Monthly Labor Review July 2004 13

Self-employment continues to be an important source

of jobs in the United States; as in the past,

the incidence of self-employment continues to be highest

among men, whites, older workers,

and in agriculture, construction, and services industries

Steven Hipple is an

economist in the

Division of Labor Force

Statistics, Bureau of

Labor Statistics.

E-mail:

Hipple.Steve@bls.gov

Steven Hipple

Self-employment in the U.S.

Self-employment in the

United States: an update

Following a long-term decline, the

proportion of total employment made up

of self-employed workers has leveled

off in recent years. In 2003, 10.3 million workers were self-employed. The self-employment

rate—the proportion of total employment made

up of the self-employed—was 7.5 percent, up

slightly from the rate in 2002. Reflecting the

protracted shift away from agricultural selfemployment, the vast majority (90.8 percent)

of the self-employed in 2003 were in nonagricultural industries; in contrast, this proportion

was 56.7 percent in the late-1940s.

Information on employment and unemployment is available from the Current Population

Survey (CPS).1 In addition to classifying employment by occupation and industry, the CPS

subdivides employment by class of worker—

that is, wage and salary employment, self-employment, and unpaid family work.

This article discusses the CPS measurement

of self-employment, addresses historical trends

in self-employment, and provides an overview

of characteristics of the self-employed.

How are the self-employed

measured in the CPS?

Since January 1994, employed respondents in

the monthly CPS have been asked the following

question: “Last month, were you employed by

government, by a private company, a nonprofit

organization, or were you self-employed?”

Individuals in the CPS who respond that they

were employed by government, a private company, or a nonprofit organization are classified

as wage and salary workers. Individuals who

respond that they are self-employed are asked:

“Is this business incorporated?” Individuals

who respond “yes” are classified as wage and

salary workers and are treated as employees of

their own businesses. The “no” responses are

classified as unincorporated self-employed—

the measure that typically appears in Bureau of

Labor Statistics publications.

Although the basic questions to determine

class of worker status have undergone few

changes since 1948, there is a break in series

that took effect in 1967. Prior to that year, there

was no question on incorporation of a business

for the self-employed. Beginning in 1967, individuals identified as incorporated self-employed were classified as wage and salary workers. As table 1 shows, there was a substantial

decline in self-employment beginning in 1967

due to the fact that these individuals were now

classified as wage and salary workers. Other

changes were implemented with the redesign of

the CPS in 1994.2

 Furthermore, in 2003, the CPS

adopted the 2002 North American Industry

Classification System (NAICS) and the 2000

Standard Occupational Classification (SOC) system. The switch to these new classification systems affects comparability of the estimates of
14

Self-employment in the U.S.

Monthly Labor Review July 2004

employment by class of worker.3

Table 2 shows data on incorporated self-employment since

1989. The proportion of total employment composed of the

incorporated self-employed was nearly unchanged at 3.0 percent during the 1989–93 period; the implementation of the

redesign of the CPS in 1994 caused the proportion to increase

to 3.5 percent.4 Since 1994, the rate of incorporated selfemployment has ranged between 3.2 and 3.6 percent. Estimates of incorporated self-employment are available prior to

1989. These data show that incorporation has become increasingly common over time, rising from 1.5 million in

March 1976 to 2.1 million in 1979 and 2.8 million in 1982;

as a proportion of total employment, the rates rose from 1.8

percent to 2.2 percent to 2.8 percent over these points in time.

The move toward incorporation is a function of many complex factors. Workers will typically incorporate their business for traditional benefits of the corporate structure, including limited liability, tax considerations, and the enhanced

opportunity to raise capital through the sale of stocks and

bonds.

Trends in self-employment

The proportion of individuals who are self-employed has

fallen steadily since the late-1940s. (See table 1.) Several

reasons could explain the overall decline in self-employment

over the period. The most obvious reason is the overall decline in agricultural employment, an area in which a large

proportion of employment comprises the self-employed.

This decrease in self-employment in agriculture is primarily

due to the disappearance of small farms, the rise of large

farming operations, and enhanced productivity in the agricultural sector. A second explanation is the increase in the

likelihood of businesses to incorporate—often for tax purposes. This would result in a decrease in the self-employed

because in the official statistics workers in these firms are

now classified as wage and salary workers. For instance,

between 1990 and 2003, the proportion of nonagricultural

employment made up of the unincorporated self-employed

declined from 7.5 to 6.9 percent, while the proportion of nonfarm employment composed of the incorporated self-emTable 1. Unincorporated self-employment, annual averages, selected years, 1948–2003

[In thousands]

 All industries Nonagricultural industries Agriculture

Total Self- Total Self- Total Selfemployed employed employed employed employed employed

