Self-Employed Women

The top three occupations of American women who are self-employed:

• Child care worker
• Hairdresser
• House cleaner

Source: Bureau of Labor Statistics, Monthly Labor Review, Female Self-Employment in the United States: An Update to 2012

Will This Be the Bottom for Self-Employment?

The percentage of Americans who are self-employed shrinks a bit more nearly every year. Last year was no exception. In 2013, only 6.5 percent of the employed aged 16 or older were self-employed—yet another record low.  This figure was down from 7.0 percent in 2010 and 7.3 percent in 2000, according to the Bureau of Labor Statistics.

But we might have seen the bottom for self-employment. Beginning this year, the Affordable Care Act makes health insurance available to all. America's entrepreneurs are now free to start businesses without the loss of health insurance and the threat of financial catastrophe. This time next year we will know whether 2013 was the end of the long decline in self-employment.

Weekend Work

Forty-two percent of the self-employed are at work on an average weekend day, according to the 2012 American Time Use Survey. This compares with 31 percent of wage and salary workers.

Obamacare Will Boost Self-Employment

Despite all our talk about the entrepreneurial spirit, the percentage of Americans who are self-employed is lower than in most other developed countries. The reason is our awkward system of employer-provided health insurance, which throws entrepreneurs under the bus of the private health insurance market. Studies have shown that workers are much more likely to strike out on their own if their spouse has employer-provided health insurance or when Medicare coverage kicks in at age 65.

Obamacare may change that. According to an Urban Institute study, implementation of the Affordable Care Act (otherwise known as Obamacare) will boost the number of self-employed Americans by 1.5 million in 2014, an increase of nearly 12 percent. The Urban Institute's state-by-state estimates show self-employment rising by 248,000 in California and 124,000 in Texas (if the ACA is fully implemented, that is). The increase will exceed 50,000 in six other states. In Massachusetts and Vermont, no increase is forecast. That's because those states have systems similar to Obamacare already in place.

Source: Urban Institute, The Affordable Care Act: Improving Incentives for Entrepreneurship and Self-Employment

The Joke of Self-Employment

Self-employment does not work in the United States. Thanks to our employment-based health insurance system and the difficulty and cost of obtaining health insurance as an individual, few Americans want to work for themselves. That's why self-employment rises during recessions (when there are no other options) and falls as the economy recovers.

The Census Bureau's report on trends in self-employment between 2010 and 2011 finds exactly this pattern. The percentage of American workers who are self-employed fell between 2010 and 2011 as the economy recovered from the Great Recession. Both the incorporated and the non-incorporated self-employed declined as a share of the nation's employed. In 2011, 3.4 percent of workers were incorporated self-employed and another 6.2 percent were non-incorporated self-employed. Both figures were lower in 2011 than in 2010, which, according to the Census Bureau is "consistent with research finding that an expanding economy encourages exits from self-employment by increasing opportunities in the wage-work sector of the labor market."

Source: Census Bureau, Changes in Self-Employment: 2010 to 2011

No IPO for Them

The idea of starting a business is not all that appealing to the nation's college students. When students are asked to rate the attractiveness of starting their own company or non-profit organization in the next five years, these are the answers...

Very attractive: 17%
Somewhat attractive: 30%
Not very attractive: 27%
Not attractive at all: 26%

Why so little interest in being an entrepreneur? Maybe it's because 69 percent say they will be in debt when they graduate, owing a median of $30,000. That fact would also explain why the number-one life goal of today's college students is not finding meaningful work, contributing to society, finding a partner, or having children. The number-one goal is financial security.

Source: Heldrich Center for Workforce Development, Rutgers University, Talent Report: What Workers Want in 2012

Entrepreneurship Declines

This isn't rocket science. In a nation that seems hell bent on making it difficult if not impossible for individuals to buy health insurance, entrepreneurship is nearly extinct.

According to the Kauffman Index of Entrepreneurial Activity, only 0.32 percent of adults started a business in 2011, down 5.9 percent from the level of 2010. Demographically speaking, the entrepreneurs of today have nothing left to lose. By educational level, high school dropouts are most likely to start a business. Least likely: college graduates.

Source: Ewing Marion Kauffman Foundation, Kauffman Index of Entrepreneurial Activity

Why So Few Americans Are Self-Employed

Only 7 percent of American workers are self-employed, a figure that has been trending downward for decades. The new Federal Reserve Bank of Boston study, Self-Employment in the Global Economy, might explain why. According to the study's findings, the greater the exposure to foreign competition the lower the level of self-employment. This holds true across different countries and even in different industries within the United States.

Employer-Based Health Insurance Discourages Entrepreneurship

That is the finding of a new study by the Rand Corporation. By examining business ownership among workers with and without a spouse's health insurance coverage and with and without Medicare coverage, researchers at Rand discovered what they call an "entrepreneurship lock." Business starts are suppressed by workers' dependence on employer-based health insurance.

People with access to a spouse's health insurance plan are more likely to become self-employed than those who do not have this health insurance alternative, according to the results of the study. Self-employment also rises when people turn 65 and become eligible for Medicare and no longer need employer-based health insurance. In fact, self-employment rates jump up in the very month people turn 65.

The researchers conclude that "the bundling of health insurance and employment may create an inefficient level of business creation."

Two Million Artists

Two million Americans are trying to make a living as artists, according to a new report by the National Endowment for the Arts. Every decade or so the NEA updates its profile of people whose primary employment is in the arts. The latest report, Artists in the Workforce, 1990-2005, finds 2 million workers who identify their primary occupation as actor, announcer, architect, fine artist, art director, animator, dancer, choreographer, designer, entertainer, musician, singer, photographer, producer, director, writer, or author. The 2 million figure excludes another 300,000 workers whose secondary employment is in the arts.  

Artists have a median age of 40. Most are college graduates. Among those who work full-time, median personal income was $45,200 in 2005--below the $52,500 median income of all professional workers. 

Architects have the highest median income ($63,500 among full-time workers), and actors have the lowest ($31,500). One in three artists is self-employed. Not surprisingly, women artists make less than their male counterparts. Another NEA report, Women Artists: 1990 to 2005 details the differences. 

Fewer Self-Employed

So much for America's entrepreneurial spirit. Self-employment is disappearing in the United States as workers cry uncle in the health insurance wrestling match. According to Bureau of Labor Statistics' projections, the percentage of non-agricultural workers who are self-employed will fall even lower than its current miniscule level of 6.7 percent during the next ten years. Interestingly, the BLS foresees this decline despite the baby-boom generation's entry into the prime age of self-employment: 65-plus. People aged 65 or older are more likely to be self-employed than younger adults because Medicare—the universal health insurance program for the nation's elderly—solves their health insurance problem.  The projected decline in self-employment despite the aging of boomers means only one thing: self-employment among younger Americans will drop to rock-bottom levels as Americans become contortionists in their hunt for affordable health care coverage. Source: Bureau of Labor Statistics