What percentage of the workforce has been self-employed over time?

The landscape of the U.S. workforce has changed significantly over the past three decades, not only in the industries and types of jobs workers are pursuing but in how they work and structure their careers. Self-employment has always played a healthy role in the American economy, but the digital age has pushed this sector to evolve more as well.

As the nature of self-employment continues to shift, so does its role in the economy. Historically, most self-employed people were freelancers, independent contractors, those in trade fields or salespeople. While these professions still make up a large part of the self-employed workforce, the proliferation of the internet and smartphones has created many new categories of work. These days, it’s not uncommon to call an Uber driver for a ride, hire an Instacart shopper to pick up your groceries, or order dinner through Grubhub or DoorDash. While some do these jobs full-time, others  do it as a side gig to their main job, adding a secondary income.

The role of social media has also prompted significant changes for self-employment. When opening Instagram or YouTube, you’ll be greeted by a parade of influencers and content creators who not only market the goods and services for other businesses, but have created product offerings of their own. In both large and small cities, entrepreneurs are popping up all over, selling everything from services to homemade goods.

In this report from Ooma, we’ll look at the trends in employment over the last 30 years and explore some of the factors influencing our ever-changing work environment in the United States.

Defining self-employed: incorporated vs. unincorporated

In the United States, “self-employed” refers to people who work for themselves rather than a company. According to the IRS, this includes individuals who work entirely alone, like freelance writers or independent contractors, or those who are the sole proprietors of a business, such as a local bakery or a small retail business. Self-employed workers can be divided into two main types: unincorporated and incorporated.

Unincorporated self-employed

The unincorporated self-employed often work independently or in small groups without forming a legal business structure like a corporation. They may not pay corporate taxes, but handle their taxes as individuals. This category includes freelancers, gig workers and independent contractors. These individuals have fewer barriers to entry into the workforce, but often face less stability and limited benefits.

Incorporated self-employed

Incorporated self-employed individuals, on the other hand, have registered their work as a business entity. These people are often entrepreneurs, small business owners, or professionals such as consultants, accountants or even online influencers who want the benefits and protections of having an official business structure. Incorporating offers potential tax advantages, increased credibility and often, more growth opportunities. This group tends to face more requirements and paperwork, but benefits from greater long-term security and legitimacy in return.

What role do self-employed people play in the economy?

Self-employment has become an essential component of the U.S. economy, serving as a key indicator of economic freedom and opportunity. According to the Urban Institute, self-employment offers women, marginalized people, and those of lower economic status a chance at earning more than their traditionally employed counterparts. Furthermore, self-employed positions also provide opportunities to individuals who may not be free to pursue a regular 9-5 job. In particular, stay-at-home parents of young children and people with disabilities benefit from gig work and freelancing, because such jobs don’t limit them to traditional working hours or restrictions.

Regarding the broader economy, self-employed individuals also create opportunities for others. Some hire employees and all contribute to the local economy by circulating their income into their communities. In addition to creating jobs, these individuals drive innovation and respond quickly to new trends. By starting their own businesses, self-employed people inject fresh ideas into various sectors, making industries more competitive and adaptable. Additionally, self-employed workers are responsible for a wide range of services and products, from local restaurants to tech startups to personal training programs. This variety not only strengthens the economy by broadening available services but also provides consumers with a wider range of unique offerings that aren’t as readily available from larger companies.

Factors that have impacted changes in self-employment since the 1990s

The internet and smartphone technology development in the late 1990s and early 2000s has transformed how people work. Platforms like Uber, Instacart and DoorDash have introduced new ways for people to earn money independently, creating a whole category of “gig work.” Unlike traditional self-employment, gig work allows people to choose when and where they work with minimal commitment, attracting many people looking for flexible options or supplemental income.

The COVID-19 pandemic also profoundly impacted the number of people who wanted to pursue self-employment. As businesses closed and layoffs surged, many sought alternative income sources. Some turned to freelance or gig work to support themselves during uncertain times, while others leaped to start their own businesses, hoping for more control over their futures.

In a DoorDash 2020 survey, 76 percent of Dashers responded that being a Dasher positively impacted their ability to provide for themselves and their families, while two-thirds of restaurants claimed that DoorDash was crucial to their business during COVID-19.

Individuals reporting as self-employed increased significantly throughout the pandemic. The Center for Economic and Policy Research reported that the rise in self-employment was disproportionately represented by women, especially those with young children at home, women without college degrees, and Black and Hispanic women.

Conclusion

Self-employment in the United States has advanced significantly since the 1990s. Technological changes, economic shifts and events like the COVID-19 pandemic have all influenced how and why people choose self-employment. Whether driving for a gig platform, freelancing remotely, starting a small business, or building an online brand, self-employed individuals contribute significantly to the economy.

Regardless of how the workforce continues to grow and evolve, effective communication support is still needed. Contact Ooma today to learn about our essential communication solutions, which empower self-employed professionals and small businesses to succeed in this ever-changing landscape.

Percentage of U.S. population that is self-employed since 1993