According to recent Pew Research data, almost 35% of Americans today are self-employed or have been hired by a self-employed person. Pew also highlights that the rate of self-employment in the U.S. remained steady in 2014 at exactly 10%. Of note, today’s self-employment rate is almost unchanged from the 10.2% self-employment rate reported in 1976 when this data was first reported.
The October 22nd Pew report also pointed out that there was a notable trend towards the self-employed choosing to become incorporated. According to U.S. Bureau of Labor Statistics data, the percentage of workers who are self-employed and incorporated rose from 2.9% in 1990 to 3.7% in 2014, and the share of workers who are self-employed and unincorporated fell from 8.5% in 1990 to 6.3% in 2014. The biggest reason for this trend is changes in the nature of employment in the agriculture, forestry and fishing industries. Almost 43% of of all workers in these industries were unincorporated self-employed workers in 1990, but by 2014, the share had decreased to 33.5%.
Self-employed create jobs
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Data analyzed by Pew shows that 24% of self-employed workers (3.4 million out of 14.6 million) had at least one paid employee in 2014. Not surprisingly, self-employed workers with incorporated businesses more frequently had employees than unincorporated businesses, at 41% compared to 13%.
The 3.4 million self-employed workers who hired other workers had a total of 29.4 million paid employees in 2014. That is an average of 8.6 employees per business, not counting the owner(s). However, most of these businesses are quite small. On average. these workers with their own employees only hired a median of three people.
More than 2.2 million self-employed with incorporated businesses hired workers and 1.2 million who were unincorporated hired workers in 2014. The incorporated created 22.5 million jobs, and the unincorporated accounted for 6.9 million workers employed.
The statistics showed that the incorporated self-employed hired an average of 10.2 workers each, compared with an average of merely 5.6 for the unincorporated. That said, the median numbers hired were much closer at four for the incorporated and three for the unincorporated. Thus, in terms of employment size, most businesses run by self-employed workers, whether incorporated or not, are fairly small, with about four employees or less.
When you dig into the numbers, it turns out that a small share of business owners with a larger number of employees are the main drivers of job creation by the self-employed. In fact, over half the jobs created by the self-employed derive from only about one-tenth of the self-employed with paid employees. Moreover, the large majority of these enterprises were incorporated.