Self-Employed Businesses Unlikely to Hire Employees
BY Matt Quinn
August 20, 2004 -- It's been said that hiring the first employee can often be the most difficult. Maybe that's why so many small businesses aren't bothering to hire any at all.
Of the nearly 10.3 million workers designated as self-employed, only 16.9 percent had other paid employees in 2003, according to a new study by the Bureau of Labor Statistics. This marked a significant drop from 1995, the year the government first started tracking the statistic, when 20.7 percent had other workers on the payroll.
Moreover, of the 1.7 million with employees in 2003, more than three-quarters had only one to four employees. Less than 4 percent had 20 or more workers.
The good news is that, after a long decline, the proportion of total employment made up of the self-employed leveled off in the last five years, according to the BLS. The number of self-employed workers represented 7.5 percent of the total employed workforce in 2003, up from 7.3 percent in 2002. Almost 370,000 workers were added to the self-employed ranks in 2003.
The study found that men tend to gravitate toward operating their own businesses more than women. In 2003, 8.8 percent of working men were self-employed, compared to 6.0 percent of women.
The occurrence of self-employment was also more common among whites than African Americans, Latinos and Asians. Eight percent of the white population was self-employed in 2003, compared to 4.1 percent of African Americans, 5.5 percent of Latinos and 6.9 percent of Asians.
By industry, self-employment was most common in agriculture, construction and the service sector. In 2003, more than 40 percent of workers in agriculture were self-employed, due to the high occurrence of independent farms. Nearly 17 percent of those in the construction business ran their own shop. Slightly less than 14 percent of professional and business service workers were made up of business owners.
Geographically, the western region of the U.S. had the highest likelihood of self-employment, where 8.9 percent of workers ran their own businesses. Self-employment was least frequent in the Northeast with only 6.9 percent of workers running the show.
MATT QUINN contributes to the Wall Street Journal's corporate finance blog. He has also written extensively about banking and corporate finance for publications including Inc., American Banker, and Financial Week. He lives in Brooklyn, New York.