The quantity and quality of rural jobs have been seriously affected by problems such as sagging farm economies, decreases in rural industries, and increased foreign competition, leading many workers to migrate to more urbanized areas. Other workers may choose self-employment over relocation. Women, in particular, may have difficulty finding suitable jobs in rural areas because of their need to balance work and family obligations. Rural areas in general are often considered economically disadvantaged due to problems such as lower levels of capital, less-developed infrastructure, and fewer resources/business services. These factors would logically create difficulties for entrepreneurs and small business owners and therefore discourage business start-ups. However, interviews with some rural women in Pennsylvania have revealed that rural areas may be more conducive to small business start-ups. This study examines the levels of self-employment by comparing the rates of self-employment for women and men in rural (non-metropolitan) and metropolitan areas within Pennsylvania, the state with the highest number of rural residents.
Pennsylvania boasts a population of more than 12.5 million people. Of these, almost 340,000 were self-employed, 110,000 of which were women (Pennsylvania State Data Center, 2005). Although Pennsylvania ranks 6th in the US in terms of total population, it ranks 1st in rural population, with approximately 2 million non-metropolitan residents. Of its 67 counties, 35 are designated as non-metropolitan. Pennsylvania, therefore, is a very appropriate choice for a comparison of self-employed rural and urban women and men. As will be discussed later, rural and non-metropolitan have different technical meanings. However, for the purposes of this study these will be used synonymously, as will the terms urban and metropolitan.
Rural areas are often considered economically disadvantaged because of their lower levels of development and limited work opportunities (Fendley & Christenson, 1989; Kale, 1989; MacKenzie, 1992; Mueller, 1988; Osborne, 1987; Small Business Administration [SBA], 2001; Tigges & Green, 1994; Trucker & Lockhart, 1989). Areas that boast many high-value entrepreneurs are generally found around urban cores that feature needed capital (human as well as financial) and infrastructure (Low, Henderson & Weiler, 2005). Rural women in particular "have been an economically disadvantaged group historically" and face restricted employment opportunities (Lichter, 1989, p. 199,200).
Despite these problems, some studies (Jack & Anderson, 2002; Robinson, 2001; Tosterud & Habbershon, 1992) have found that rural residents do not necessarily view their location as a disadvantage. Entrepreneurship provides rural residents an avenue for financial improvement and independence without giving up their unique and traditional way of life (Tosterud & Habbershon, 1992). Kilkenny, Nalbarte, and Besser (1999) state that a business owner may feel successful even with a low income if the quality of life in the community is high. Taking population into consideration, Clark and James (1992) found the rate of business ownership to be higher in nonmetro areas with low populations.
This study further explores this issue by using Census 2000 data to determine if there is a difference in women's self-employment rates in metropolitan and non-metropolitan counties of Pennsylvania, and compares them to men's. The following section reviews the literature on rural and women-owned businesses. The results of this study are then presented and analyzed.
CHALLENGES FOR RURAL BUSINESS OWNERS
The quantity and quality of jobs in rural areas have been seriously affected by problems such as sagging rural farm economies, increased foreign competition, and decreases in rural industries (Lichter, 1989). Economic decline has led many workers to migrate to urban areas, decreasing the population and purchasing power in rural areas. MacKensie (1992, p. 92) states that "rural areas are seen by many as being on the fringe rather than a part of the mainstream of both the economy and society." In 2000, average earnings per job were $37,298 for metro residents, but only $27,375 for non-metro residents nationwide (Economic Research Service [ERS], 2003a). Compared to 1999, this represents a 0.5% decrease for those in metro areas and a 1.4% decrease for non-metro areas. Similarly, per capita income in metro areas was $30,691 compared to $22,985 in non-metro areas. In general, per capita income has been greater in metropolitan than non-metropolitan areas since 1979 (Barkley, 1993; Kean, Gaskill, Letstritz, & Jasper, 1998).
Rural development often lags behind that of urban areas in terms of population, buying power, capital, entrepreneurial climate, innovation, support services such as health care, and welldeveloped electronic and transportation infrastructures, (MacKenzie, 1992; Mueller, 1988; SBA, 2001). For example, an airport with scheduled passenger service within 50 miles and access to interstate highway interchanges are both associated with greater earnings growth in rural areas (Aldrich & Kusmin, 1997). Business services such as accounting, banking, advertising, and legal counsel may be difficult to locate, leading to higher fixed costs and greater difficulty competing (Osborne, 1987; Trucker & Lockhart, 1989; Fendley & Christenson, 1989; SBA, 2001). In addition, the merger of small rural banks with larger banks that are less willing to loan funds to small businesses make it more difficult to obtain financing (SBA, 2001).
