Self-Employment Not Falling

The New Times article Are We Becoming Less Entrepreneurial has a chart showing that the percentage of the U.S. workforce that is self-employed has been falling since 1990.  The data source is the OECD Fact Book.

However, as the chart below shows, according to the U.S. Bureau of Labor Statistic (BLS) the percentage has been roughly steady to slightly up over the last decade.

  

I haven't had a chance to check out the OECD data, but it appears likely that the OECD only counts unincorporated self-employment.  It also looks like they include agricultural self-employment, which is generally not included when looking at U.S. self-employment.  See our post on agricultural self-employment for more details.   

Because self-employment data collection pre-dates the creation of LLCs and other self-employment incorporation methods, the U.S. BLS classifies self-employment into two categories - unicorporated and incorporated self-employment.

Unincorporated self-employed refers to people who identify themselves as self-employed but don't have a corporate entity.  The percentage of the U.S. workforce who are self-employed but unincorporated has trended down over the last decade, going from 7% in 1998 to 6.44% in 2008. 

The second group is incorporated self-employed.  This group consists of people who identify themselves as self-employed and say their business is incorporated.  The precentage of incorporated self-employed has trended up over the last decade, going from 3.2% in 1998 to 3.93% in 2008. 

There are many reasons for the self-employed to incorporate including limited liability, customer expectations and tax advantages.  And with the creation of the LLC, the cost of starting and operating a corporate entity is quite small.  As the chart below shows, incorporated self-employment  has become popular over the last decade and continues to increase as a percentage of total self-employment.

   

As with most small business data, self-employment data is open to interpretation and, unfortunately, there are no definitive answers.  Some argue that having a corporate entity means you are not self-employed.  I disagree and point to myself as an example.  When I first became self-employed I was unincorporated.  I now have an LLC, but I am still self-employed. 

While self-employment as a percentage of the U.S. workforce has been relatively stable, we believe over the next decade the percentage of self-employed Americans will increase.  Our reasons - too long to list here - are laid out in the Intuit Future of Small Business forecast reports which we co-author. 

Comments

[Allen]

I hope that self employment continues to grow steadily. I think it's great for this country!

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While self-employment as a percentage of the U.S. workforce has been relatively stable, we believe over the next decade the percentage of self-employed Americans will increase.