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News from EPI New Social Security Administration data show that economic impact of self-employment remains small

EPI economist Lawrence Mishel presents a new analysis of Social Security earnings data for the self-employed and W-2 earners to examine the growth of self-employment and its economic impact, providing another key indicator that complements the recently released Contingent Worker Survey from the Bureau of Labor Statistics (BLS) and Mishel’s analysis (with research assistant Julia Wolfe) of nonemployer establishment trends.

Mishel notes that some analysts have pointed to the growth of Schedule C and self-employment earnings tax filings as an important indicators of surging self-employment that is not captured by BLS data. Mishel notes that “tracking headcounts of tax filings does not adequately reflect trends in the economic impact of self-employment since most of the growth is activity for supplementary incomes” and measures of self-employment earnings show they have actually fallen as a share of all earnings.

Mishel examines self-employment earnings data from the Social Security Administration through 2015 (the latest data) and confirms previous general findings regarding Uber drivers, independent work, all online demand platform work, nonemployer establishments, and independent contractors more generally. These previous findings are:

  1. The number of people involved in these types of work activity has increased;
  2. The increase is primarily among people who are doing so to earn supplementary income and for a short amount of hours. The increase in the various self-employment activities has not occurred in people’s “main job” or as their main source of income; and
  3. The economic scale of these activities has not changed much when measured as a share of economy-wide total hours worked, earnings, or compensation. While headcount measures of self-employment activity do show a large increase, the overall economic impact of this activity is relatively small in scale and growth.

The specific findings are:

  • Self-employed filers were 11.7 percent of all filers in 2015, up from 9.6 percent in 2000. So, the share of earners who have self-employment income rose 2.1 percentage points between 2000 and 2015, clearly demonstrating the expansion of self-employment activity and a greater headcount. It is noteworthy that there was only a very modest expansion of self-employment over the 2012–2015 period (rising from 11.5 to 11.7 percent) at a time when online platform work was rapidly growing.
  • Measured by its share of total earnings, self-employment earnings grew from 5.2 to 5.7 percent of all earnings between 2000 and 2007 but then fell slightly to 5.5 percent of all earnings by 2015, a decline that occurred during the expansion of Uber and gig work following 2012. Another way to describe this trend is to note that W-2 earnings comprise nearly all of earnings, roughly 94-95 percent of the total, and it has remained that way throughout the 2000–15 period. That is, self-employment earnings remain a very small share of total earnings.

“I think the most important metric for examining the ‘future of work’ would be the quality and nature of how people earn their living on their main job,” said Mishel. “Judged in this way, self-employment has not become more prevalent and altered how people earn their living. That is, the growth of self-employment does not reflect a ‘rapidly changing nature of work’ and does not signal that freelancing will come to be a dominant way that people earn their living.”