1948 .................. 58,343 10,775 18.5 50,714 6,110 12.0 7,629 4,665 61.1

1950 .................. 58,918 10,359 17.6 51,758 6,019 11.6 7,160 4,340 60.6

1955 .................. 62,170 9,577 15.4 55,722 5,851 10.5 6,450 3,726 57.8

1960 .................. 65,778 9,098 13.8 60,318 6,303 10.4 5,458 2,795 51.2

1965 .................. 71,088 8,394 11.8 66,726 6,097 9.1 4,361 2,297 52.7

1966 .................. 72,895 8,127 11.1 68,915 5,991 8.7 3,979 2,136 53.7

19671 ................. 74,372 7,170 9.6 70,527 5,174 7.3 3,844 1,996 51.9

1970 .................. 78,678 7,031 8.9 75,215 5,221 6.9 3,463 1,810 52.3

1975 .................. 85,846 7,427 8.7 82,438 5,705 6.9 3,408 1,722 50.5

1980 .................. 99,303 8,642 8.7 95,938 7,000 7.3 3,365 1,642 48.8

1985 .................. 107,150 9,269 8.7 103,971 7,811 7.5 3,179 1,458 45.9

1990 .................. 118,793 10,097 8.5 115,570 8,719 7.5 3,223 1,378 42.8

19942 ................. 123,060 10,648 8.7 119,651 9,003 7.5 3,409 1,645 48.3

1995 .................. 124,900 10,482 8.4 121,460 8,902 7.3 3,440 1,580 45.9

1996 .................. 126,708 10,489 8.3 123,264 8,971 7.3 3,443 1,518 44.1

1997 .................. 129,558 10,513 8.1 126,159 9,056 7.2 3,399 1,457 42.9

1998 .................. 131,463 10,303 7.8 128,085 8,962 7.0 3,378 1,341 39.7

1999 .................. 133,488 10,087 7.6 130,207 8,790 6.8 3,281 1,297 39.5

2000 3 4 .............. 136,891 10,215 7.5 134,427 9,205 6.8 2,464 1,010 41.0

20014 ................. 136,933 10,109 7.4 134,635 9,121 6.8 2,299 988 43.0

20024 ................. 136,485 9,926 7.3 134,174 8,923 6.7 2,311 1,003 43.4

2003 .................. 137,736 10,295 7.5 135,461 9,344 6.9 2,275 951 41.8

1 Prior to 1967, estimates of the self-employed included persons who

operated their own incorporated businesses, not specifically identified until

that year.

2 Data for 1994 are not directly comparable with data for earlier years

due to a major redesign of the CPS.

3 Data for 2000–03 have been revised to incorporate Census 2000

population controls.

4 Data for nonagricultural and agricultural industries are not directly

comparable due to adoption of the North American Industry Classification

System (NAICS) and the Standard Occupational Classification (SOC) system.

Year

 4

Percent Percent Percent
Monthly Labor Review July 2004 15

ployed rose from 2.9 to 3.6 percent over the same period.

Research carried out by Marilyn E. Manser and Garnett

Picott compared the contribution of self-employment to net

job creation in Canada and the United States. The authors

found that, during the 1980s, the role of self-employment

within the two countries was somewhat similar. During the

1990s, however, self-employment accounted for essentially

none of the net job creation in the United States, whereas the

majority of net employment growth in Canada over the same

period was composed of self-employed workers.5

Generally, during labor market contractions, most labor force groups are impacted negatively and experience

a decline in employment. This procyclical response certainly affects many of the self-employed, as their businesses fail when profits decline or disappear. However, a

competing countercyclical effect could result if laid-off

wage and salary workers must rely on what was formerly

“moonlighting” self-employment or possibly enter the

ranks of the self-employed.

Recent analysis conducted by Ellen R. Rissman used data

from the National Longitudinal Survey of Youth (NLSY) and,

based on the model formulated in her study, found that flows

into self-employment occur during recessions and flows out

of self-employment occur during economic expansions.6

Additional research carried out by Daniel Aaronson, Ellen

R. Rissman, and Daniel G. Sullivan concluded that a large

proportion of the increase in self-employment since the beginning of the most recent recession is due to unincorporated

firms emerging during weak economic conditions.7

Indeed, there has been an increase in the proportion of

nonagricultural employment made up of the self-employed

since the end of the most recent recession.8 Between early

2002 and mid-2004, labor market conditions continued to be

somewhat sluggish, and, over this period, nonagricultural

self-employment rose slightly from 6.5 percent to 6.8 percent of total nonagricultural employment.9

 (See chart 1.)

Characteristics of the self-employed

Demographics. In 2003, older workers were more likely to

be self-employed than younger workers.10 (See tables 3 and

4.) (The following analysis will primarily focus on the unincorporated self-employed; in most cases the patterns exhibited by the incorporated self-employed are very similar.) The

self-employment rate for workers age 65 and older was 19.1

percent, in contrast with only about 2.0 percent for their counterparts age 16 to 19 and age 20 to 24. Younger workers

rarely have acquired the capital and managerial skills needed

to start a business, whereas many older workers may be able

to obtain these resources through their own efforts or through

access to available credit. Furthermore, older workers who

have retired from wage and salary jobs may become selfTable 2. Incorporated self-employment, annual averages, 1989–2003

[In thousands]

All industries Nonagricultural industries Agriculture

Total Incorporated Total Incorporated Total

employed self-employed employed self-employed employed

1989 ................ 117,342 3,444 2.9 114,142 3,311 2.9 3,199 133 4.2

1990 ................ 118,793 3,463 2.9 115,570 3,332 2.9 3,223 131 4.1

1991 ................ 117,718 3,379 2.9 114,449 3,253 2.8 3,269 126 3.9

1992 ................ 118,492 3,519 3.0 115,245 3,371 2.9 3,247 148 4.6

1993 ................ 120,259 3,555 3.0 117,144 3,399 2.9 3,115 156 5.0

19941 ............... 123,060 4,246 3.5 119,651 4,049 3.4 3,409 197 5.8

1995 ................ 124,900 4,224 3.4 121,460 4,011 3.3 3,440 213 6.2

1996 ................ 126,708 4,080 3.2 123,264 3,917 3.2 3,443 163 4.7

1997 ................ 129,558 4,341 3.4 126,159 4,142 3.3 3,399 199 5.9

1998 ................ 131,463 4,290 3.3 128,085 4,099 3.2 3,378 191 5.7

1999 ................ 133,488 4,303 3.2 130,207 4,116 3.2 3,281 187 5.7

20002 3 ............ 136,891 4,458 3.3 134,427 4,316 3.2 2,464 142 5.8

20013 ............... 136,933 4,452 3.3 134,635 4,313 3.2 2,299 139 6.0

20023 ............... 136,485 4,608 3.4 134,174 4,476 3.3 2,311 132 5.7

2003 ................ 137,736 4,956 3.6 135,461 4,810 3.6 2,275 146 6.4

Percent

Incorporated

selfemployed

1 Data for 1994 are not directly comparable with data for earlier years

due to a major redesign of the CPS and the introduction of 1990 censusbased population controls, adjusted for the estimated undercount.

2 Data for 2000–03 have been revised to incorporate Census 2000

population controls.

3 Data are not directly comparable due to adoption of the North American

Industry Classification System (NAICS) and the Standard Occupational

Classification (SOC) system.

3

Year

Percent Percent
16

Self-employment in the U.S.

Monthly Labor Review July 2004

employed to supplement their retirement income.

