Who are the self-employed?
I thought this would be a pretty straightforward empirical question. It seems like the sort of question that has an actual answer. There are people who are self-employed, and those people have characteristics, and they are the sort of characteristics that researches would be interested in and would document. This is sort of true, but the answers are not as clear as I was hoping they would be. For one thing the material presented here is somewhat dated. I am pulling numbers from reports from 2010, and 2006. In any case, this should be a good starting point for some basic demographics regarding the self-employed.
Data and Definitions
Much of the data comes from this report which is a 2010 report using data from 2009. The report on duration of employment is older, published in 2006, uses National Longitudinal Survey of Youth (NLSY1979) Data using data that runs through 2002. With the rise of the “gig-economy” and the proliferation of startups, current trends in self-employment may be different than the data presented here.
People counted as self-employed are those who answered “self-employed” to the following question from the Current Population Survey .
“Last week, were you employed by government, by a private company, a nonprofit organization, or were you self-employed? ”
If they answer “government”, “private company”, nonprofit organization” they are counted as wage and salary workers.
The CPS goes on to ask “if this business in incorporated” if they answer yes, they get classified as incorporated self-employed, if no, they get classified as unincorporated self-employed. These two classifications have different demographics, and are probably best treated separately.
Demographics of the Self-Employed
In 2009 there were 15.3 million self-employed people in the United States, 9.8 million were unincorporated and 5.5 million were incorporated. A large clump of the self-employed in America are farmers, although the percentage has been declining, in 2009 just under 40% of the unincorporated self-employed worked in Agriculture.
In general, the self-employed are older, more likely to be white, more likely to be male, and better educated than the general workforce.
Both the Incorporated and Unincorporated self-employed are more heavily male, than the general workforce. This is especially true for the Incorporated self-employed.
The Self-employed are generally older than Wage and Salary workers. This is probably because it takes time and experience to acquire the resources and skills to go into business for yourself. In general, the Incorporated self-employed are older than the unincorporated, but there are relatively more unincorporated self-employed in the greater than 65 age group. The percentages displayed here are the percentages within the employment category, so the 10% for Wage and Salary workers at 20-24 years, means that 10% of the Wage and Salary workers are between 20-24 years .
The report I am using about the duration of the self-employed uses NLSY data to give the following information regarding duration of self-employment.
In general spills of self-employment are short, with many people leaving self-employment after just one year. People who have been self-employed for a while are less likely to leave self-employed for Wage or Salary work. Economic conditions seem to influence self-employment, with more people leaving self-employment when economic conditions are better. This indicates that many people are self-employed because they can’t find satisfactory work in the general labor market.
The above graph is an estimation of the duration of the first self-employment spell for males over 21. Due to censoring issues with longitudinal surveys like the NLSY It is a better estimate than the basic survey numbers. This should be interpreted as the odds that someone who has been self-employed for the duration on the x-axis rejoins the Wage and Salary labor force. So about 15% of people who have been self-employed for three years, cease being self-employed at that time.