The more than 150 million workers in the United States include approximately 16 million workers who identify as self-employed. They work for profit or for a fee in their own businesses and are a representation of American small business owners. Many are also creating jobs for other workers, on the order of around 30 million in recent years.
New analysis of government data from the Pew Research Center reveals that the COVID-19 recession, which reduced business activities for public health reasons, had a similar impact on employment levels among the self-employed and those who were not. However, the recovery was stronger for the self-employed. At the same time, freelance hires have declined since 2019, with cutbacks mostly coming from male-run businesses.
Self-employment can be a Gateway to the business world for entrepreneurs across the country. It can also be a desirable option for those who want to be their own boss or are looking for more flexible working hours. Some workers who lose their jobs during an economic downturn turn to self-employment, which has increased during recessions. In the coronavirus pandemic, this may have also been helpful option for some parents juggling childcare and work.
Understanding the impact of the economic recession caused by the COVID-19 pandemic self-employed in the United States and their recruitment activity, the Pew Research Center analyzed data for the years 2019, 2020 and 2021 Current population survey monthly records.
The CPS is the official US government source for monthly unemployment estimates. In this report, the monthly CPS files were combined to create quarterly files to increase sample sizes for the self-employed. Estimates of the number of self-employed or non-self-employed exclude those who are absent from work for any reason. This is done to take better account of inactivity among the self-employed, who are not generally classified as unemployed, even if they run out of business.
For a quarter of the sample each month, the CPS also records the number of workers usually hired by self-employed workers in their businesses. For 2021, these data were only available for the months of February to August (the latest available at the time of this analysis). These seven months of data for 2021 were combined to increase the sample size, and the process was repeated for 2019 and 2020 to remove the effect of seasonal variations on the estimated trends. Estimates of workers typically hired by the self-employed are based on a sample of self-employed workers that includes those who were absent from work.
The COVID-19 epidemic has data collection affected US government efforts in its investigations, limiting in-person data collection and affecting the response rate. It is possible that some measures of labor market activity and how they vary across demographic groups may be affected by these changes in data collection.
The number of actively self-employed workers – not absent for any reason – fell from 14.8 million in the second quarter of 2019 to 12.7 million in the second quarter of 2020, a decrease of 14.2%. During the same period, the number of self-employed active at work fell from 137.3 million to 115.9 million, a loss of 15.5%. Thus, the immediate impact of the recession, which lasted until March and April 2020, was felt the same way by the self-employed and the rest of the workers.
The number of self-employed actively at work rebounded strongly as part of the economic recovery, increasing by 17.6% from the second quarter of 2020 to the second quarter of 2021. This was enough to bring the number of self-employed to 14.9 million, restoring to 2019 levels. However, employment among other active workers has not yet recovered to its pre-recession level, standing at 131.4 million in the second quarter of 2021, a further 5.9 million ( 4.3%) less than in 2019.
Changes in self-employment were similar for women and men, both of whom saw sharp job losses in 2020 and notable gains in 2021. Some 5.2 million women were self-employed and actively employed. in the second quarter of 2019, but the number fell to 4.4 million in the second quarter of 2020, a loss of 15.0%. Among men, self-employment fell from 9.6 million in 2019 to 8.2 million in 2020, a loss of 13.7%. By the second quarter of 2021, the number of self-employed women and men had grown to 5.4 million and 9.5 million, respectively, about as many as in 2019 and marking a full recovery.
Among workers who are not self-employed but who are actively working, neither women nor men have returned to their pre-recession employment levels. Among women, their number stood at 62.8 million in the second quarter of 2021, down 2.7 million (4.1%) compared to the second quarter of 2019. Over the same period, non-self-employed men experienced a drop in employment of 4.5%. , from 71.8 million to 68.6 million.
Hiring of other workers by the self-employed
Self-employed workers and the businesses they run are an important source of job creation. In 2019, the self-employed had 31.4 million employees on their payroll. In total, the self-employed and their employees accounted for nearly 30% of total employment in the United States in 2019. This was about the same as their share of total employment in 2014, when the data turned to available for the first time. But, after stabilizing in 2020, the number of freelancers hired fell in 2021 and is currently below its 2019 level.
In 2020, the self-employed reported having 31.5 million workers on their payroll, roughly the same as in 2019. Meanwhile, the number of other workers in the economy – neither self-employed nor working for the self-employed – rose from 110.5 million. to 98.7 million.
It is not entirely clear why employment in businesses run by self-employed workers did not decline during the recession. One reason could be that the Current Population Survey – the government survey that is the source of the estimate – asks about the âusualâ number of employees on a self-employed person’s payroll. While waiting for a more permanent downsizing of their companies, the self-employed may not have reported a different level of hiring in 2020 than in 2019.
A delay in reporting downsizing could also be the reason why the wage bill of the self-employed would have declined during the economic recovery, from 31.5 million in 2020 to 28.3 million in 2021, even as l employment of other workers rose from 98.7 million. to 107.5 million. It is also possible that the recent increase in resignation rates by workers has affected independent business owners more. Nevertheless, the self-employed and their employees still accounted for around 29% of total employment in 2021.
Self-employed men, who outnumber self-employed women, are also more likely to have employees. The factors that seem to be at the root of this gender gap are differences in family obligations and the distribution of men and women between industries. In 2019, about 26% of self-employed men and 16% of self-employed women had a payroll. In addition, among the self-employed with employees, men hired an average of 9.4 workers in 2019, compared to an average of 7.6 workers among women. Thus, men represent most of the hires of the self-employed.
In 2019, self-employed men had a total payroll of 24.7 million employees and self-employed women had a total payroll of 6.7 million. But the number of workers employed by self-employed men fell to 21.2 million in 2021, as these companies reduced their hires by about one worker each, on average. The number of workers hired by self-employed women has remained stable and, on the contrary, appears to have increased during the pandemic, reaching 7.1 million in 2021.
It is not clear why self-employed men cut their hires during the pandemic, but not women. Self-employed men are more concentrated in construction, and self-employed women are more present in service sector industries, such as personal care and laundry services. But the overall employment trends in these two sectors have been similar during the pandemic, with job losses in construction no more serious than the losses of service delivery Industries. Unfortunately, the sample size limitations in the source data do not allow for a more detailed accounting of gender differences in hiring trends among the self-employed.