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Who are the self-employed? Employment profiles and recent trends.

Self-employment holds great attraction for many people. Compared to working for someone else, it seems to promise higher earnings, enhanced professional standing, and independence. Practical considerations, such as the desire to work at home or adjust a work schedule to meet family needs, can also strongly motivate people to start up a business. Retired people often become self-employed to supplement their pensions and to have something to do. Finally, others with to work for themselves because they are extremely dissatisfied or bored with their current jobs or careers and want a change. * Whatever their reasons, an estimated 15.6 million workers -- 13 percent of the labor force--were self-employed in 1990. About 10 million worked in their own unincorporated businesses and 3.5 million owned incorporated businesses. Approximately 2 million worked for wages and salaries in their primary jobs but were also self-employed in part-time businesses.

* This article presents a profile of self-employed workers in 1990, including their concentration by industry, occupation, sex, race, Hispanic origin, and age. It also analyzes how these characteristics have changed since 1983. (Comparable data are not available for earlier years.) Self-employed people are predominantly white males between the ages of 25 and 45 who own businesses in one of the services industries or in retail trade. They are concentrated in the precision production, craft, and repair occupations (especially the construction trades) and in executive, administrative, and managerial occupations. Although the overwhelming majority of self-employed workers are men, the number of women working in their own businesses has been growing very rapidly recently. The number of self-employed black and Hispanic workers has also grown rapidly, but they still represented fewer than 1 in 10 of all self-employed as of 1990. Women, blacks, and Hispanic workers who are self-employed tend to be clustered into the same occupational groups as their counterparts in wage and salary jobs.

Most of the data and analysis in this article relate to self-employed who operate their own unincorporated business. Owners of incorporated businesses are discussed later. Wage and salary employees who moonlight in their own businesss are not discussed. All data are from the Current Population Survey.

Industry

Over half of all self-employed owners of unincorporated businesses worked in the services and in retail trade in 1990 (see table 1, page 30). The services sector alone had nearly 4 million self-employed workers, or more than twice as many as any other sector, and accounted for nearly 40 percent of all self-employed workers. Among the detailed services industries, lodging places except hotels and motels had the largest number of self-employed workers (321,000). People who own their own business in this industry operate rooming and boarding houses, camps and trailering parks, and similar places of residence. Business services not elsewhere classified (296,000), beauty shops (292,000), and automotive repair shops (281,000) were other industries with large numbers of self-employed workers.

Retail trade had 1.5 million self-employed people in 1990, or 15 percent of the total. The largest numbers worked in eating and drinking places (253,000) and direct selling establishments (205,000). Two other sectors with significant numbers were construction and agriculture, forestry, and fisheries, each with approximately 1.5 million workers and 15 percent of the total. The proportion of self-employed workers in agriculture (40 percent) is especially significant.

Manufacturing, which employed 19 percent of wage and salary workers, accounted for only 4 percent of all self-employed workers in 1990. This is undoubtedly due to the extensive capital required to start up a factory. The remaining sectors also accounted for relatively small shares of self-employed workers.

Between 1983 and 1990, the total number of self-employed owners of unincorporated businesses increased by slightly more than 1 million, or by nearly 11 percent. This rate of growth was considerably slower than that for total employment, which was 17 percent. Consequently, the self-employed proportion of the work force fell. However, agricultural production alone lost nearly a quarter of a million self-employed workers between 1983 and 1990; were it excluded from the total, the proportion of self-employed workers would have remained unchanged at about 8.4 percent.

The services industries provided a significant number of new opportunities for self-employment, increasingly by 808,000 jobs. About 154,000 jobs were created in services to dwellings and other buildings, 95,000 in business services not elsewhere classified, 80,000 in child day care services, 51,000 in beauty shops, and 43,000 in loding places except hotels and motels. Although there were relatively few people who owned their own business in computer and data processing services in 1983, their numbers had grown rapidly by 1990--from 31,000 to 75,000.

