Does self-employment reward women’s talent more fairly than salaried work?

Gender pay gaps are stubborn. Even when women and men have similar education and experience, earnings often diverge over time—especially at senior levels, where promotion gates, sponsorship dynamics, and “proving it again” standards can intensify. This paper asks a deceptively simple question with big implications:

The authors don’t romanticize entrepreneurship. They acknowledge a well-documented pattern: women founders often underperform men on typical business metrics and earn less financially than male founders. What’s missing in many conversations, though, is a counterfactual: What would these same women have earned if they stayed in wage employment instead?  

That counterfactual matters because wage work and entrepreneurship reward talent differently. In wage employment, earnings depend heavily on gatekeepers—managers, promotion committees, compensation systems, and organizational politics. In entrepreneurship, founders can sometimes “route around” these constraints, capturing value more directly from customers and markets. The authors integrate two perspectives to frame this idea:

• A mobility perspective: people move into entrepreneurship when wage work opportunities are limited or unattractive.
• A glass ceiling perspective: women face steepening barriers to advancement and earnings growth in wage employment.
  

Put together, the authors argue: if women’s human capital is systematically undervalued in wage work, entrepreneurship may—at least for some women—offer rewards more proportional to productivity, narrowing the gender gap relative to salaried jobs.  

What We Studied

The authors use matched employee–employer data from Sweden spanning 1990–2020, allowing them to observe individuals’ earnings in wage work and after they transition into entrepreneurship. The Swedish setting is especially useful because earnings data are comprehensive and precise—critical when you’re comparing wage income to founder income at scale.  

Sweden is often seen as relatively strong on gender equality, yet gender wage gaps still exist. The authors argue this makes Sweden a “conservative test”: if you find meaningful patterns there, they may plausibly appear in other advanced economies too.  

The key empirical move is an individual fixed-effects approach. Instead of comparing different people (which gets messy fast), the authors compare each person’s earnings before and after they become a founder. This helps control for time-invariant traits like risk tolerance, motivation, or stable ability differences that might influence both (1) who becomes an entrepreneur and (2) how much they earn.  

One of the most distinctive elements: the dataset allows the authors to use 12th-grade GPA as an ability indicator and build an ability-based benchmark for expected wage earnings. This lets them test whether high-ability women are more likely to be underpaid in wage work—and whether entrepreneurship helps them close that “ability–earnings mismatch.”  

Key Insights

Women founders earn less than men, but the entrepreneurship gap is smaller than the wage gap

A cross-sectional look confirms the familiar headline: women founders under-earn men founders. But the paper’s main point is comparative: the gender earnings gap is smaller in entrepreneurship than in wage employment. In other words, entrepreneurship doesn’t erase inequality—but it can be a less unequal earnings context than salaried work for the same population.  

The “premium” from switching into entrepreneurship is larger for women

The fixed-effects results highlight the central mechanism: when individuals move from wage work into entrepreneurship, women experience larger earnings gains than men. The authors summarize this clearly: on average, women earn about 22% more as entrepreneurs than they would in wage work, compared with an 8% premium for men.  

This is the subtle but powerful idea:

• Women may still earn less than men as founders, yet
• entrepreneurship may improve women’s earnings more than it improves men’s earnings, relative to their respective wage baselines.
  

High-ability women face stronger “ceilings” in wage work

The authors predict and find that the “gender premium” to entrepreneurship is most pronounced among high-ability women, who are the ones most likely to experience wage ceilings in traditional employment. The story is not that entrepreneurship magically rewards women more; it’s that wage work may fail to reward high-ability women proportionately, increasing the relative attractiveness of founding.  

This is where the appendix visuals sharpen the logic: if women’s wage residuals deteriorate as ability rises (Figure A2), then high-ability women have more to “reclaim” by moving into a context where gatekeeping is different.  

