.
JUDITH: That sounds like a huge impact. Can you talk a little bit about what the overall economic impact is of each of these individual uh happenings with the businesses?
SARAH: Right. So I think this is an issue not just for those individual businesses but it’s also an issue for the broader economy. So, we look at our expectations for growth this year so we’re actually expecting some of the strongest growth in roughly a generation but this is largely built on the back of short-term stimulus. If we want to think about how we’re going to continue to grow the economy at a strong pace not just in the immediate term where we’re coming out of this crisis, we have to think about what’s going to raise productivity and a big part of that is- is innovation. So, any time you have structural impediments for any group to their ability to start or grow a business, that hurts potential innovation so you don’t necessarily get the best ideas, the best processes to market and that limits how much the economy can grow over the long term, how much wealth we can create for- for our economy as well and so, that has implications for- for everyone. And so, it’s not just about these individual businesses but I think there’s- there’s a broader productivity and growth story to this as well.
JUDITH: Really interesting. Sarah, this has been fascinating and I know that there’s so much more in the full report. Thank you so much for uh helping us at least to begin to understand what the important implications are of the pandemic on women-owned businesses. I encourage all of you to click on the link that’s below this video to read the full report, She Means Business, and there you can find additional information about economic implications on women-owned businesses but also on women in the labor force. Thank you for joining us and we look forward to hearing from you or seeing you on the next broadcast.