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Nationally, self-employed workers total over 15.3 million, according to the most recent data from the U.S. Census Bureau. While the COVID-19 pandemic has had drastic impacts on the economy as a whole, many small business owners and other self-employed workers have been particularly hard hit.
Two different data sources—the Census Bureau and the Bureau of Labor Statistics (BLS)—pegged the national self-employment rate in the range of 9.6% to 10% for 2019. While recently updated data from the BLS reported a jump from 10% to 10.5% in 2020, the total number of self-employed workers actually decreased from 2019 to 2020. The increase in the self-employment rate can be explained by both an increase in the number of self-employed workers operating their own incorporated businesses and a decrease in the total number of people employed. The U.S. saw a large increase in new business applications in 2020, indicating that some workers likely turned to self-employment after losing their jobs due to the pandemic.
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Self-employed workers and the performance of their businesses are crucial to the national economy. Research from the Pew Research Center estimates that while self-employed workers account for just 10% of the workforce, they provide jobs for another 20%, or about 30 million additional workers. The shutdown last spring in the early stages of the COVID-19 pandemic forced many small businesses to close their doors either temporarily or permanently. While government measures including the CARES Act and Paycheck Protection Program helped keep some small businesses up and running, many others missed out on this aid or did not receive enough.
Business incorporation offers owners advantages that may be especially helpful during tough economic times, yet only 37% of self-employed workers incorporate. Incorporation can help business owners protect their personal assets if the business fails or can’t pay its debts, and incorporated businesses have easier access to capital. Incorporated business owners are predominantly white and male, meaning other demographic groups are likely to be disproportionately hurt by the economic impacts of the pandemic.
While 10.5% of workers are self-employed at the national level, the self-employment rate varies considerably by location. At the state level, Montana and Wyoming boast the highest shares of self-employed workers in the country, at 14.2% and 13%, respectively. Residents in Florida, Colorado, and California are also among the most entrepreneurial. Conversely, West Virginia has the lowest share of self-employed workers in the U.S., with just 7.1% of its workers employed in their own businesses. Other Rust Belt states like Indiana, Ohio, Pennsylvania, Kentucky, and Wisconsin also have low rates of self-employment.
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To find the locations with the most self-employed workers, researchers at HireAHelper used data from the U.S. Census Bureau. The researchers ranked states according to the share of self-employed workers. Researchers also calculated the total number of self-employed workers, the share of self-employed workers in incorporated businesses, the most over-indexed industry for self-employed workers, and the median income for both full-time self-employed workers all full-time workers. The most over-indexed industry for self-employed workers was determined as the industry within a state that has the greatest difference in self-employment rate when compared to that industry at the national level.
The analysis found that in California, full-time self-employed workers earn a median $50,517 per year, compared to $53,070 for all workers. In total, 11.4% of full-time California workers are self-employed. Out of all U.S. states, California has the 9th highest self-employment rate. Here is a summary of the data for California:
- Share of workers that are self-employed: 11.4%
- Total number of self-employed workers: 2,184,114
- Share of self-employed workers in incorporated businesses: 30.3%
- Most over-indexed industry for self-employed workers: Information
- Median income for self-employed workers (full-time): $50,517
- Median income for all workers (full-time): $53,070
For reference, here are the statistics for the entire United States:
- Share of workers that are self-employed: 9.6%
- Total number of self-employed workers: 15,317,732
- Share of self-employed workers in incorporated businesses: 37.2%
- Most over-indexed industry for self-employed workers: N/A
- Median income for self-employed workers (full-time): $50,507
- Median income for all workers (full-time): $50,078
For more information, a detailed methodology, and complete results, you can find the original report on HireAHelper’s website: https://hireahelper.com/lifestyle/cities-with-the-most-self-employed-workers/
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