The only other sectors with significant increases in self-employed were construction (294,000) and finance, insurance, and real estate (113,000). Among the detailed industries in the latter sector, real estate accounted for almost all of the job growth.

Two sectors experienced significant declined in the number of self-employed workers. The loss of nearly a quarter of a million workers in agricultural production was moderated somewhat by the gain of 99,000 jobs in horticultural services. Jobs for self-employed workers declined by 89,000 in retail trade; the rather large losses in direct selling establishments, eating and drinking places, and gasoline service stations were offset somewhat by gains elsewhere in retail trade.

Occupation

The self-employed were found in all the major occupational groups (see table 2, page 32), but their concentration was much higher than average in farming, forestry, and fishing occupations. Most of these self-employed workers were farm operators and managers. Relatively small proportions of the self-employed were in three of the major occupational groups: Administrative support occupations including clerical; technicians and related support occupations; and operators, fabricators, and laborers.

Sales occupations had the largest number of self-employed people in 1990, nearly 1.8 million or 18 percent of the total. Significant numbers of these workers were supervisors and proprietors (768,000); real estate sales workers (248,000); and street and door-to-door sales workers (145,000).

Precision production, craft, and repair occupations had the next highest number of self-employed. Most of the workers in this group, over 1 million, were found among the construction trades, especially carpenters, painters, plumbers, and electricians. Similarly, self-employed service workers were highly concentrated by occupation, mostly as hairdressers and cosmetologists and child care workers except private household.

Between 1983 and 1990, the largest increase in self-employed workers was in executive, administrative, and managerial occupations, which grew by 394,000. The next largest increase were in service occupations (322,000), professional specialty occupations (233,000), and precision production, craft, and repair occupations (134,000). Several detailed occupations in the managerial and professional groups, such as accountants and auditors, physicians, and lawyers, experienced little or no change in employment over the period. (This is explained, in part, by the trend toward incorporation which is discussed later.) In contrast, many service occupations with sizable concentrations of workers grew rapidly, the most notable being child care workers except private household, hairdressers and cosmetologists, and cleaning and building service occupations.

Farming, forestry, and fishing occupations lost nearly 200,000 jobs and declined from 17 percent of the total self-employed in 1983 to 14 percent in 1990. All of the loss occurred among farm operators and managers.

Sex

Of the nearly 10 million self-employed workers in 1990, approximately one-third were women (see table 3, page 34). The proportion of self-employed women (33.1 percent) was considerably lower than the proportion of women in the total towk force (45 percent). Women were a majority of the workers in two occupational groups: Administrative occupations including clerical, and service occupations.

Nearly half of all self-employed women were in the service and sales occupations. Among the detailed service occupations, most women were child care workers except private household (470,000) or hairdressers and cosmetologists (263,000). Significant numbers of self-employed women in sales were supervisors and proprietors (270,000), street and door-to-door sales workers (117,000), and real estate sales workers (113,000).

Many women in professional specialty occupations were self-employed as teachers except postsecondary (95,000); designers (77,000); and painters, sculptors, craft-artists, and artist printmakers (63,000). About half of the women in the administrative support occupations including clerical were employed as bookkeepers and accounting and auditing clerks (127,000).

From 1983 to 1990, the number of self-employed women increased by 715,000 compared to an increase of only 317,000 for men. This trend parallels the rapid entry of women into the labor force, but it may also indicate that women are creating more opportunities for themselves to work in their own businesses. During the 1980's, the number of self-employed women increased as a percent of the total in several occupations, including accountants and auditors; management analysts; physicians; lawyers; sales representatives; finance and business services; and insurance sales workers.

Over a third of the increase for women occurred among the service occupations, with the largest gains in cleaning and building service occupations and child care workers except private household. The next largest increases in self-employed women were in professional specialty occupations and executive, administrative, and managerial occupations.

