Sam Staler is a free-lance writer and graduate student in economics at Wright State University in Dayton. Ohio. His articles have appeared in the Chicago Tribune. the Houston Post, the Santa Ana Register (CA). The Times of the Americas, and several other papers.
The U.S. economy is faced with one of the most difficult challenges of the century. A dramatic shift in the labor market has occurred during the 1960s, 1970s, and 1980s which significantly affects the direction and composition of the hi-tech, hi-touch economy of the information society. The huge influx of working women over the past two decades has created enormous economic and political pressures, pushing the issue of discrimination to the forefront of political and eco nomic debate once again.
As a group, women are unquestionably discriminated against in the market place. Women often have fewer skills, are more inexperienced, and more likely to leave the labor market than are men. Further, men often preclude their advancement, whether consciously or unconsciously.
Faced with these impediments, what are the most effective means for women to achieve economic success? While many have chosen political solutions, legislated approaches to the problems of discrimination have failed. Laws rarely change fundamental attitudes and prejudices. At the same time, however, a growing number of women are trying a much more effective approach: entrepreneurship.
In a market economy, economic development can only occur through initiative, innovation, and, above all, risk taking. Contrary to popular belief, the market has a long and successful history of taking people of all ethnic and racial groups from “rags to riches.”
The market, however, works in a subtle way that few people fully comprehend. A market economy is driven by entrepreneurship which thrives on providing a socially desirable product efficiently and effectively. It is only through the utilization of means compatible with the market that any person or group can succeed.
The Current Economic Challenge
Women now make up 44 per cent of the work force. The number of women re-entering the work force soon after childbirth rose to 57 per cent in 1985. This feminization of the work force has dramatically altered the scope and dynamics of the economy, and, contrary to popular belief, the economy is responding accordingly. Business increasingly realizes that it must cater to the needs of women if it is to remain competitive, and herein lies the real opportunity for economic progress.
“One of the most interesting things I see happening in the late 20th century is that the corporation is changing because women are starting to participate in it,” observes economist Jennifer Roback. “Women’s greater participation benefits small companies at the expense of big ones. Big companies are not willing to be flexible about child care and maternity leave and home emergencies. Small businesses can handle things like that, and, in particular, your own business can handle it.”
Twenty-four per cent of all the businesses operating in the United States are owned by women, accounting for $98.3 billion in receipts in 1982. While these businesses are still concentrated in low income service companies (over half earn less than $5,000 per year), their representation is increasing. The 1986 White House Conference on Small Business in Washington, D.C., serves as one indicator: participation by women doubled from 1980 to 35 per cent of all delegates.
More important, however, is the service orientation of these businesses. Service-oriented businesses, which are becoming increasingly important in the innovative information society, offer unique opportunities for many women. First, they often are labor intensive, requiring little capital but many hours of work to succeed. Second, they can be started on a small scale and built over time, utilizing skills that can be developed in the process. Third, they often do not require, immediately, the complete commitment of the entrepreneur. These businesses can be started relatively easily and have extraordinary possibilities for growth.
Ironically, these types of businesses have often fueled the development of other minority groups facing severe discrimination. Asian-Americans, for instance, started out in labor-intensive industries such as laundries and restaurants. Indeed, the experiences of other groups lacking suitable job skills, experience, and capital indicate that the process of entrepreneurial development applies to many sectors of the population.
(per cent of
Ethnic Group national average)
West Indian 94
Puerto Rican 63
American Indian 60
Source: Sowell, p. 8.
The Legacy of the Market: Ethnic Enterprise
Traditionally, economic success for minority and disadvantaged groups has come through business not politics. Jews, Asians, blacks, and Hispanics have all succeeded in the American economy through employment in small businesses or entrepreneurship, whether in storefront shops or professional careers. No group has been successful in using the political system to affect significantly their relative income. In fact, “some of the most dramatic rises from poverty to affluence in the United States have been among groups who did not attempt to use the political route to economic advancement . . . .”
Table I provides statistics about various ethnic groups and their relative family incomes. Notably, the groups with the highest family incomes have faced severe discrimination based on their ethnicity and race. However, racism has not prevented the Jews, Japanese, or Chinese from becoming economically successful in the United States. Furthermore, these groups have not been favored by government intervention.
The key element of economic success for these ethnic groups has been their relative concentration in business and enterprise. Indeed, aside from the well-known position of Jews in business, the Chinese and Japanese have a long history of entrepreneurship stemming from their immigrant background in the United States. “[T]he social histories of Americans of Chinese and Japanese descent,” writes sociologist Ivan H. Light, “offer empirical illustration of the manner in which poverty, discrimination, and ethnic visibility stimulated business proprietorship among some disadvantaged immigrants.” For example, almost 12 per cent of Koreans are self- employed, while 7.9 per cent of all Japanese and 7.6 per cent of all Chinese are self-employed. These percentages are well above the national average of 6.8 per cent. Despite extreme discrimination against Asian-Americans in the past, they remain one of the most upwardly mobile income groups in the United States.
The recent experience of Korean immigrants most dramatically illustrates this phenomenon. Ethnic and immigrant businesses provide an essential alternative to the general labor market.