Recent research conducted by Julie Zissimopoulos and

Lynn A. Karoly examined factors associated with transitions

into self-employment among older individuals. Using

longitudinal data from the Health and Retirement Study, the

authors analyzed the impact of a person’s health, wealth,

access to employer-provided benefits, and other factors such

as availability of a flexible work schedule on their wage and

salary job. The authors concluded that the likelihood of

future groups of older workers to enter self-employment at

the same rates as those observed in their study will be affected

by economic conditions, individual wealth, and other factors such as possible changes to the Social Security system

and other social insurance programs and technological

advances.11

Self-employment is more common among men than

women. In 2003, 8.8 percent of men were self-employed,

compared with 6.0 percent of women. Self-employed men

are more likely than their female counterparts to be employed

in industries—construction, for example—that have a large

proportion of self-employed workers.

Whites were more likely than blacks or Hispanics to operate their own businesses. In 2003, the self-employment

rate for whites was 8.0 percent, while the rates for blacks or

African Americans and Hispanics or Latinos were 4.1 percent and 5.5 percent, respectively. The rate for Asians was

6.9 percent.

Michael Hout and Harvey S. Rosen used the General Social Survey to study how family background affects the probability of being self-employed. The authors found that blacks

have lower rates of self-employment than whites partly because of their differing family structures. Also, within each

family type, blacks had lower self-employment rates than

whites. Hout and Rosen contend that there is no indication

that the rates of self-employment between blacks and whites

will converge in the near future.12

Other research carried out by Robert W. Fairlie and Bruce

D. Meyer examined trends in white and black male self-employment in nonagricultural industries from 1910 to 1997.

The authors found that self-employment rates declined

through 1970 and then rose. With regard to white males,

trends in business ownership were due to falling rates within

industries, ending in 1970, and then counterbalanced by a

continued shift towards industries with a large proportion of

self-employed workers. Blacks were much less likely than

whites to be self-employed over the 1910–97 period. In their

1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04

6

6.5

7

7.5

8

8.5

6

6.5

7

7.5

8

8.5

Chart 1. Nonagricultural self-employment as a percent of total nonagricultural employment,

1990–2004, seasonally adjusted

Percent Percent

NOTE: Shaded areas represent recessions. Data are monthly.
Monthly Labor Review July 2004 17

study, Fairlie and Meyer argue that, absent continuing forces

holding back self-employment among blacks, a simple intergenerational model suggests a rapid convergence of black

and white rates of self-employment.13

Workers who were natives of the United States were somewhat more likely than the foreign-born to be self-employed.

The self-employment rate for U.S. citizens was 7.6 percent,

compared with 6.7 percent for the foreign-born.14 Foreignborn workers who were naturalized citizens had a higher

probability of being self-employed than their counterparts

who were noncitizens; the self-employment rate for naturalized citizens was 8.3 percent, in contrast with 5.6 percent for

noncitizens. Among the foreign-born—both naturalized citizens and noncitizens combined—natives of South Korea had

the highest probability of owning their own business; about

one in every five of these workers were self-employed.

Self-employed workers were found at both ends of the

educational spectrum. Among workers age 25 and older,

those with either an advanced degree or with less than a high

school diploma had relatively high self-employment rates—

9.2 percent. The probability of being a business owner was

somewhat lower for workers with an associate degree, high

Table 3.

Unincorporated self-employed Incorporated self-employed Wage and salary workers1

Total Men Women Total Men Women Total Men Women

Age

 Total, 16 years and older:

 Thousands ........................... 10,295 6,430 3,865 4,956 3,626 1,330 122,358 63,236 59,123

 Percent ................................. 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

16 to 19 years ........................ .9 1.0 .7 .2 .2 .5 4.7 4.5 5.0

20 to 24 years ........................ 2.6 2.8 2.3 1.0 .9 1.2 10.7 10.8 10.6

25 to 34 years ........................ 15.6 15.3 16.2 11.6 11.5 12.0 23.0 24.1 21.8

35 to 44 years ........................ 26.4 25.4 28.0 28.7 29.0 27.8 25.1 25.4 24.8

45 to 54 years ........................ 27.1 27.2 27.0 30.8 30.6 31.4 22.5 21.7 23.4

55 to 64 years ........................ 18.8 19.1 18.3 20.5 19.9 22.0 11.1 10.7 11.6

65 years and older ................. 8.5 9.2 7.5 7.2 7.8 5.6 2.7 2.7 2.8

 Race and Hispanic or

Latino ethnicity

White ...................................... 88.2 88.7 87.3 90.1 90.5 88.9 82.2 83.6 80.7

Black or African American ..... 5.8 5.6 6.1 4.1 4.2 3.9 11.4 10.0 12.9

Asian ...................................... 3.9 3.5 4.4 4.6 4.2 5.9 4.2 4.3 4.1

Hispanic or Latino .................. 9.3 10.2 7.7 5.5 5.4 5.9 13.2 15.2 11.0

 Country of birth

 and U.S. citizenship status

U.S. born ................................ 87.2 86.6 88.1 87.0 86.8 87.3 85.5 83.4 87.8

Foreign-born .......................... 12.8 13.4 11.9 13.1 13.2 12.8 14.5 16.6 12.2

 U.S. citizen ........................... 6.4 6.4 6.3 8.6 8.6 8.6 5.5 5.6 5.4

 Not a U.S. citizen ................. 6.4 7.0 5.6 4.5 4.6 4.1 9.0 11.0 6.8

 Educational attainment

 Total, 25 years and older:

 Thousands ........................... 9,936 6,186 3,750 4,896 3,586 1,310 103,454 53,553 49,901

 Percent ................................. 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Less than a high school

 diploma ............................... 10.6 12.7 7.3 4.9 5.1 4.4 9.9 11.8 7.8

High school graduates,

 no college ........................... 31.4 32.4 29.7 23.0 23.0 23.1 30.5 30.6 30.5

Some college, no degree ...... 18.3 17.7 19.2 18.3 17.6 20.2 17.8 17.0 18.5

Associate degree ................... 8.5 7.1 10.8 7.4 7.0 8.6 9.8 8.5 11.1

College graduates ................. 31.2 30.1 33.0 46.3 47.3 43.6 32.1 32.1 32.0

 Advanced degree ............... 12.3 12.2 12.5 17.9 18.8 15.5 10.9 11.2 10.6

 Characteristic

1Data exclude the incorporated self-employed.