Overall, the SBA (1999) reports that between 1990 and 1995, all industries did better in nonrural than in rural areas. One reason for this may be that rural companies tend to be smaller and have less income than those in metro areas (Henderson, 2002). Glancey (1998) adds that small business owners in urban areas may be more interested in growth whereas rural business owners may be primarily motivated by lifestyle.
Women with families often look to entrepreneurship in order to control their schedules and gain more control over their lives (Arai, 2000; Birley, 1989; Clark & James, 1992; Lombard, 2001 ; NFWBO, 1998a). This may be especially true in rural areas where there are likely to be fewer childcare options (Jack & Anderson, 2002; Tigges & Greene, 1994). Lichter (1989) concluded that in 1985, one-third of rural women were underemployed, meaning they were not able to find full-time work or a job paying adequate wages. Rural women were underemployed at a rate 38% greater than urban women, and 42% higher than rural men. It has been suggested that skilled rural women would make more money by working in managerial positions for employers, but because these jobs are not readily available or easily accessible, these women are motivated to start and operate their own businesses (Clark & James, 1992; Tigges & Greene, 1994).
POSITIVE FACTORS FOR RURAL AREAS
Self-employment seems to be a desirable option for non-metropolitan residents despite the economic difficulties. Using General Social Survey data, Hout and Rosen (2000) found that the sons of farmers, businessmen and professionals had higher rates of self-employment than did sons of clerical, retail, and manual workers. A study comparing the rates at which new firms and jobs were created in rural and urban areas of the midwest found no significant differences between the areas (Lin, Buss, & Popovich, 1990). Furthermore, Clark and James (1992) found the rate of business ownership to be higher in midwest non-metropolitan areas with low populations. Tosterud and Habbershon (1992) found that many new business owners in South Dakota started their businesses so they could remain in the state, and felt their chances of success were not decreased by their location. This was consistent with an Iowa study in which rural business owners saw their location as providing advantages.
Likewise, a small group of women micro-business owners in Pennsylvania appreciated their rural locations because of lower costs and established social networks that made it easier for them to start businesses and decreased their perceived risk of failure (Robinson, 2001). Findings from a focus group with small business owners in Vermont show that local community support was crucial to business and created an advantage to these rural residents (Sullivan, Halbrandt, Wang, & Scannell, 1997). However, in reviewing the literature on social capital and entrepreneurship, Westland and Bolton (2003) found that community ties can also be negative if they stifle growth or innovative thinking.
The current literature is conflicting in that many reports show those in rural areas, particularly women, to be economically disadvantaged, while other studies have shown that rural business owners view their locations as neutral or even advantageous. This study examines this issue by comparing the rates of self-employment of men and women in metropolitan and non-metropolitan counties of Pennsylvania. The following sections present the methodology followed in this study and the results of statistical tests on data obtained from the U.S. Census Bureau.
Data regarding the number of self-employed people and unpaid family workers in each county of Pennsylvania were obtained from Census 2000 (U.S. Census Bureau, 2003). This particular data set, Summary File 4, provides data on Class of Worker by Sex, Place of Work, and Veteran Status based on sample data. An advantage of this type of data is that figures are available for even the smallest county. In contrast, data from 100% count files for very small counties are frequently withheld. For example, data on the number of men and women who work as unpaid workers in a family business are available in this data set, even those these counts are only 10 and 4 respectively.
Classifications for the metropolitan and non-metropolitan status of each county, as well as each county's Rural-urban Continuum Code were obtained from the ERS (2003b). The Office of Management and Budget has categorized each county as either metro or non-metro based on the relationship to areas designated as Metropolitan Statistical Areas (MSA). The ERS has further assigned each county a code from 1 to 9, with 9 being the most rural. New codes that better reflect the rurality of counties based on Census 2000 data were released in June 2003 (ERS, 2003c). These codes take into consideration not only the number of people living in urban areas of a given county, but also the economic ties between non-metro and metro counties. Metro counties are classified by the size of the population in the MSA of which they are a part. Non-metro counties are coded according to their total urban population and whether they are adjacent to a metro county. Table 1 presents the nine classifications of the Rural-urban continuum code and the number of Pennsylvania counties categorized as each one. It should be noted that no counties in Pennsylvania were categorized as 5.
