New research shows that 44 million workers—or 28.2%—were self-employed at some point during a given week in 2019. 14% of workers said being an independent contractor was their primary job.
Gallup conducted the just-released State of the Self-Employed survey for Intuit’s QuickBooks, at the end of 2019, prior to the pandemic. Many self-employed people have seen a change in their work situation since then, due to the sudden downturn in the economy. For the first time, significant numbers have qualified for unemployment, under the Coronavirus Aid, Relief and Economic Security (CARES) Act. Meanwhile, many traditional workers have lost their jobs, a factor that tends to drive people into starting businesses.
Several factors were sparking the growth of self-employment prior to the crisis, QuickBooks found. First, traditional jobs don’t offer as much compensation as they once did. Wage growth has been minimal, despite rising housing and education costs, and employers have been cutting back on traditional employee benefits in response to rising healthcare costs and slow productivity growth in the U.S. since 1980. This has motivated workers to look for additional ways to earn income.
Many Americans, including those with traditional jobs, are turning to self-employment, according to … [+]
Meanwhile, technology has made it easier to run a freelance business. “Web and mobile applications have allowed workers to add new revenue streams—whether driving a car, conducting repairs, offering technical consulting, writing an article or doing hair and makeup,” the report notes. “These factors have combined to not only motivate workers but to also make it easier and more practical to do so.”
As the authors acknowledge, there is a lot of conflicting data about how many self-employed professionals there are—in part because the studies use different methodologies— and some estimates count as few as 32 million workers in this category.
In this case, Gallup tapped federal data from the Bureau of Labor Statistics, Census Bureau and IRS and Gallup’s own 2019 Great Jobs Survey, which “explicitly asks about secondary work and alternative arrangements.” Gallup’s Great Jobs Survey was conducted from February 8 to April 1, 2019 among a random sample of 9,671 adults ages 18 and older living in all 50 states and the District of Columbia.
Some of key findings from the State of the Self-Employed:
Popular industries: 57% of sole proprietors who work outside of farms are employed in just five sectors: professional services, repair and personal services, construction, administrative services and retail. There was 722% growth in transportation services, such as taxi services, from 2000 to 2017.
Hotbeds of self-employment: Florida, Georgia and Vermont have the highest rates of self-employment of any states. The lowest rates are in Indiana, West Virginia and Wisconsin.
Highest-income freelancers: The self-employed professionals with the highest median income live in New Jersey, Rhode Island, Connecticut and Massachusetts. Across the states, the incomes of the self-employed generally correlate with the incomes of employees, the survey found.
Income diversification: 22% of self-employed professionals have multiple revenue streams, compared to 11% who work for an employer.
Side hustles are common: The average sole proprietorship brought in $34,751 in annual revenue in 2017, compared to $40,800 among those who consider themselves primarily self-employed.
There are pros and cons: Only 59.1% of the self-employed are satisfied with predictable pay, compared to 80.8% of those with traditional jobs; similarly, just 39.4% of the self-employed are happy with their benefits, compared to 60.4% of traditional workers.
However, the groups weren’t all that far apart in how they feel about their level of pay. Just 52.6% of the self-employed and 54.9% of traditional workers say they are. And, in what may have been a sign of just how insecure jobs were prior to the COVID-19 crisis, just 74.9% of traditional workers were happy with their job security, compared to 67.4% of the self-employed.
Meanwhile, the self-employed are generally happy with their day-to-day work, with 70.1% saying they are, compared to 66.5% of traditional workers. 70.4% of the self-employed are happy with the control they have over their work hours and location, compared to 63.8% of the self-employed; 59.9% of the self-employed are happy with their power to change things, versus 44.3% of traditional workers.
Overall, the report concludes that self-employed workers “enjoy the same overall quality of life as employed workers”—a finding reinforced by BLS data showing that 79% of independent contractors prefer their work arrangement over a traditional job.
“The lower satisfaction with material aspects of their jobs—such as benefits and the stability of pay—seem to be balanced by the satisfaction from the greater autonomy and use of their strengths,” the report notes.
Whether this all holds true as the economy recovers from the pandemic remains to be seen. What does seem likely is that with 40 million Americans filing jobless claims the past 10 weeks, we’ll probably see more people turning to side hustles and solopreneur businesses to make ends meet—that is, once the economy opens back up enough for them to do so.