NOTE: Detail for the above race and Hispanic or Latino groups will not sum

to total because data for the “other races” group are not presented and

Hispanics or Latinos are included in both the white and black population

groups. Detail for other characteristics may not sum to totals due to

rounding. In addition, data exclude unpaid family workers.

Unincorporated self-employed, incorporated self-employed, and wage and salary workers by sex and

selected characteristics, 2003 annual averages
18

Self-employment in the U.S.

Monthly Labor Review July 2004

school graduates with no college, and workers with some

college but no degree.

Among the incorporated self-employed, the rate of selfemployment for individuals with advanced degrees (6.5 percent) was more than three times the rate for their counterparts with less than a high school diploma—2.1 percent.

Employment among the incorporated self-employed tends to

be concentrated in those occupations—management, professional and related occupations—in which a large proportion

of workers have advanced degrees. For instance, above-average incorporated self-employment rates were found among

dentists (40.1 percent); veterinarians (30.9 percent); physicians and surgeons (18.3 percent); and lawyers, judges, magistrates, and other judicial workers (11.5 percent).

Tables 5 and 6 show trends in nonagricultural self-employment rates since 1989 for self-employed workers and

incorporated business owners by sex, race, Hispanic or

Latino ethnicity, and age. Over this period, the incidence of

self-employment has consistently been more common among

men, whites, and older workers. However, the rates of selfemployment among most of the unincorporated groups have

been falling, whereas the incidence of self-employment

among the vast majority of the incorporated groups has been

rising.

Work schedules and multiple jobholding. In terms of work

schedules, about one in every three of the nonagricultural

self-employed worked part time—that is, 1 to 34 hours per

week. There were, however, differences between men and

women. Only about one-fourth of all self-employed men

worked part time, compared with nearly half of their female

counterparts.

Table 4. Self-employment rates by sex and selected characteristics, 2003 annual averages

Self-employment rates1

 Characteristic Unincorporated self-employed Incorporated self-employed

Total Men Women Total Men Women

 Age

 Total, 16 years and older ......................... 7.5 8.8 6.0 3.6 4.9 2.1

16 to 19 years .............................................. 1.5 2.2 .9 .2 .2 .2

20 to 24 years .............................................. 2.0 2.5 1.4 .4 .5 .3

25 to 34 years .............................................. 5.3 5.9 4.6 1.9 2.5 1.2

35 to 44 years .............................................. 7.8 8.7 6.7 4.1 5.6 2.3

45 to 54 years .............................................. 8.7 10.5 6.8 4.8 6.7 2.7

55 to 64 years .............................................. 11.7 14.1 9.0 6.1 8.3 3.7

65 years and older ....................................... 19.1 22.8 14.3 7.8 10.9 3.7

 Race and Hispanic or Latino ethnicity

White ............................................................ 8.0 9.2 6.4 3.9 5.3 2.3

Black or African American ........................... 4.1 5.3 3.0 1.4 2.2 .7

Asian ............................................................ 6.9 7.4 6.3 4.0 4.9 2.9

Hispanic or Latino ........................................ 5.5 6.3 4.3 1.6 1.9 1.1

 Country of birth

 and U.S. citizenship status

U.S. born ...................................................... 7.6 9.1 6.0 3.7 5.1 2.1

Foreign-born ................................................ 6.7 7.3 5.8 3.3 4.0 2.2

 U.S. citizen ................................................. 8.3 9.6 6.8 5.4 7.3 3.2

 Not a U.S. citizen ....................................... 5.6 5.9 5.0 1.9 2.2 1.3

 Educational attainment

 Total, 25 years and older ......................... 8.4 9.8 6.8 4.1 5.7 2.4

Less than a high school

 diploma ...................................................... 9.2 10.8 6.4 2.1 2.5 1.4

High school graduates,

 no college .................................................. 8.7 10.4 6.7 3.1 4.3 1.8

Some college, no degree ............................ 8.6 10.1 7.0 4.2 5.8 2.6

Associate degree ......................................... 7.5 8.4 6.6 3.2 4.8 1.9

College graduates ....................................... 8.0 9.0 6.9 5.9 8.2 3.2

 Advanced degree ...................................... 9.2 10.2 7.8 6.5 9.1 3.4

1Self-employment rates are calculated by dividing the number of self-employed workers in a specified worker group by total employment in the same

worker group.
Monthly Labor Review July 2004 19

[Percent]