RESULTS AND ANALYSIS
T-tests were conducted on the proportions of men and women in metro and non-metro counties who were self-employed (see Table 2). As expected, men were more likely than women to be self-employed regardless of their location. In total, non-metro workers are significantly more likely to be self-employed. This holds true for both women and men, although the difference is greater among men. Proportionately, non-metro men are almost twice as likely as non-metro women to be self-employed, with metro men having a similar, but smaller (1.8 times as likely) advantage. Non-metro men, however, were almost 1.4 times as likely as metro men to be self-employed, while non-metro women were about 1.25 times as likely as non-metro women to be self-employed.
These data were then further analyzed by rural-urban continuum code classification, with the results shown in Table 3. Metro counties seem to be fairly similar, with the means all within 0.37 of a percentage point of each other, with greater spreads among non-metro counties. The four counties coded 8 and 9, which are completely rural, were combined in order to conduct an Analysis of Variance test. The results of the test show that the probability that the means of the different county groups being this different by random chance is extremely small.
As the counties become more rural, the rates of self-employment tend to generally increase, except in the counties coded as 7, which were lower than those coded as 6, and sometimes 4, but still consistently higher than the metro counties. One reason for these findings may be that people in non-metro areas seek self-employment because of a lack of other work opportunities. It may also suggest that non-metro residents are willing to create their own job situations in order to remain in a location where suitable jobs are not readily available despite the economic disadvantages of non-metro areas, as was the case with small business owners in South Dakota (Tosterud & Habbershon, 1992). Another answer may be that provided by women in Robinson's (2001) study who stated that they felt there was less risk to starting a business in a rural area because of low costs and social networks. This was echoed by Scottish small business owners studied by Jack and Anderson (2002). Although it is beyond the scope of this paper to determine the nature of self-employed people in these counties, it is also possible that people who choose to live in more rural areas are more self-reliant, choosing to create their own opportunities, and are not discouraged by hindrances to business ownership that are associated with rural areas.
This study used recently released Census 2000 data to compare the self-employment and unpaid family worker participation rates in metro and non-metro counties of Pennsylvania. The literature on small business in rural areas leads to conflicting conclusions as it is clear that rural small business owners, or potential small business owners, face many obstacles due to their locations. Henderson (2002) concluded that the small size of markets combined with remoteness, less access to venture capital, and more difficulty accessing technology frequently results in fewer high-growth entrepreneurs in rural areas.
However, several studies have also reported that rural business owners like their locations and therefore find ways to overcome the disadvantages. These businesses contribute to the overall quality of life in non-metropolitan areas and boost regional economic development by adding to the list of businesses (Low et al., 2005). This may be one way in which non-metro residents try to overcome the problems of rural economic disadvantages.
Due to the perceived quality of life in a rural area, some people may enjoy lifestyle-oriented businesses rather than seeking to maximize growth and profits (Kilkenny et al., 1999). With regards to profit maximization, rural firms may enjoy lower costs and fewer restraints on space (Glancey, 1998). This maybe especially so if rural companies can also take advantage of social networks and embeddedness (Jack & Anderson, 2002, Kilkenny et al, 1999; Robinson, 2001; Tosterud, & Habbershon, 1992; Westland, & Bolton, 2003). Future research should further examine the reasons for higher rates of self-employment in non-metro areas to identify ways rural business owners are overcoming the disadvantages of their locations and taking advantage of their special situations.
Aldrich, L. & Kusmin, L. (1997). Rural economic development: What makes rural communities grow? Agricultural Information Bulletin No. 737. United States Department of Agriculture.
Arai, A.B. (2000). Self-employment as a response to the double day for women and men in Canada. The Canadian Review of Sociology and Anthropology, 37(2), 125-142.
Barkley, D. L. (1993). Economic adaptation: Alternatives for non-metropolitan areas. Boulder, CO: Westview Press.
Birley, S. (1989). Female entrepreneurs: Are they really different? Journal of Small Business Management, 32-37.
Clark, T. & James, F.J. (1992). Women-owned businesses: Dimensions and policy issues. Economic Development Quarterly, 6(1), 25-40.
Economic Research Service. (2003a, July 15). Pennsylvania State Fact Sheet. www.ers.usda.gov/StateFacts/PA.HTM Retrieved August 5, 2003.
Economic Research Service.(2003b). Measuring rurality: Rural-urban continnum codes. www.ers.usda.gov/Briefing/Rurality/RuralUrbCon Retrieved August 9, 2003.
Economic Research Service.(2003c). Measuring rurality: New definitions in 2003. www.ers.usda.gov/Briefing/Rurality/Newdefinitions Retrieved August 9, 2003.