Self-employment helped Korean immigrants overcome tremendous disadvantages in the work place and attain more secure work at higher incomes, accelerating the pace of social mobility. Immigrants face many of the same disadvantages as native born minorities (including women), and, in many cases, the discrimination is more severe: “Immigrant doctors, pharmacists, engineers, or attorneys may pump gasoline in service stations, but they are looking for escape from this level of employment. Hence, their labor force disadvantages (poor English, unrecognized professional degrees, under- and unemployment) confer on educated immigrants a motive to open their own businesses.” Further, these groups maintain a propensity toward self- employment through successive generations.
For minorities, especially immigrants, the market has allowed them to take advantage of their undervalued human capital. Instead of attempting to overcome institutional barriers to social mobility, many minority groups have chosen the entrepreneurial route to success. Asian- Americans in particular have much higher rates of self-employment than other groups.
Women and Economic Change
The market provides a remarkable opportunity for women as well. When people shop for services in the Yellow Pages, or buy a product on the supermarket shelves, they do not check the ethnic background or sex of the producer.
Sexual discrimination, like racism, cannot be legislated away. By participating in the market, and taking advantage of the renewed trend toward small companies and entrepreneurship, women will make more headway against discrimination than at any other time in their history.
The problem, however, is much more complex than getting more women into business. Corporations, with their hierarchy of powerbrinksmanship, allow men to exercise their prejudices to the detriment of women. While some have made progress in hiring women, large corporations often institutionalize impediments to progress. Furthermore, men may not realize that they are discriminating. In a recent Woman’s Day survey 81 per cent of the women polled felt that men underestimate them in the work place. Since men often dominate decision-making in larger corporations, women are often fighting the perceptions of their male supervisors.
Yet, with the current trend toward an economy driven by smaller corporations, the prospects for women are looking better. The 1980s is hailed as the decade of entrepreneurship, and companies such as Federal Express and Apple Computer successfully challenge corporate giants. Deregulation has sparked entrepreneurship in many sectors of the economy, and this trend has clear implications for the role of women.
Jennifer Roback notes that “We are starting to observe a strengthening of the smaller firm as opposed to the larger firm because the small firm can accommodate the other needs that women have in their lives.” Women are beginning to dominate the labor supply, and newer and smaller firms have the managerial flexibility to more effectively utilize female workers. As Table 2 illustrates, women are currently concentrated in flexible, service-oriented firms. Many, such as personal services, allow for future growth, building from the ground floor up.
Despite their large numbers, however, women are still relative newcomers to the economy. In the past, significant economic progress has not occurred for a generation or two. While this may seem slow, no other system has permitted faster change or growth for any particular group. In fact, the free market is often derided for the pace of economic and cultural change inherent in it as a social system.
Personal services 419.113
Real estate agencies 225,551
Health services 128.389
Special trade contractors 47,219
Food stores 37,635
Apparel and accessory stores 29,130
Wholesale trade, non-durable 22,231
Total Women-Owned Businesses: 2,884,450
Source: 1982 U.S, Economic Census
The influx of women, like immigrants in the late nineteenth century, has created an imbalance of resources in human capital. This condition, however, merely sets the creative and innovative forces of the market in motion. As long as it is free to change, the economy will adjust. In effect, the market economy is driven by a “causal loop” between resources and human wants. The evolution of the market society has created institutions which distribute natural resources (including people, human capital) so that the most valued wants of society are met.
In achieving this, the market has developed an amazingly diverse, decentralized economic system unparalleled in the modern world. “This diversity in the forms of economic life . . . is important not for its own sake but because it is an earmark of successful adaptation and full utilization of the resources available. The thematic terms are thus autonomy, experiment, and diversity.”
Women, like various minority groups, may find that their talents, skills, and needs are best met outside the corporate world and in the realm of small business. By moving into entrepreneurial enterprises, they are more likely to expand their own opportunities and open up theroad to economic progress. The ultimate result of this challenge is a more competitive and more productive society.
Rather than attempting to find political solutions, then, women should be moving into the market through their own business ventures. Instead of regulating policies and practices of existing businesses, women should be setting the standards for future generations by providing more efficient and effective alternatives in the market. Instead of mandating the approval of men in existing corporations, they should be maximizing their effectiveness by providing a better product cheaper within an economic climate suitable to their needs and wants.
Thus, the needs of women in the market may be better served by deregulating the economy—by allowing people to provide capital to new and “risky” businesses without the burdensome rules of the Securities and Exchange Commission or potential regulation of the Federal Trade Commission. The key to the success of women and minorities is access: protecting the ability of all people to enter the market and provide products that consumers desire without paternalistic and counterproductive restraints perpetuated by the state.
9. For a readable explanation of the relationship between the market and economic discrimination see Walter Williams. The State Against Blacks (New York: McGraw-Hill Book Company, 1982), chapters l, 2 and 11.
10. For a clear, concise discussion and analysis of the relationship between government, law, and discrimination see Thomas Soweli, Civil Rights: Rhetoric or Reality? (New York: William Morrow and Company, Inc,, 1984), chapters 1, 2, 5 and 6.