Black or Hispanic 16 to 20 to 25 to 35 to 45 to 55 to 65

 Year Total Men Women White African Asian or 19 24 34 44 54 64 years

American Latino years years years years years years and

older

1989 ........ 7.5 9.0 5.8 8.0 3.3 – 5.9 1.2 2.3 5.8 8.4 9.7 11.6 19.8

1990 ........ 7.5 8.9 5.9 8.0 3.6 – 5.4 1.1 2.3 5.9 8.5 9.9 11.9 19.0

1991 ........ 7.7 9.2 6.0 8.2 3.7 – 5.3 1.0 2.3 6.0 8.6 10.2 11.7 19.9

1992 ........ 7.4 9.1 5.6 7.9 3.5 – 5.0 1.3 2.1 5.6 8.0 9.8 11.5 19.6

1993 ........ 7.6 9.4 5.6 8.1 3.5 – 5.4 1.1 2.1 5.8 8.2 9.8 12.2 19.8

19941 ....... 7.5 8.7 6.2 8.0 3.6 – 5.2 2.1 2.2 5.6 8.0 9.4 12.1 20.0

1995 ........ 7.3 8.4 6.1 7.8 3.7 – 4.8 1.8 2.2 5.4 7.7 9.3 11.4 19.4

1996 ........ 7.3 8.3 6.1 7.8 3.6 – 5.1 1.2 2.3 5.3 7.7 9.3 11.1 19.3

1997 ........ 7.2 8.2 6.0 7.6 3.4 – 5.0 1.2 2.1 5.1 7.7 9.0 11.7 19.8

1998 ........ 7.0 8.0 5.8 7.5 3.4 – 4.7 .8 2.0 4.9 7.6 8.9 11.2 18.5

1999 ........ 6.8 7.8 5.6 7.2 3.5 – 5.0 .9 2.1 4.9 7.2 8.5 10.7 17.7

20002 3 .... 6.8 7.8 5.7 7.2 4.1 6.7 4.8 1.4 2.0 4.9 7.4 8.6 10.6 16.9

20013 ....... 6.8 7.7 5.7 7.2 3.9 6.4 5.2 1.4 2.2 4.7 7.2 8.3 10.7 16.6

20023 ....... 6.7 7.6 5.6 7.1 3.9 5.7 5.2 1.5 2.1 4.9 7.0 8.2 9.9 15.3

20033 ....... 6.9 8.0 5.7 7.3 4.0 6.8 5.5 1.5 1.9 5.0 7.4 8.2 10.5 15.3

1 Data, beginning in 1994, are not directly comparable with data for earlier

years due to a major redesign of the CPS and the introduction of censusbased population controls, adjusted for the estimated undercount.

2 Data not directly comparable due to incorporation of Census 2000

population controls.

3 Data are not directly comparable due to adaptation of the North

American Industry Classification System (NAICS) and the Standard

Occupational Classification (SOC) system.

NOTE: Dash indicates data not available.

Table 5.

1989 ....... 2.9 4.2 1.3 3.2 0.5 – 1.4 0.1 0.3 1.6 3.7 4.6 5.0 7.2

1990 ....... 2.9 4.2 1.4 3.1 .7 – 1.1 .1 .3 1.7 3.5 4.8 4.9 7.0

1991 ....... 2.8 4.1 1.3 3.1 .6 – 1.1 .1 .3 1.6 3.5 4.6 5.0 6.8

1992 ....... 2.9 4.3 1.4 3.2 .5 – 1.2 .1 .3 1.5 3.4 4.9 5.4 7.2

1993 ....... 2.9 4.2 1.4 3.2 .5 – 1.4 .1 .3 1.5 3.4 4.6 5.5 7.1

19941 ...... 3.4 4.6 2.0 3.7 .9 – 1.4 .9 .7 1.9 3.8 5.0 6.1 8.5

1995 ....... 3.3 4.5 2.0 3.6 .9 – 1.5 .7 .7 1.9 3.7 4.8 5.9 7.9

1996 ....... 3.2 4.5 1.7 3.5 .9 – 1.4 .1 .5 1.8 3.6 4.7 5.6 7.3

1997 ....... 3.3 4.6 1.8 3.6 .8 – 1.4 .1 .3 1.8 3.7 4.9 5.9 8.2

1998 ....... 3.2 4.5 1.8 3.5 .9 – 1.4 .1 .3 1.7 3.7 4.5 6.1 7.7

1999 ....... 3.2 4.4 1.8 3.4 1.0 – 1.4 .1 .3 1.7 3.6 4.4 5.7 7.8

20002 3 ... 3.2 4.5 1.8 3.5 1.2 3.5 1.4 .1 .3 1.7 3.7 4.5 5.7 7.7

20013 ...... 3.2 4.4 1.8 3.4 1.2 4.2 1.3 .1 .4 1.7 3.7 4.4 5.7 7.5

20023 ...... 3.3 4.7 1.8 3.6 1.1 4.1 1.2 .1 .3 1.7 3.7 4.6 6.0 7.7

20033 ...... 3.6 4.9 2.0 3.9 1.4 4.0 1.6 .2 .4 1.9 4.1 4.7 6.1 7.7

Table 6. 

[Percent]

1 Data, beginning in 1994, are not directly comparable with data for

earlier years due to a major redesign of the CPS and the introduction of

census-based population controls, adjusted for the estimated undercount.

2 Data not directly comparable due to incorporation of Census 2000

population controls.

3 Data are not directly comparable due to adaptation of the North

American Industry Classification System (NAICS) and the Standard

Occupational Classification (SOC) system.

NOTE: Dash indicates data not available.

Year Total Men White

Black

or

African

American

Asian

Hispanic

or

Latino

16 to

19

years

20 to

24

years

25 to

34

years

35 to

44

years

45 to

54

years

55 to

64

years

65

years

and

older

Incidence of incorporated self-employment in nonagricultural industries by sex, race, Hispanic or Latino

ethnicity, and age, annual averages,1989–2003

Incidence of unincorporated self-employment in nonagricultural industries by sex, race, Hispanic or Latino

ethnicity, and age, annual averages,1989–2003

Women
20

Self-employment in the U.S.

Monthly Labor Review July 2004

The following tabulation shows the percent distribution

of hours at work and average weekly hours for nonagricultural self-employed workers in 2003:

Hours worked per week Both sexes Men Women

Total at work (in thousands) .... 8,750 5,422 3,328

Percent distribution .................. 100.0 100.0 100.0

1 to 14 hours ............................ 10.3 6.7 16.1

15 to 34 hours .......................... 23.2 19.0 30.0

35 hours or more ...................... 66.5 74.3 53.9

 35 to 40 hours ........................ 32.2 35.0 27.6

 41 to 48 hours ........................ 6.9 7.7 5.7

 49 hours or more .................... 27.4 31.6 20.6

Average weekly hours .............. 38.4 41.3 33.8

Among the self-employed, men were much more likely

than women to put in a long workweek; for instance, 31.6

percent of men worked 49 hours or more per week, in contrast with 20.6 percent of women. The average workweek

for men was nearly 8 hours longer than that for women (41.3

hours versus 33.8 hours).

Since 1994, monthly data on multiple jobholding have

been available from the CPS. In the survey, a quarter of respondents are asked questions about the occupation, industry, and class of worker of their secondary job. In 2003, 1.5

million workers were classified as wage and salary on their

main job and self-employed on their secondary job; these

workers, however, made up a small proportion of total employment—only 1.1 percent. As is the case with total multiple jobholding, this proportion has declined steadily since

the mid-1990s.

Industry and occupation

Industry. The probability of being self-employed was highest for workers in agriculture, forestry, fishing, and hunting;

construction; “other services”; and, professional and business services. (See table 7.)

