United States Small Business Administration

Office of Advocacy
RS 134
_______________________________________________________________________________________________

_______________________________________________________________________________________________

Purpose

Working out of the home has become a significant and growing phenomenon in the United States. "Homebased business owners" are self-employed individuals who operate a business or profession primarily from or in a home office. "Telecommuters" are employees who do office work at home during normal business hours. The 1987 Characteristics of Business Owners survey found that more than 7 million businesses - including the majority of women-owned businesses (54.6 percent) and nearly half of all non-minority male-owned businesses (49.8 percent) - were homebased. The May 1991 Current Population Survey identified 5.6 million primary homebased businesses. A 1990 proprietary survey estimated 7.4 million home business owners - including those with a side business - and 7.2 million freelance workers, totaling 14.6 million "homebased business" persons out of a work force of 122.7 million.

Owning a homebased business and working at home for wages are both labor market options that offer flexibility to potential entrepreneurs and employees. Understanding why people choose these options, how homebased businesses benefit the larger economy, and whether homebased business ownership and work should be encouraged are relevant to current policy discussions.

Scope and Methodology

Data from the Bureau of Labor Statistics' National Longitudinal Survey (NLS) were used for this research. The NLS provides detailed information that allows for comparisons between homebased and non-homebased business owners and between workers who work at home and those who do not. Nearly the full range of variables believed to be critical to choice of homebased work are reported in the NLS: labor market experience, socioeconomic variables and environmental factors.

Three cohorts from the NLS, encompassing 17,068 individuals, were selected for this study: 1988 surveys of men and women ages 23 to 30 (the NLS of Youth), the 1988 survey of women ages 34 to 44 (the NLS of Young Women) and the 1989 survey of women ages 52 to 66 (the NLS of Mature Women).

In each cohort, four labor market categories were examined: among the self-employed, homebased business owners and non-homebased business owners were compared; among wage-and-salary workers, telecommuters were compared with non-telecommuters.

Three types of analysis were used: (1) comparative profiles of individuals who pursue each of the four labor market outcomes; (2) logistic regression models to explain the demographic and human capital variables associated with each of the labor market categories; and (3) regression models to examine the consequences of working at home as opposed to earning income on-site.

Highlights

Homebased Business Owners

• Employment characteristics are key determinants of the mode of work and certain cohorts are associated with certain industries. For young men, having a homebased business is associated with a professional occupation such as engineering or computer science. For men in their 20s, it is associated with employment in the construction industry, agriculture and business services industries. For women in their 20s, homebased businesses are most strongly associated with private household occupations and employment in the personal services industry. For women in their 30s, it is associated with service, sales, professional specialties and clerical occupations. For mature women, the personal services industry is the only determinant of self-employment (there was only one homebased business in this cohort).
• There is little difference in the profile characteristics of business owners who work at home and those who do not. While age is not a limitation for men entering business, the likelihood of a woman becoming a homebased business owner increases with age. Also, non-minorities are more likely to be self-employed and own homebased businesses than members of minority groups. Education and work experience do not influence the likelihood of homebased business operation for women and only increase it slightly for young men.
• There are interesting differences in the incomes of homebased businesses. Homebased businesswomen in their 20s earn substantially less than self-employed women who work outside the home. Businessmen of the same age make almost the same income, regardless of the location of their business. Women over 30 earn about the same net income working at home in a homebased business or in a non-homebased business.
• The mean number of employees for homebased businessmen in their 20s is 5.9 employees; for non-homebased businessmen it is 10.6 employees. For women the corresponding numbers are 1.5 and 5.2.
• Homebased businesses have greater net worth than non-homebased businesses. Young men homebased business owners have mean family assets of $10,014 compared with $4,801 for non-homebased business-men. Women in their 20s have $9,378 and $6,004, respectively. Homebased business women in their 30s and 40s have family assets of $137,796 compared with $112,617 for those women who do not work at home. These findings belie the notion that homebased businesses lack assets against which they can borrow to raise capital.
• There is little difference between the hours worked in a homebased versus a non-homebased business. Self-employed male youth work 52.1 hours at home versus 49 hours for non-homebased, with a mean number of 21.9 home hours. Self-employed women in their 20s work a mean number of 36 hours regardless of work location. Businesswomen work 21.6 hours at home when they are homebased, and 41.6 if employed outside the home. Self-employed women in their 50s average 42.7 hours per week working for their firm. (There was only one homebased businesswoman in the older cohort.)
  

Telecommuters

• Work patterns of telecommuters and non-telecommuters are very similar. Men and women spend about the same amount of time - about one hour - on lunch, coffee breaks and personal relaxing.
• Homebased work is not associated with employees who have a young child. Employees do not care for their children on telecommuting days.
• Telecommuters do not smoke, drink or use drugs as much as people who do not work at home. Telecommuters receive promotions at a greater rate than non-telecommuters.
• Telecommuters have positive attitudes toward their work. They like the kind of work, they do not feel isolated from their peers, and they enjoy considerable job stability.
  

Ordering Information

The complete report is available from:

National Technical Information Service
U.S. Department of Commerce
5285 Port Royal Road
Springfield, VA 22161
(703) 487-4650
(703) 487-4639 (TDD)

Order Number: PB93-192862

Cost: A06; A02 Microf.

*Last Modified 6-11-01