August 29, 2022
Key Findings
- The increase in self-employment was disproportionately among women and especially non-white women.
- The rise in self-employment is much larger among workers with young children (under age 6) in the household than those without young children.
- Although reasons for choosing self-employment vary, the ongoing childcare crisis has made it difficult for working-class mothers with young children to seek or maintain conventional payroll jobs. Part of the rise in self-employment is likely due to some of these mothers shifting from payroll jobs to self-employment in order to meet work-family responsibilities.
- The self-employment rise occurred only among less-educated workers, while the share of self-employment among workers with college degrees and beyond fell.
- Most of the rise in self-employment was among the incorporated self-employed. This is encouraging since people who take the time and effort to incorporate a business are likely more committed to it than those who do not. There were large increases in incorporated self-employment among Black and Hispanic workers and older and more educated workers.
In the wake of the pandemic shutdowns, there was a sharp rise in the number of people who reported being self-employed. This was undoubtedly due in part to the sharp rise in unemployment as millions of businesses laid off their staff, and many went out of business permanently.
However, the share of workers reporting that they are self-employed has remained above pre-pandemic levels even into 2022, when the unemployment rate has been below 4.0 percent. The percentage of employed people who report being self-employed increased from 10.0 percent in the first half of the years 2017 to 2019 to 10.4 percent in the first six months of 2022. In own percent (a term used to distinguish between a percent change and percentage point change), this amounts to a 4.0 percent increase in the share of self-employment in total employment, or an additional 600,000 people being self-employed.
This analysis examines which groups have seen the largest rise in self-employment compared to the years just before the pandemic. To avoid problems of seasonal adjustment, it uses the first half of the years 2017 to 2019 as the comparison period. The analysis in this article is similar to a recent paper from the Federal Reserve Bank of St. Louis, which also examined which groups saw the largest rise in self-employment.
The Demographic Breakdowns
The first issue examined is the extent to which the rise in self employment is among people who report being either incorporated or unincorporated in their self-employment. Usually, people who take the time and effort to incorporate are more committed to the business they are operating. Table 1 shows the comparisons between the pre-pandemic period for the unincorporated and incorporated self-employed.
| (by percent) | ||
|---|---|---|
| 2017–2019 | 2022 | |
| Not self-employed | 90.1 | 89.6 |
| Self-employed, total | 10.0 | 10.4 |
| Self-employed, not incorporated | 6.2 | 6.3 |
| Self-employed, incorporated | 3.8 | 4.1 |
Authors’ analysis of 2017–2022 Current Population Survey downloaded from IPUMS CPS, University of Minnesota, www.ipums.org
Most of the rise in self-employment after the pandemic shutdowns was among the incorporated self-employed. This increased from 3.8 percent in the pre-pandemic period to 4.1 percent in the first half of 2021. By contrast, those reporting that they are self-employed but unincorporated increased by just 0.1 percentage point from 6.2 percent to 6.3 percent.
The next issue is examining the change by gender. The increase in self-employment was considerably larger for women than for men, as shown in Table 2.
| (by percent) | ||||
|---|---|---|---|---|
| Male | Female | |||
| 2017–2019 | 2022 | 2017–2019 | 2022 | |
| Not self-employed | 87.9 | 87.7 | 92.5 | 91.8 |
| Self-employed | 12.1 | 12.4 | 7.5 | 8.2 |
Source: Authors’ analysis of 2017–2022 Current Population Survey downloaded from IPUMS CPS, University of Minnesota, www.ipums.org.
The share of employed women who report being self-employed rose from 7.5 percent in the pre-pandemic period to 8.2 percent: an increase of 0.7 percentage points. By contrast, the share of employed men who report being self-employed rose by just 0.3 percentage points (from 12.1 percent to 12.4 percent). For both men and women, the increase among incorporated self-employed was larger than for unincorporated self-employed, as shown in Table 3.
| (by percent) | ||||
|---|---|---|---|---|
| Male | Female | |||
| 2017–2019 | 2022 | 2017–2019 | 2022 | |
| Not self-employed | 87.9 | 87.7 | 92.5 | 91.8 |
| Self-employed, total | 12.1 | 12.4 | 7.5 | 8.2 |
| Self-employed, not incorporated | 7.1 | 7.1 | 5.1 | 5.4 |
| Self-employed, incorporated | 5.0 | 5.3 | 2.4 | 2.8 |
Source: Authors’ analysis of 2017–2022 Current Population Survey downloaded from IPUMS CPS, University of Minnesota, www.ipums.org.
