Trying to understand the gig economy's size is difficult. The same is true of the self-employed freelance market size, which is often overstated. But one thing that is clear from government figures: Self-employment is on a serious downswing. And there's a significant drop among millennials.
First, the overall figures. Here is a 20-year look with data from the Bureau of Labor Statistics as assembled and put into a graph by the Federal Reserve Bank of St. Louis.
The figures are of self-employed workers who are unincorporated and in non-agricultural occupations. So, people in the early entrepreneurial or self-employment stage. Their businesses are likely small because they can operate without a traditional corporate structure.
The number of self-employed has fluctuated in the 20 years between August 1, 1998 and August 1, 2018. The current number, about 8.9 million, is about the same as the earlier one. However, these are raw numbers. I used the St. Louis Fed's website to compare the number of self-employed as a percentage of the civilian labor force. In the context of the working population, the story is clearer.
Over the last 20 years, there has been a significant decline of a full percentage point in the percentage of working people who are self-employed, from about 6.4 percent to 5.4 percent. That suggests a falling interest. What seems particularly interesting is an age analysis. Here's a BLS chart looking at self-employment in 2015:
You might think that millennials have strong interest in self-employment, what with the gig economy and all. But, as mentioned at the start, that market may be much smaller than many realize and the appetite for trying self-employment seems to get stronger with age. In particular, if looking again at unincorporated self-employment, not even 5 percent of millennials are involved.
Allison Schrager at Quartz pulled in a different set of data from the Federal Reserve's Survey of Consumer Finances and found that in the more general and broader category of self-employment or partnership, people in the 25-to-39-year-old age bracket have tumbled in interest. In 1998, those involved stood at 11 percent. In 2016, it dropped to 7 percent.
She argued that experience of the Great Recession at a young age (the oldest of millennials then would have been in their mid-teens) might have scarred them for life. The impact of such unconstrained and unprotected risk seems to correlate with higher interests in job-oriented college majors and an aversion to stock investment.
For the entrepreneurially inclined, this has mixed results. Finding peer support groups outside of hotbed areas like Silicon Valley is probably more difficult. That is a shame, because trying to start and maintain a business is difficult. People who have always worked for someone else don't have the experience to understand. Mentors are great, but don't replace being able to speak and discuss problems with someone facing similar issues at the same time.
Overall, the reduction in the number of people willing to take the self-employment leap also might translate into fewer businesses eventually growing into something substantial. Eventually it affects the greater economy.
But there is the advantage of less competition. Fewer people search for funding, introductions to potential business partners, and talent willing to take a risk at a startup.