Women Earn Less Even as Social Entrepreneurs

Research into whether there is a gender pay gap among social entrepreneurs in the UK has found that women as social entrepreneurs earn 29 per cent less than their male colleagues, well above the average UK gender pay gap of 19 per cent.

The research is said to be the first of its kind and was carried out by SEFORÏS – a multidisciplinary, international research project on social enterprise funded by the European Commission.

The project includes a consortium of 12 organisations from 10 countries including Belgium, China, Germany, Hungary, Portugal, Romania, Russia, Spain, Sweden, and the UK.

The research estimates that the adjusted pay gap to be about 23 per cent after controlling for a range of demographic, human capital and job characteristics, as well as personal preferences and values.

A discussion paper on the results by Sun?ica Vuji? at the University of Antwerp in Belgium expresses some surprise at the results.

“These differences are hard to explain by discrimination since these CEOs set their own pay,” Vuji? said.

“Income may not be the only aim in an entrepreneurial career, so we also look at job satisfaction to proxy for non-monetary returns. We find female social entrepreneurs to be more satisfied with their job as a CEO of a social enterprise than their male counterparts.

“This result holds even when we control for the salary generated through the social enterprise. Our results extend research in labour economics on the gender pay gap as well as entrepreneurship research on women’s entrepreneurship to the novel context of social enterprise. It provides the first evidence for a “contented female social entrepreneur” paradox.”

The research suggests that the size and performance of the social enterprise is probably the main explanatory variable for this adjusted (unexplained) gender pay gap.

“The mechanism that we propose is the following: female social entrepreneurs set up their own social enterprise and pay themselves a salary determined by its characteristics and performance, for example size, growth, and profit," Vuji? said.

“The characteristics of the enterprise are determined by their personal traits and preferences for risk, innovation, and preference for self as opposed to other-interest. For example, if women are more risk averse, have less access to sources of finances, set up their enterprise in lower-paid sectors of the economy, and are more innovative and prosocial, these traits and preferences will determine the size and the performance of the social enterprise that they run, and subsequently determine the salary that they can pay themselves.

“We have noted that job satisfaction might also be an important variable, capturing non-monetary returns to a career in social entrepreneurship. Our data suggest that female social entrepreneurs are more satisfied with their job than their male counterparts, even when we control for their lower salary.

“Our findings therefore are consistent with the “paradox of the contented female (social) business owner,” whereby the female social entrepreneur job satisfaction is independent of the salary generated through the social business."

The research discussion paper said the findings have interesting implications for policy makers.

“There are numerous reasons to support social entrepreneurship, including the promise of social enterprise as a vehicle to address pressing social issues which governments no longer have the resources to deal with,” the research paper said.

“There are also the documented positive spill-over effects of social on commercial entrepreneurship. Social enterprise appears to be a route into commercial entrepreneurship attracting those who are typically less likely to engage in commercial entrepreneurship and who through the social enterprise experience build skills and confidence that they subsequently leverage for commercial entrepreneurship (Estrin et al. 2013).

“ However, the results of this study contribute to a more rounded perspective, highlighting that although social enterprise is a highly satisfying occupational choice, it also perpetuates gender pay inequalities. What is not clear is whether this should be of concern to policy makers, if the pay gap is not driven by discrimination but rather by choices of the social entrepreneurs themselves.

“Since society in general will likely always be concerned by income inequalities, whether explicable by social and economic factors or not, policy makers might wish to engage business support and communication campaigns to mitigate the pay gap while stressing personal fulfilment."