As can be seen in Table 4, most of the increase in self-employment was among Black and Hispanic people.
| (by percent) | ||||||||
|---|---|---|---|---|---|---|---|---|
| White | Black | Hispanic | Other | |||||
| 2017–2019 | 2022 | 2017–2019 | 2022 | 2017–2019 | 2022 | 2017–2019 | 2022 | |
| Not self-employed | 88.7 | 88.5 | 94.2 | 93.2 | 91.7 | 90.1 | 91.0 | 91.0 |
| Self-employed | 11.3 | 11.5 | 5.8 | 6.8 | 8.4 | 9.9 | 9.0 | 9.1 |
Source: Authors’ analysis of 2017–2022 Current Population Survey downloaded from IPUMS CPS, University of Minnesota, www.ipums.org.
The share of employed Blacks who reported being self-employed rose from 5.8 percent to 6.8 percent: an increase of 1.0 percentage point. Measured in own percent, this is more than a 17.0 percent rise in the share of Blacks who report being self-employed. For Hispanics, there was a 1.5 percentage point rise in shares from 8.4 percent to 9.9 percent. This is also more than a 17.0 percent rise, measured in own percent.
By contrast, the rise in self-employment among whites was just 0.2 percent, from 11.3 to 11.5 percent. Despite this smaller increase, a considerably larger share of employed whites still reports being self-employed than Blacks or Hispanics.
This racial/ethnic breakdown also shows up in the incorporated self-employed in Table 5.
| (by percent) | ||||||||
|---|---|---|---|---|---|---|---|---|
| White | Black | Hispanic | Other | |||||
| 2017–2019 | 2022 | 2017–2019 | 2022 | 2017–2019 | 2022 | 2017–2019 | 2022 | |
| Not self-employed | 88.7 | 88.5 | 94.2 | 93.2 | 91.7 | 90.1 | 91.0 | 91.0 |
| Self-employed, total | 11.3 | 11.5 | 5.8 | 6.8 | 8.4 | 9.9 | 9.0 | 9.1 |
| Self-employed, not incorporated | 6.7 | 6.7 | 3.8 | 3.9 | 6.2 | 6.9 | 5.3 | 5.3 |
| Self-employed, incorporated | 4.6 | 4.8 | 2.0 | 2.9 | 2.1 | 3.0 | 3.7 | 3.8 |
Source: Authors’ analysis of 2017–2022 Current Population Survey downloaded from IPUMS CPS, University of Minnesota, www.ipums.org.
The share of employed whites who report being incorporated self-employed rose 0.2 percentage points, from 4.6 percent to 4.8 percent. For Blacks, the increase was 0.9 percentage points, from 2.0 percent to 2.9 percent. In own percent, this is a 45 percent rise. Hispanics also had a 0.9 percentage point increase in the share reporting that they are incorporated self-employed, from 2.1 percent to 3.0 percent.
Combining race, ethnicity, and gender, the increase in self-employment is concentrated among non-white women, as shown in Table 6.
| (by percent) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Women | ||||||||
| White | Black | Hispanic | Other | |||||
| 2017–2019 | 2022 | 2017–2019 | 2022 | 2017–2019 | 2022 | 2017–2019 | 2022 | |
| Not self-employed | 91.4 | 90.8 | 96.0 | 94.8 | 94.0 | 92.6 | 92.9 | 92.3 |
| Self-employed | 8.6 | 9.2 | 4.1 | 5.2 | 6.1 | 7.4 | 7.1 | 7.7 |
Source: Authors’ analysis of 2017–2022 Current Population Survey downloaded from IPUMS CPS, University of Minnesota, www.ipums.org.
| (by percent) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Men | ||||||||
| White | Black | Hispanic | Other | |||||
| 2017–2019 | 2022 | 2017–2019 | 2022 | 2017–2019 | 2022 | 2017–2019 | 2022 | |
| Not self-employed | 86.4 | 86.5 | 92.2 | 91.4 | 89.9 | 88.2 | 89.3 | 89.7 |
| Self-employed | 13.6 | 13.6 | 7.8 | 8.6 | 10.1 | 11.8 | 10.7 | 10.3 |
Source: Authors’ analysis of 2017–2022 Current Population Survey downloaded from IPUMS CPS, University of Minnesota, www.ipums.org.
Among white men, there is no change in the share of self-employment from the pre-pandemic period (see Table 7). For Black men, there is an increase of 0.8 percentage points, and for Hispanic men a rise of 1.7 percentage points. The share of self-employment among white women rose by 0.6 percentage points; it rose by 1.1 percentage points for Black women and 1.3 percentage points for Hispanic women. It is worth noting that even with these increases, white men still have the highest rates of self-employment.