Specific industries within agriculture, forestry, fishing, and

hunting that had high rates of self-employment included animal production (52.9 percent) and crop production (38.1

percent). Within the “other services” sector, self-employment rates were highest for barber shops (48.8 percent), personal and household goods repair and maintenance (43.1

percent), nail salons and other personal care services (41.8

percent), and beauty salons (33.5 percent). In the professional and business services sector, the proportion of employment made up of business owners was highest in offices

of other health care practitioners (39.4 percent); specialized

design services (36.9 percent); other schools, institution, and

education services (32.6 percent); landscaping services (29.4

percent); and child day care services (29.4 percent).

Occupation. The self-employed are widely distributed across

occupations. (See table 7.) Occupational categories that had

the highest self-employment rates were construction and extraction; management, business, and financial; and sales and

related occupations.

Construction and extraction occupations with relatively

high self-employment rates included carpet, floor, and tile

installers and finishers (33.4 percent); painters, construction

and maintenance (26.5 percent); and drywall installers, ceiling tile installers, and tapers (23.1 percent). Specific occupations within the management, business, and financial category with large proportions of business owners included

management analysts (27.8 percent); construction managers

(25.1 percent); property, real estate, and community association managers (21.8 percent); and tax preparers (19.1 percent). Within the sales and related occupations category, selfemployment rates were highest for door-to-door sales workers, street vendors, and related workers (49.9 percent); real

estate brokers and agents (29.4 percent); and first line supervisors/managers of retail sales workers (15.7 percent).

A number of jobs in the professional and related occupations category lend themselves to business ownership. For

instance, the rate of self-employment was very high for artists and related workers (46.9 percent); writers and authors

(46.8 percent); musicians, singers, and related workers (43.0

percent); and photographers (38.3 percent).

Regions

In 2003, the likelihood of being a business owner was highest in the western region. The self-employment rate in the

West was 8.9 percent, compared with 7.4 percent in the

South, 6.9 percent in the Midwest, and 6.6 percent in the

Northeast.15 (See table 8.)

By far, the largest proportion of foreign-born workers was

in the West; nearly one in every four workers in this region

was foreign-born. Among the foreign-born, the self-employment rate for individuals in the West (7.7 percent) was aboveaverage, and higher than the rates for their counterparts in

the South (6.7 percent), Northeast (6.0 percent), and Midwest (4.7 percent).

As is the case for the entire Nation, men were more likely

than women to be self-employed in every region. Among the

incorporated self-employed, the disparity in self-employment

rates was even greater; in every region, men were at least

twice as likely as women to own their own business.

Presence of paid employees

Beginning in January 1995, two questions were added to the

CPS to provide information on the self-employed that would

allow these individuals to be classified as employers, or al-
Monthly Labor Review July 2004 21

ternatively, persons who worked on their own account. Specifically, the unincorporated self-employed were asked if they

had any paid employees, and if so, the number of employees

they usually employed. Table 9 shows data on the presence

of paid employees from 1995–2003. The estimates show

that the incidence of employment of other individuals in selfemployed business is uncommon. Indeed, in 2003, only 16.9

percent of the self-employed had paid employees. Interestingly, this proportion had declined from 20.7 percent in 1995.

Of the 1.7 million with employees in 2003, over threefourths had just 1 to 4 employees; the share with more than

20 was very small—less than 4 percent. These proportions

were fairly consistent over the 1995–2003 period.16 Men

were about twice as likely as women to have paid employees. In 2003, about 1 in every 5 self-employed men had

employees, compared with 1 in every 10 women. For both

groups, the proportions have declined slightly since the data

were first collected in 1995. In terms of number of employees, the pattern between men and women was very similar,

and about the same as for all self-employed workers.

Table 7. Self-employment rates by sex, occupation and industry, 2003 annual averages

[Percent]

Self-employment rates1

Occupation and industry Unincorporated self-employed Incorporated self-employed

Total Men Women Total Men Women

 Occupation

 Total, age 16 and older ................................................ 7.5 8.8 6.0 3.6 4.9 2.1

Management, professional, and related occupations ... 8.7 11.3 6.2 5.8 8.8 2.7

 Management, business, and financial occupations .... 12.3 14.9 8.7 9.7 12.9 5.3

 Professional and related occupations ......................... 6.2 7.9 4.8 2.9 5.0 1.3

Service occupations ...................................................... 7.7 5.9 9.0 1.1 1.5 .9

Sales and office occupations ........................................ 5.5 7.2 4.5 3.5 5.8 2.3

 Sales and related occupations .................................... 10.0 10.7 9.3 6.0 8.7 3.2

 Office and administrative support occupations ........... 1.8 1.1 2.0 1.5 .9 1.7

Natural resources, construction, and maintenance

occupations ................................................................ 12.6 12.7 11.0 3.3 3.3 2.2

 Farming, fishing, and forestry occupations ................. 6.4 7.5 2.5 1.6 1.7 .9

 Construction and extraction occupations .................... 16.5 16.3 23.7 4.3 4.3 4.7

 Installation, maintenance, and repair occupations ...... 7.7 7.8 6.9 2.0 2.1 .9

Production, transportation, and material moving

occupations ................................................................ 3.8 4.0 3.3 1.2 1.4 .6

 Production occupations ............................................... 3.2 3.1 3.6 .9 1.1 .5

 Transportation and material moving occupations ....... 4.5 4.8 2.5 1.6 1.6 1.0

 Industry

 Total, age 16 and older ................................................ 7.5 8.8 6.0 3.6 4.9 2.1

Agriculture, forestry, fishing, and hunting ...................... 41.8 40.9 44.3 6.4 6.0 7.6

Mining ............................................................................ 1.7 1.5 5.1 4.2 4.0 2.0

Construction .................................................................. 16.9 17.6 10.9 7.2 6.9 10.1

Manufacturing ................................................................ 1.9 1.9 2.1 2.1 2.4 1.4

 Durable goods ............................................................. 1.9 1.9 1.8 2.3 2.5 1.6

 Nondurable goods ....................................................... 2.0 1.7 2.5 1.8 2.3 1.0

Wholesale and retail trade ............................................. 6.0 5.6 6.5 4.4 5.7 2.9

 Wholesale trade ........................................................... 5.3 5.5 4.9 6.3 7.0 4.8

 Retail trade .................................................................. 6.2 5.6 6.8 3.9 5.2 2.6

Transportation and public utilities .................................. 5.1 6.0 2.5 2.5 2.9 1.5

Information ..................................................................... 4.1 4.8 3.2 2.9 3.8 1.7

Financial activities ......................................................... 7.6 10.4 5.3 4.9 7.6 2.7

Professional and business services .............................. 13.7 14.8 12.3 7.1 8.9 4.7

Education and health services ...................................... 4.0 4.1 4.0 1.5 3.8 .7

Leisure and hospitality ................................................... 5.9 6.9 4.9 2.8 3.6 2.1

Other services ............................................................... 15.7 16.6 14.9 4.4 6.2 2.7

1 Self-employment rates are calculated by dividing the number of self-employed workers in a specified worker group by total employment in the same worker group.
22

Self-employment in the U.S.