Industry context matters

The paper also finds that the entrepreneurship advantage for women is stronger in male-typed industries, where advancement barriers in wage work can be more intense. In male-typed industries, the gender earnings gap is larger in wage employment but smaller in entrepreneurship—consistent with the idea that founding provides an alternative route around entrenched structures.  

Importantly, the authors report that transitions into entrepreneurship usually don’t involve jumping between gendered industry types; many founders stay within the same broad industry category when they move from employee to entrepreneur. That reduces the chance that the result is simply “women pick different industries when they found.”  

High-ability women are more likely to transition into entrepreneurship

One of the paper’s more pointed claims is that the pattern reflects a selection mechanism: high-ability women are more likely to transition into entrepreneurship than high-ability men, partly because women’s wage earnings are more likely to fall below what their ability predicts—creating “push” away from salaried tracks. Meanwhile, men’s wages align more closely with ability benchmarks, reducing the incentive to exit.  

Takeaways

For women considering entrepreneurship

A practical message from this study is to stop comparing entrepreneurship income only to other founders (where men often dominate the upper tail). Instead, compare entrepreneurship to the realistic path in wage employment:

• What is your wage progression likely to be in your current organization/industry?
• Are you seeing signs of a ceiling (promotion stalls, pay compression, muted performance rewards)?
• If so, entrepreneurship may be a strategic move—not because it guarantees higher earnings, but because it may better monetize your human capital relative to your wage baseline.  
  

For employers

The findings suggest a retention implication that many firms miss: if you systematically under-reward high-performing women—especially in male-dominated functions—you may be training future founders. The paper explicitly notes that structural constraints in wage employment can push talented women toward entrepreneurship.  

Practical actions employers can take (without needing to “solve society” first):

• Audit pay growth and promotion velocity by gender within job families, not just overall averages.
• Look for “ability–pay mismatches” (e.g., high performance ratings but flat comp).
• Treat opaque promotion criteria as a strategic liability: opacity doesn’t just harm equity—it can fuel unwanted turnover.
  

For policymakers

This paper’s logic implies that interventions aimed only at “fixing women” (confidence, pitch style, networking) may miss the driver. If wage work under-rewards women’s human capital—particularly at higher ability levels—then supporting women’s entrepreneurship is partly about removing structural frictions:

• easier access to early customers, procurement, and credible references
• financing that reduces penalty from gatekeeper bias
• mentorship that helps founders translate professional expertise into market signals

Impact

This study changes the conversation from “Do women earn less in entrepreneurship?” to “Relative to what alternative—and for whom?”

The bigger implication is that entrepreneurship can function as a mobility channel that partially compensates for labor-market inequities. That’s uncomfortable in a good way: it suggests that some of the “women’s entrepreneurship story” is not just about opportunity recognition, grit, or preference, but about how traditional employment systems allocate rewards.

At the same time, the findings also set a boundary: the entrepreneurship advantage appears most meaningful for certain groups (high-ability women; women in male-dominated industries), and it does not imply that entrepreneurship is universally better or that it eliminates the absolute earnings gap. Entrepreneurship may narrow gaps on one benchmark (relative gains), while other gaps remain (absolute levels, access to capital, scaling outcomes).

For research, the paper points toward a more nuanced agenda: returns to entrepreneurship shouldn’t be treated as uniform—gender, ability, and industry context meaningfully shape the payoff structure.  

Recommendations

If you’re a leader, policymaker, investor, or founder, the practical next step is to reframe entrepreneurship as a comparative earnings strategy:

1. For individuals: model your “stay” path vs. your “found” path. Don’t compare yourself to the median founder; compare to your likely wage trajectory and the ceiling signals you observe.
2. For employers: treat gendered ceilings as a strategic leak. If high-ability women see wage work as capped, entrepreneurship becomes a rational exit.
3. For ecosystems: support mechanisms that reduce gatekeeper bias (capital access, customer access, credibility signals), especially in male-dominated sectors where wage penalties appear steepest.