The sharpest rises in self-employment were among workers with young children (under age 6) in the house, as shown in Table 8.
| (by percent) | ||||
|---|---|---|---|---|
| No Child Under Age 6 at Home | Child Under Age 6 at Home | |||
| 2017–2019 | 2022 | 2017–2019 | 2022 | |
| Not self-employed | 89.9 | 89.5 | 91.0 | 90.0 |
| Self-employed, total | 10.1 | 10.5 | 9.0 | 10.0 |
| Self-employed, not incorporated | 6.3 | 6.3 | 5.5 | 5.9 |
| Self-employed, incorporated | 3.8 | 4.1 | 3.5 | 4.1 |
Source: Authors’ analysis of 2017–2022 Current Population Survey downloaded from IPUMS CPS, University of Minnesota, www.ipums.org.
As can be seen above, there is a 0.4 percentage point rise in the share of self-employed among people with no kids under age 6. By contrast, the increase is 1.0 percentage point for workers who have a child under age 6 in the household. Notably, this increase is most prominent for women with young children (see Table 9). For men with a child under age 6 at home, self-employment increased from 10.6 to 11.4 percent, a change of roughly 7.5 percent. Women in the same category saw self-employment rise more than twice as fast, going from 7.1 to 8.3 percent, a 16.9 percent increase in own percent. Women with children under 6 also saw a much larger rise in incorporated self-employment than men (36.4 percent versus 8.7 percent).
| (by percent) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Men | Women | |||||||
| No Child Under Age 6 at Home | Child Under Age 6 at Home | No Child Under Age 6 at Home | Child Under Age 6 at Home | |||||
| 2017– 2019 |
2022 | 2017– 2019 |
2022 | 2017– 2019 |
2022 | 2017– 2019 |
2022 | |
| Not self-employed | 87.6 | 87.5 | 89.4 | 88.6 | 92.4 | 91.8 | 92.9 | 91.7 |
| Self-employed, total | 12.4 | 12.5 | 10.6 | 11.4 | 7.6 | 8.2 | 7.1 | 8.3 |
| Self-employed, not incorporated | 7.3 | 7.2 | 6.0 | 6.4 | 5.1 | 5.4 | 4.9 | 5.3 |
| Self-employed, incorporated | 5.1 | 5.3 | 4.6 | 5.0 | 2.4 | 2.8 | 2.2 | 3.0 |
Source: Authors’ analysis of 2017–2022 Current Population Survey downloaded from IPUMS CPS, University of Minnesota, www.ipums.org.
Examining self-employment by education levels, it is notable that the increase in self-employment is entirely among less-educated workers, as shown in Table 10.
| (by percent) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| No High School Diploma | High School Diploma | Some College | Bachelor’s | More Than Bachelor’s | ||||||
| 2017– 2019 |
2022 | 2017– 2019 |
2022 | 2017– 2019 |
2022 | 2017– 2019 |
2022 | 2017– 2019 |
2022 | |
| Not self-employed | 90.1 | 89.6 | 90.4 | 89.7 | 90.9 | 89.6 | 89.3 | 89.7 | 89.1 | 89.2 |
| Self-employed, total | 9.9 | 10.4 | 9.6 | 10.3 | 9.1 | 10.4 | 10.7 | 10.3 | 11.0 | 10.8 |
| Self-employed, not incorporated | 8.2 | 8.5 | 6.5 | 6.9 | 5.8 | 6.5 | 5.8 | 5.3 | 5.7 | 5.3 |
| Self-employed, incorporated | 1.7 | 1.9 | 3.1 | 3.4 | 3.3 | 3.9 | 4.9 | 5.0 | 5.3 | 5.5 |
Source: Authors’ analysis of 2017–2022 Current Population Survey downloaded from IPUMS CPS, University of Minnesota, www.ipums.org.
The share of employed workers without a high school degree, who report being self-employed, rose by 0.5 percentage points to 10.4 percent. The increase was 0.7 percentage points for workers with a high school degree and 1.3 percentage points for workers with some college.
By contrast, there were declines in the share of self-employment among workers with a Bachelor’s degree and workers with more than a Bachelor’s degree. The share of self-employment among the former group fell by 0.4 percentage points and by 0.2 percentage points for workers with more than a Bachelor’s.
For less educated workers, the rise in self-employment was slightly higher in the unincorporated category. The rise in the unincorporated self-employed was 0.3 percentage points for those without a high school degree, compared to 0.2 percentage points for incorporated self-employed. For high school grads, it was 0.4 percentage points for the unincorporated compared to 0.3 percentage points for the incorporated. For those with some college, the increases were 0.7 percentage points and 0.6 percentage points, respectively.
By contrast, the drop in self-employment among more educated workers was entirely among the unincorporated self-employed, with the share dropping 0.5 percentage points for workers with a college degree and 0.4 percentage points for workers with more than a college degree. The share of employed workers reporting that they are incorporated self-employed rose by 0.1 percentage points for those with a college degree and by 0.2 percentage points for those with more than a college degree.