Monthly Labor Review July 2004

[Percent]

Census region and division Unincorporated self-employed Incorporated self-employed

Total Men Women Total Men Women

Total, United States ...................... 7.5 8.8 6.0 3.6 4.9 2.1

Northeast .................................... 6.6 7.9 5.2 3.6 5.2 1.9

New England ............................. 7.5 8.9 6.0 3.4 5.0 1.8

Middle Atlantic ........................... 6.3 7.5 4.9 3.7 5.3 2.0

Midwest ....................................... 6.9 7.9 5.8 3.6 5.0 1.9

East North Central .................... 6.1 6.9 5.3 3.5 4.9 1.9

West North Central ................... 8.6 10.1 7.0 3.7 5.2 2.1

South ........................................... 7.4 9.0 5.6 3.7 5.1 2.2

South Atlantic ............................ 6.6 7.9 5.1 4.4 6.2 2.4

East South Central .................... 7.6 9.3 5.6 2.9 4.1 1.7

West South Central ................... 8.7 10.6 6.4 3.1 4.0 2.0

West ............................................ 8.9 10.0 7.6 3.4 4.4 2.2

Mountain ................................... 8.0 8.7 7.2 4.8 6.2 3.1

Pacific ........................................ 9.3 10.6 7.8 2.8 3.6 1.8

1Self-employment rates are calculated by dividing the number of self-employed workers in a specified worker group by total employment in the same

worker group.

Table 9. Self-employed workers by sex and presence and number of paid employees, annual averages, 1995–2003

 Characteristic 1995 1996 1997 1998 1999 2000 2001 2002 2003

Total, age 16 and older (thousands) ....... 10,409 10,580 10,501 10,355 10,053 9,949 9,855 9,627 10,319

Percent with no paid employees ....... 79.3 79.6 79.6 79.6 80.6 80.9 80.9 82.0 83.1

Percent with paid employees ............ 20.7 20.4 20.4 20.4 19.4 19.1 19.1 18.0 16.9

Total with paid employees

(thousands) .................................. 2,159 2,155 2,143 2,115 1,954 1,900 1,883 1,737 1,743

Percent ......................................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

1–4 employees .................................. 78.6 76.7 74.2 77.2 75.7 74.3 77.4 74.4 76.7

5–9 employees .................................. 13.8 15.4 17.1 14.6 14.9 15.5 13.2 15.9 14.4 

10–19 employees .............................. 5.2 5.3 5.8 6.0 5.1 5.9 6.5 5.6 5.3

20 or more employees ...................... 2.3 2.6 2.9 2.3 4.2 4.4 3.0 4.1 3.7

Men, age 16 and older (thousands) ....... 6,556 6,646 6,596 6,517 6,299 6,186 6,106 5,978 6,427

Percent with no paid employees ....... 74.5 75.0 75.4 75.6 76.6 77.1 76.7 78.2 79.7

Percent with paid employees ............ 25.5 25.0 24.6 24.5 23.4 22.9 23.3 21.8 20.3

Total with paid employees

(thousands) .................................. 1,673 1,662 1,625 1,594 1,471 1,418 1,424 1,301 1,307

Percent ......................................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

1–4 employees .................................. 78.3 76.8 74.5 77.4 76.0 74.8 76.5 74.8 75.5

5–9 employees .................................. 14.0 15.6 17.4 14.3 14.8 14.5 14.1 15.6 15.1

10–19 employees .............................. 5.1 4.9 5.1 6.0 4.7 6.1 6.3 5.3 5.3

20 or more employees ...................... 2.5 2.8 3.0 2.3 4.5 4.7 3.1 4.2 4.0

Women, age 16 and older (thousands) .. 3,853 3,934 3,905 3,838 3,754 3,763 3,749 3,649 3,892

Percent with no paid employees ....... 87.4 87.5 86.7 86.4 87.1 87.2 87.7 88.0 88.8

Percent with paid employees ............ 12.6 12.5 13.3 13.6 12.9 12.8 12.3 12.0 11.2

Total with paid employees

(thousands) .................................. 486 492 519 522 483 483 460 437 437

Percent ......................................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

1–4 employees .................................. 79.8 76.6 73.2 76.4 74.7 72.7 80.2 73.2 79.9

5–9 employees .................................. 12.8 14.6 16.4 15.3 15.5 18.4 10.2 16.7 12.1

10–19 employees .............................. 5.8 6.7 7.9 5.7 6.4 5.4 7.0 6.6 5.3

20 or more employees ...................... 1.9 2.0 2.3 2.3 3.5 3.5 2.6 3.2 2.7

NOTE: The estimates shown above use sample weights based on

population controls developed from the 1990 Census. The 2003 estimates

use sampling based on population controls developed from Census 2000.

In addition, the 2003 estimates use revised classification and editing

systems for class of worker, industry, and occupation. These estimates were

tabulated using the outgoing rotation groups only. Because the sample for

these tabulations is limited to one quarter of the full CPS sample, estimates

of the unincorporated self-employed may not exactly match estimates

derived from the full sample. The reliability also will be less than the

reliability of the estimates based on the full CPS sample.

