Self-Employment Rises Among Women, Surpassing Pre-Covid Highs

Self-employed women, broadly speaking, felt the full brunt of the Covid downturn at greater numbers than nearly any other group. The rate of self-employed mothers working at least 30 hours a week, for instance, dropped by more than 40% in one month from March to April 2020, according to Federal Reserve data. The rates of self-employed fathers working at least 30 hours a week dropped by 18% in comparison.

That number has reversed, according to new data from the Federal Reserve Bank of Dallas. In the years that followed the initial Covid surge, the number of women and mothers that have chosen the self-employment route has steadily increased, rising faster than rates of men and fathers.

Women now represent nearly 40% of all self-employed individuals, up from 34% in 2016. By August 2022, the number of self-employed women with children surpassed pre-Covid numbers as it sat 8% higher than rates seen in January 2020. These rates jumped even higher among women of color.

“As the rate of self-employment grows for all women, and especially for those of color, their businesses will have an increasingly large impact on the economy,” wrote Emily Ryder Perlmeter, a senior advisor in community development at the Federal Reserve Bank of Dallas.

Rates Fell During Hard Times

A reason that self-employment rates dropped further for women during the Covid recession also highlights holes within the parental safety-net. Childcare proved to be a significant cause of the decline amongst women who had children and were self-employed.

“Child care burdens in the United States fall disproportionately on women, which means that self-employed mothers were more likely than fathers to take time off to focus on at-home schooling,” wrote Perlmeter. “For another, women-owned firms were more likely than those owned by men to be in a financially precarious position prior to the pandemic.”

Women-owned firms without employees had an almost identical chance of operating at a loss as they did operating with a profit – 37% to 39% – in the months leading up to the pandemic. With little room to maneuver and familial demands that fell more on women than men, women-led, self-employed businesses suffered.

Tactics to Overcome Uncertainty

When dealing with issues that have large, societal reasons for existing – like the oft expectation that when stuff goes awry, it’s the mother not the father that will stay home with the kids – you cannot fix it through personal finance solutions. But you can fix your own susceptibility to the burden through personal financial tactics. It’s where honing that focus during times of relative strength (or less concern) can have significant benefits if something unexpected occurs again.

One important strategy is to try and build an emergency fund that covers expenses in case your work slows or you have to take time away for a short period. While let’s hope there’s not another Covid-like experience in our lifetime, you will likely experience shocks to your self-employment, in good economic conditions and bad. These shocks can come in the form of slower business, health concerns or parental duties. But having 3-6 months of monthly pay that you store in an easily accessible business savings account – separate from your personal account – will ensure you do not have to derail your self-employment company at the slightest sign of adversity.

The other tactic: make sure to diversify your clients.

Often, when someone in self-employment struggles, they have only one way to charge or attract clients. They serve one specific sector or only produce one type of product or service. But having multiple types of clients, across different sectors, needing different services or tools will ease this stress.

Outside of a Covid-esque derailment, while one part of the business lags, other parts of the business can be used to make up the shortfall.