The BLS recently released their Industry Employment and Output Projections to 2020.
One of the more interesting projections is the share of the labor force
that is self-employed: it's projected to fall to 5.9 percent in 2020
from 6.3% in 2010.
At first this seems somewhat counter intuitive. But it becomes a bit more clear once you understand how the BLS defines self-employment.
For most purposes the BLS uses unincorporated self-employment. These are people who identify themselves as self-employed but don't have a corporate entity. If a self-employed person has a corporate entity (an LLC, S Corp, C Corp, etc.) they are counted as incorporated self-employed.
For reasons too complex to discuss here, the BLS generally only reports or talks about unincorporated self-employed in their publications. Since a bit more than 35% of the total self-employed are incorporated, the BLS decision to report only the unincorporated self-employed leads to a lot of confusion.
Compounding this confusion is that incorporation is becoming more popular among the self-employed. The cost of incorporating is quite low and there are many potential business, tax, liability and health insurance reasons for doing so. In fact, many have caught wind of these benefits, causing the share of self-employed who are incorporated to increase from under 30% in the 1990s to over 35% today.
If you roll up the unincorporated self-employment numbers with incorporated self-employment, you find that about 10% of the workforce was self-employed in 2010 - not the 6.3% referenced in the report.
I also suspect if the BLS included incorporated self-employed in their forecast, total self-employment as a percent of the workforce would grow -- not decline -- over the forecast time frame.
For more on this topic, see our 2009 article Self-Employment Not Falling. It covers the same ground and provides more detail and links on incorporated and unincorporated self-employment.
At first this seems somewhat counter intuitive. But it becomes a bit more clear once you understand how the BLS defines self-employment.
For most purposes the BLS uses unincorporated self-employment. These are people who identify themselves as self-employed but don't have a corporate entity. If a self-employed person has a corporate entity (an LLC, S Corp, C Corp, etc.) they are counted as incorporated self-employed.
For reasons too complex to discuss here, the BLS generally only reports or talks about unincorporated self-employed in their publications. Since a bit more than 35% of the total self-employed are incorporated, the BLS decision to report only the unincorporated self-employed leads to a lot of confusion.
Compounding this confusion is that incorporation is becoming more popular among the self-employed. The cost of incorporating is quite low and there are many potential business, tax, liability and health insurance reasons for doing so. In fact, many have caught wind of these benefits, causing the share of self-employed who are incorporated to increase from under 30% in the 1990s to over 35% today.
If you roll up the unincorporated self-employment numbers with incorporated self-employment, you find that about 10% of the workforce was self-employed in 2010 - not the 6.3% referenced in the report.
I also suspect if the BLS included incorporated self-employed in their forecast, total self-employment as a percent of the workforce would grow -- not decline -- over the forecast time frame.
For more on this topic, see our 2009 article Self-Employment Not Falling. It covers the same ground and provides more detail and links on incorporated and unincorporated self-employment.
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