Race and Hispanic Origin

Black and Hispanic workers are under-represented among the self-employed, accounting for only 4.5 percent and 5.1 percent, respectively, in 1990. Their proportion of total employment was 10 percent for black workers and 7 percent for Hispanics.

Of the 456,000 self-employed blacks in 1990, nearly 110,000 worked in service occupations, more than half of them in just two detailed occupations: Child care workers except private household (37,000) and hairdressers and cosmetologists (26,000). Precision production, craft, and repair occupations accounted for 94,000, with significant numbers of construction and maintenance painters, automobile mechanics, and carpenters. Executive, administrative, and managerial occupations, and professional specialty occupations accounted for most of the remaining self-employed black workers.

The number of black self-employed workers increased from 346,000 in 1983 to 456,000 in 1990. The only major occupational groups with significant increases were executive, administrative, and managerial occupations; service occupations; and sales occupations.

Self-employed Hispanic workers numbered 517,000 in 1990, with the largest number employed in precision production, craft, and repair occupations (106,000). Many worked as automobile mechanics, carpenters, and construction and maintenance painters. Two major groups, sales occupations and service occupations, each had about 90,000. Most of those in the service occupations were child care workers except private household, hairdressers and cosmetologists, and janitors and cleaners.

During the 1983-90 period, the number of Hispanic self-employed workers grew more than twice as fast as the number of self-employed blacks; consequently, Hispanics now outnumber blacks. The largest gains occurred in service occupations (54,000); executive, administrative, and managerial occupations (30,000); and sales occupations (30,000). Even in farming, foresty and fishing occupations, in which the overall number of self-employed declined, Hispanics increased by nearly 23,000.

Age

More than half of all self-employed workers in 1990 were between the ages of 25 and 44 (see chart). The distribution of self-employed workers by age was very similar to that for total employment. The major difference was the percentage of workers age 16 to 24--only 4.5 percent for self-employed versus 16.8 percent for total employment. Most of the increase from 1983 to 1990 occurred among those age 35 to 44, who increased by 717,000.

Incorporated Self-Employed

Workers

The employment estimates and trends discussed above concern self-employed workers who are not incorporated. An additional 3.5 million people owned incorporated businesses in 1990. Although classified as wage and salary employees in the Current Population Survey (because a corporation pays all of its employees a salary, including the owner), this group should be taken into account in an analysis of self-employed workers. Table 4, pages 36, presents the data for icorporated self-employed workers by occupation for 1983 and 1990.

Most of the 3.5 million incorporated self-employed workers in 1990 were concentrated in just five detailed occupations: Managers and administrators not elsewhere classified (not show separately in table 4); supervisors and proprietors, sales occupations; physicians; lawyers; and bookkeepers and accounting and auditing clers.

Incorporated self-employed workers increased more than twice as fast from 1983 to 1990 as did workers operating their own unincorporated businesses--25 percent versus 11 percent. The trend toward incorporation is the result of many advantages that corporate structure porvides, including limited liability, tax considerations, and the increased ability to raise capital. Another factor is the pension fund tax shelter, which is more comprehensive for corporate owners than for other individuals.

The number of incorporated self-employed workers increased by nearly 682,000 from 1983 to 1990. Nearly 60 percent of the increase occurred in executive, administrative, and managerial occupations (291,000) and sales occupations (114,000). Other major occupational groups with substantial increases in incorporated self-employed workers were professional specialty occupations; precision production, craft, and repair occupations; and administrative support occupations including clerical.

Employment in several detailed occupations grew at a much faster rate than that for all workers in this category. Among these occuptions were dentists; managers of properties and real estate; accountants and auditors; management analysts; secretaries, stenographers, and typists; and carpenters.

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George T, Silvestri is an economist in the Office of Employment Porjections, BLS. David Frank, an economist in the same office, prepared the data.
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Author:Silvestri, George T.
Publication:Occupational Outlook Quarterly
Date:Mar 22, 1991
Words:2238
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