Fendley, K. & Christenson, J. A. (1989). Rural reflation: An idea for community development. Journal of the community development society, 20(1), 103-115.
Glancey, K. (1998). Determinants of growth and profitability in small entrepreneurial firms. International Journal of Entrepreneurial Behavior & Research, 4(1).
Goffee, R & Scase, R. (1982). Women in charge. London: George Allen & Unwin.
Henderson, J. (2002). Building the rural economy with high-growth entrepreneurs. Economic Review, 3rd Quarter, 45-70.
Hout, M. & Rosen, H.(2000). Self-employment, family background, and race. Journal of Human Resources, 35(4), 670692.
Jack, S. L., & Anderson, A. R (2002). The effects of embeddedness on the entrepreneurial process. Journal of Business Venturing, 17, 467-487.
Kalleberg, A. L. & Leicht, K. T. (1991). Gender and organizational performance: Determinants of small business survival and success. Academy of Management Journal, 34(1), 136-161.
Kale, S. (1989). Theoretical contributions to the understanding of U.S. Nonmetropolitan Economic Change. Economic Development Quarterly, 3, 58-69.
Kean, R., Gaskill, L., Leistritz, L., & Jasper, C. (1998). Effects of community characteristics, business environment, and competitive strategies on rural retail business performance. Journal of Small Business Management, 36(2), 45-57.
Kilkenny, M., Nalbarte, L. & Besser, T. (1999). Reciprocated community support and small-town business success. Entrepreneurship & Regional Development, 11, 231-246.
Lichter, D.T. (1989). The underemployment of American rural women: Prevalence, trends and spatial inequality. Journal of Rural Studies, 5(2), 199-208.
Lin, X, Buss, T.F. & Popovich, M. (1990). Entrepreneurship is alive and well in rural America: A four-state study. Economic Development Quarterly, 4 (3), 254-259.
Lombard, K. V. (2001). Female self-employment and demand for flexible, nonstandard work schedules. Economic Inquiry, 39(2), 214-237.
Loscocco, K. A. & Leicht, K. T. (1993). Gender, work-family linkages, and economic success among small business owners. Journal of Marriage and the Family, 55, 875-887.
Low, S., Henderson, J., & Weiler, S. (2005). Gauging a region's entrepreneurial potential. Economic Review - Federal Bank of Kansas City, 90(3), 61-89.
MacKenzie, L. R. (1992). Fostering entrepreneurship as arural economic development strategy. Economic Development Review, Fall, 38-44.
Mueller, W. (1988). Beyond blue highways. Venture, 10(8), 40-44.
National Foundation for Women Business Owners. (1998a, February 24). Entrepreneurial ideals motivate women to start businesses. http://www.nfwbo.org/rr018.htmRetrievedDecember 16, 1998
National Foundation for Women Business Owners. (1998b). NFWBO news, 1998, No. 3. www.nfwbo.org/news9803.htmRetrieved December 16, 1998
Osborne, D. (1987). Bootstrap banking. Inc., 9(9 - August), 69-72.
Pennsylvania State Data Center (2005). How Pennsylvania measures up - State rankings, http://pasdc.hbg.psu.edu Retrieved February 20, 2005.
Pennsylvania State Data Center. (2001). Pennsylvania's women-owned businesses Rank 7th in nation. Research Brief June 14, 2001.
Robinson, S., (2001). An examination of entrepreneurial motives and their influence on the way rural women small business owners manage their employees. Journal of Developmental Entrepreneurship, 6(2), 151-167.
Small Business Administration. (2001). Advancing rural America. Washington, D.C.: Office of Advocacy.
Sullivan, P., Halbrendt, C, Wang, Q., & Scannell, E. (1997). Exploring female entrepreneurship in rural Vermont and its implications for rural America. Economic Development Review, Fall, 37-42.
Tigges, L. M. & Green, G. P. (1994). Small business success among men- and women-owned firms in rural areas. Rural Sociology, 59,289-309.
Trucker, S. W., & Lockhart, C. D. (1989). Maryland small business development financing authority's equity participation investment program. Economic Development review, 7(2), 60-61.
Tosterud, R. & Habbershon, G. (1992). Rural entrepreneurship: A preliminary study. South Dakota Business Review.
Westland, H. & Bolton, R (2003). Local social capital and entrepreneurship. Small Business Economics, 21, 77-113.
U.S. Census Bureau. (2005). www.census.gov. Retrieved December 3, 2005.
Sherry Robinson, Penn State University
John Finley, Columbus State University