Self-employment rates1

Table 8. Self-employment rates by sex, region and census division, 2003 annual averages
Monthly Labor Review July 2004 23

AFTER STEADILY DECLINING FOR many years, the rate of selfemployment in the United States has edged up recently. Although self-employment was much more common in the late1940s, it still accounts for a substantial proportion of total

employment in 2003. The reduced incidence of self-employment is largely due to the decline in the importance of agriculture and unpaid family work over the post-World War II

period and the accompanying rise in incorporated self-employment and wage and salary work or “paid employment.”

In 2003, self-employed workers were more likely to be

ACKNOWLEDGMENT: The author thanks Kenneth W. Robertson for

tabulating the data on self-employed workers by presence and number of

paid employees.

1

 The Current Population Survey (CPS) is a monthly sample survey of

about 60,000 households that provides information on the demographic

characteristics of the labor force and employment status of the

noninstitutional population age 16 years and older.

2

 For more information on the impact of the CPS redesign on the selfemployment estimates, see Anne E. Polivka and Stephen M. Miller, “The

CPS after the Redesign: Refocusing the Economic Lens,” in John

Haltiwanger, Marilyn Manser, and Robert Topel, eds., Labor Statistics

Measurement Issues (National Bureau of Economic Research, Studies in

Income and Wealth Volume 60) pp. 249–86.

3

 For a detailed explanation of changes to the CPS, see Mary Bowler,

Randy E. Ilg, Stephen Miller, Ed Robison, and Anne Polivka,“Revisions

to the Current Population Survey Effective in January 2003,” Employment

and Earnings (Bureau of Labor Statistics, February 2003).

4

 As with total employment, the 1994 increase was particularly

pronounced among women. See Polivka and Miller, “The CPS after the

Redesign,” pp. 275–77.

5

 See Marilyn E. Manser and Garnett Picot, “The role of selfemployment in U.S. and Canadian job growth,” Monthly Labor Review,

April 1999, pp. 10–25.

6

 See Ellen R. Rissman, “Self-employment as an Alternative to

Unemployment,” Working Paper Number 34, Fourth Quarter 2003 (Federal

Reserve Bank of Chicago, 2003).

7

 See Daniel Aaronson, Ellen R. Rissman, and Daniel Sullivan,

“Assessing the jobless recovery,” Economic Perspectives, Second Quarter

2004 (Federal Reserve Bank of Chicago, 2004), pp. 6–9.

8

 The National Bureau of Economic Research, Inc., the generally

recognized arbiter of business cycle dates, has designated November 2001

as the trough of the recession that began in March 2001.

9

 Aaronson, Rissman, and Sullivan suggest that many of the new

enterprises that emerged during the most recent economic downturn will

disappear as labor market conditions in the wage and salary sector improve.

See Aaronson and others, “Assessing the jobless recovery,” p. 9.

10 For a comprehensive overview of self-employment among older

workers see Lynn A. Karoly and Julie Zissimopoulos, “Self-Employment

and the 50+ Population,” AARP Public Policy Institute Issue Paper, March

2004. In addition, see Lynn A. Karoly and Julie Zissimopoulos, “SelfEmployment Trends and Patterns Among Older U.S. Workers,” RAND Labor

and Population Working Paper, WR-136, December 2003, on the Internet

at http://www.rand.org/publications/WR/WR136/.

11 See Julie Zissimopoulos and Lynn A. Karoly, “Transitions to SelfEmployment at Older Ages: The Role of Wealth, Health, Health Insurance,

and Other Factors,” RAND Labor and Population Working Paper, WR-135,

December 2003, on the Internet at http://www.rand.org/publications/

WR/WR135/. For additional research on this topic, see Donald Bruce,

Douglas Holtz-Eakin, and Joseph Quinn, “Self-employment and Labor

Market Transitions at Older Ages,” Working Paper 2000-13 (Center for

Retirement Research at Boston College, December 2000).

12 See Michael Hout and Harvey S. Rosen, “Self-employment, Family

Background, and Race,” Journal of Human Resources, fall 2000, pp. 670–

92.

13 See Robert W. Fairlie and Bruce D. Meyer, “Trends in SelfEmployment Among White and Black Men During the Twentieth

Century,” Journal of Human Resources, fall 2000, pp. 643–69.

14 Beginning in 1994, questions on nativity and U.S. citizenship

status were added to the basic monthly CPS. Respondents are asked to

name their country of birth. Those who said that they were born in the

United States, Puerto Rico, or another U.S. territory, or that they were

born abroad of an American parent, or parents, are classified as U.S.

natives. Individuals who provided another response are classified as

foreign-born.

15 The four census regions of the United States are Northeast, South,

Midwest, and West. Within the Northeast, the New England division

includes Connecticut, Maine, Massachusetts, New Hampshire, Rhode

Island, and Vermont; and the Middle Atlantic division includes New Jersey,

New York, and Pennsylvania. Within the South, the South Atlantic

division includes Delaware, District of Columbia, Florida, Georgia,

Maryland, North Carolina, South Carolina, Virginia, and West Virginia;

the East South Central division includes Alabama, Kentucky, Mississippi,

and Tennessee; and the West South Central division includes Arkansas,

Louisiana, Oklahoma, and Texas. Within the Midwest, the East North

Central division includes Illinois, Indiana, Michigan, Ohio, and Wisconsin;

the West North Central division includes Iowa, Kansas, Minnesota,

Missouri, Nebraska, North Dakota, and South Dakota. Within the West,

the Mountain division includes Arizona, Colorado, Idaho, Montana,

Nevada, New Mexico, Utah, and Wyoming; the Pacific division includes

Alaska, California, Hawaii, Oregon, and Washington.

16 The February 2001 Contingent and Alternative Work Arrangements

Supplement to the CPS collected data on presence of employees from both

unincorporated and incorporated self-employed workers. Roughly 3 in

every 5 of the 3.9 million incorporated self-employed workers had paid

employees. Of this group, 40.9 percent employed 1 to 4 workers, while

15.7 percent had 20 or more employees.

men, white, and older. Workers in agriculture, construction,

and services had the greatest likelihood of being self-employed. As is the case with their industry distribution, business owners are concentrated in a wide range of occupations

ranging from professional, sales, and construction occupations. Data from the CPS also show that most self-employed

workers do not have paid employees and, of those who do,

most employ few workers. In addition, self-employed men

were about twice as likely as their female counterparts to

have paid employees.

Notes