October 11, 2023
Most of the patterns found in 2022 relative to the pre-pandemic period were still present in 2023.
Last summer, we examined the impact of the pandemic on trends in self-employment, comparing the first six months of 2022 with the first six months of the three years prior to the pandemic, 2017-2019. We found a substantial increase in self-employment, with most of the rise among the incorporated self-employed. This was noteworthy, because businesses that are incorporated are likely to be more enduring than those that are not. Those who take the effort to incorporate are often more committed to the business they are running.
We also found that the rise in self-employment was disproportionately among women, and especially women with young children at home. It was also primarily among Black and Hispanic women, and women without college degrees.
As the effects of the pandemic fade further into the distance, and the labor market remains strong, we updated the analysis to see the extent to which the pandemic-related changes are still present. The new findings show little difference between the results for the first six months of 2023 and the first six months of 2022. This suggests that the pandemic-related changes are likely to be enduring.
Summary of 2023 findings:
- Incorporated self-employment remains higher by about 7 percent than the pre-pandemic levels. Approximately 400,000 more people report being incorporated self-employed in 2023 than before the pandemic.
- The three industries that see a higher rise in self-employment are (1) transportation or communications, (2) personal services, and (3) recreation services.
- The share of Black and Hispanic workers who are self-employed is catching up to the share of whites, although a substantially larger share of employed whites still report being self-employed. Hispanics and Blacks saw a 33 percent and 50 percent increase, respectively, in the share reporting that they are incorporated self-employed, compared with the pre-pandemic period.
- Workers raising young children (under age 6) continue their path to becoming self-employed at a higher rate in 2023. The challenges in child care access for many might play a role in driving this increase. Women with young children see a roughly 41 percent rise in the incorporated self-employment.
- This is especially worth noting since the group of women with young children changes from year to year. Roughly one-fifth of the women with young children in 2022 no longer had a child under age six in 2023. The fact that the share of self-employment among this group actually edged up slightly indicates this change is likely to be lasting.
- The jumps in self-employment in the post-pandemic labor market are concentrated among workers without a college degree. The share of incorporated self-employment rose by almost 10 percent among workers with just a high school degree and more than 18 percent among workers with some college. It fell for workers with college and advanced degrees.
- For people aged 19 to 24, the rise in self-employment was mostly among the unincorporated self-employed. Workers between the ages of 25 and 44 saw large increases in incorporated self-employment. There was little change for workers between the ages of 45 and 64. Workers over the age of 65 also saw a large increase in the share of incorporated self-employed.
Most of the patterns found in 2022 relative to the pre-pandemic period were still present in 2023. In the first half of 2023, the overall rate of self-employment remains slightly higher than the pre-pandemic levels, and this is mostly driven by workers reporting incorporated self-employment (at 4.1 percent, compared to 3.8 percent before the pandemic).
While the changes are not large when measured as a share of the total labor force, they are large at their own percent. The share of employed Blacks who reported being self-employed in 2023 was 1.3 percentage points higher than the pre-pandemic share. However, this was an increase of 22.4 percent. For Hispanics, the increase was 0.9 percentage points, an increase of 10.7 percent. The increases are even more dramatic for Black and Hispanic women.
Insofar as we think it is important for people to be able to start their own businesses, and especially for those who have historically faced discrimination, the changes we have seen in this area since the pandemic are a big deal. It seems as though these changes will be enduring.