It is striking that the more educated workers reporting that they are self-employed are roughly evenly divided between incorporated and unincorporated, while the less-educated self-employed are overwhelmingly unincorporated. This gap grew larger as the pandemic progressed.
By age, there is a mixed pattern, with big jumps among the younger and oldest workers, as shown in Table 11.
| (by percent) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 19 to 24 | 25 to 34 | 35 to 44 | 45 to 54 | 55 to 64 | Over 64 | |||||||
| 2017– 2019 |
2022 | 2017– 2019 |
2022 | 2017– 2019 |
2022 | 2017– 2019 |
2022 | 2017– 2019 |
2022 | 2017– 2019 |
2022 | |
| Not self-employed | 97.7 | 96.9 | 94.1 | 93.5 | 90.3 | 89.7 | 88.4 | 87.8 | 86.1 | 86.5 | 76.2 | 75.7 |
| Self-employed, total | 2.3 | 3.1 | 5.9 | 6.5 | 9.8 | 10.3 | 11.7 | 12.2 | 13.9 | 13.5 | 23.8 | 24.3 |
| Self-employed, not incorporated | 1.7 | 2.5 | 4.1 | 4.2 | 5.9 | 6.2 | 6.9 | 6.8 | 8.2 | 7.8 | 15.2 | 15.1 |
| Self-employed, incorporated | 0.6 | 0.6 | 1.8 | 2.3 | 3.9 | 4.1 | 4.8 | 5.4 | 5.7 | 5.7 | 8.6 | 9.2 |
Source: Authors’ analysis of 2017–2022 Current Population Survey downloaded from IPUMS CPS, University of Minnesota, www.ipums.org.
The change between the unincorporated and incorporated shares by age follows, to some extent, the pattern by education. For the youngest age group, the increase in self-employment was all among the unincorporated. For older workers, the incorporated self-employed increased as a share of total self-employment.
Among workers ages 19 to 24, the percentage of self-employed rose by 0.8 percentage points from 2.3 percent to 3.1 percent. The 0.8 percentage point increase in self-employment among those between 19 and 24 was entirely among the unincorporated, while the share of incorporated self-employed was unchanged at 0.6 percent.
For workers between the ages of 25 to 34, self-employment increased by 0.6 percentage points. The increase in the share of unincorporated self-employed was 0.1 percentage points, while the increase in the share of incorporated self-employed was 0.5 percentage points (from 1.8 percent to 2.3 percent).
Self-employment rose 0.5 percentage points for workers between the ages of 35 to 44. The rise in incorporated and unincorporated self-employed shares was roughly the same for workers between the ages of 35 to 44.
For workers between the ages of 45 to 54, self-employment increased 0.5 percentage points, the share of the unincorporated self-employed edged down by 0.1 percentage points to 6.8 percent, but rose by 0.6 percentage points (to 5.4 percent) for the incorporated self-employed in that age range.
The share of self-employed actually fell by 0.4 percentage points for workers between the ages of 55 and 64. It rose by 0.5 percentage points, from 23.8 percent to 24.3 percent, for workers over age 64.
All the drop in self-employment among the 55 to 64 age group was among the unincorporated self-employed, which fell from 8.2 percent of employed workers to 7.8 percent. Among those over 64, there was little change in the share of unincorporated self-employed, while the share of incorporated self-employed increased by 0.6 percentage points to 9.2 percent.
Conclusion: What Caused the Rise in Self-Employment?
This analysis provides a starting point to assess the increase in self-employment following the pandemic shutdown, and it shows some interesting patterns. First, the increase in self-employment is disproportionately a story of women, especially non-white women, opting to become self-employed. This also seems to be tied to having young children at home. A plausible explanation for this increase is that a lack of access to childcare has made many women seek more flexible work arrangements in order to oversee their kids.
Another noteworthy pattern is that the increase in self-employment is entirely among people with less education. There is a modest decline in self-employment among workers with a bachelor’s degree or more. This would be consistent with a situation where more educated workers had more opportunities for finding a payroll job that allowed them to work from home. If workers with less education could not find a job that allowed them to work from home, they would have more reason to look to self-employment as an alternative.
The patterns of incorporated versus unincorporated self-employment also provide interesting insights. The youngest and less-educated workers were more likely to see increases in unincorporated self-employment, while older and more educated workers had most or all of their gains among the incorporated self-employed. Given that incorporated self-employment is usually longer lasting and implies a greater commitment, this dynamic is unfortunate and seems to further existing patterns of inequality.
On the other hand, in own percent terms, there were very large increases in the share of Black and Hispanic workers who report being incorporated self-employed. The shares for both increased by roughly 45 percent. While this still left the incorporated self-employed share well below the figure for whites, this is a substantial gain in a relatively short period of time. If it is sustained, it will imply substantial gains in business ownership for Blacks and Hispanics.
