August 24, 2004 (The Editor’s Desk is updated each business day.)

Self-employment rates, 1948-2003

The proportion of individuals who are self-employed has fallen steadily since the late-1940s. The self-employment rate—the proportion of total employment made up of the self-employed—was 7.5 percent in 2003, down from 18.5 percent in 1948.

[Chart data—TXT]

The most obvious reason for the decline in self-employment is the overall decline in agricultural employment. Self-employment is much more common in agriculture; the self-employment rate in 2003 was 41.8 percent in agricultural industries compared with 6.9 percent in nonagricultural industries.

In addition, there has been a decrease in the self-employment rate in agriculture itself, largely due to the disappearance of independent small farms, the rise of large corporate farming operations, and enhanced productivity throughout the agricultural sector. 

Another explanation for a decline in measured self-employment is the increase in the likelihood businesses will incorporate. Prior to 1967, estimates of the self-employed included persons who operated their own incorporated businesses. Beginning in 1967, individuals identified as incorporated self-employed were classified as wage and salary employees of their own businesses.

The Current Population Survey (CPS) is the source of these data. To learn more about the self-employed, see "Self-employment in the United States: an update," by Steve Hipple, in the Monthly Labor Review, July 2004. 

 

Related TED article: 

• Self-employment rates by industry, 2003