Millions more U.S. workers possibly self-employed than thought

Keywords Economy / Unemployment

Millions more Americans may be self-employed than previously estimated, a research paper found, and these workers are more likely to be minorities and younger.

The share of independent contractors in the labor force may be about 15% of all workers, according to the study. That’s roughly twice the typical 7% estimate from the Bureau of Labor Statistics.

Comprehensive data on informal work and other side hustles have been hard to come by, especially with the rise of the gig economy.

The authors of the paper fielded a large-scale survey to find self-employed who might have been miscoded in conventional government estimates and those who may be freelancing on the side of a primary job. They found that less-educated workers and people who have several jobs were the most likely to be underreported.

“Taking these workers into account substantively changes the demographic profile of the independent contractor workforce,” wrote the authors, from the University of Maryland and the W.E. Upjohn Institute for Employment Research.

The findings have important implications for the economy. They suggest a greater share of the workforce lacks many of the protections—such as benefits, labor regulations and insurance—afforded to employees. Separately, if many more have extra sources of income, that could help explain the resilience of consumer spending in the face of high inflation, which has been baffling economists.

Independent contractors are a subset of the self-employed whose skills and pay varies widely, the paper’s authors wrote. They include freelance consultants, Uber drivers, and some child-care workers and house cleaners.

In their survey, the researchers found that many who thought of themselves as employees were in fact independent contractors upon further questioning, including some cases of multiple levels of subcontracting.

The notion of “gig work,” which has been rising in popularity to describe on-demand jobs often handled through apps, fell flat with many groups, especially—but not only—Black workers, the economists wrote. Some associated it with a hobby rather than a job.

The survey adds to evidence that informal work has been increasingly prevalent in the U.S. economy, a trend further exacerbated by the pandemic, social media and remote work. The estimated number of Americans who freelanced in 2022 surged to a record 60 million, based on a survey by freelancing platform Upwork.

Please enable JavaScript to view this content.

Story Continues Below

Editor's note: You can comment on IBJ stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Please note our updated comment policy that will govern how comments are moderated.