In October 2020, more than 11 million Americans were unemployed, many as a result of the global COVID-19 pandemic. In April, the unemployment rate in the U.S. rose to more than 14% and slowly fell over the following six months to nearly 7%. But while the overall number of unemployed workers may be steadily shrinking, new job gains have slowed since August, leaving millions without employment headed into the holiday season.
Although many industries have been negatively impacted by the COVID-19 crisis, there’s one sector of the workforce that may be growing substantially: self-employed Americans. Many hiring managers are turning to freelance workers over salaried or hourly employees, a trend that’s unlikely to slow down in the months ahead. Millions of Americans have started freelancing (a form of self-employment) since 2019, and they may be more in demand now than ever before.
So how many Americans have opted to go into business for themselves in 2020, and how has COVID-19 impacted that shift? To find out, we analyzed 2019 and 2020 data from the U.S. Census Bureau and the Current Population Survey (CPS) for an in-depth analysis of self-employment before and during COVID-19. Read on as we explore what percentage of the workforce is currently self-employed (and which age groups), how much money they’re making, and which industries are the most stable work environments for self-employed Americans in 2020.
Self-employment has always had certain advantages over hourly or salaried employment. In addition to offering entrepreneurs control over virtually every aspect of their business, working for themselves gives people increased freedom to apply their skills, flexibility in their jobs, and a different kind of job security. Between 2019 and 2020, the percentage of working Americans who were self-employed increased from 10.4% to 10.9%. In 2020, in the midst of the COVID-19 pandemic, we found the percentage of self-employed Americans rose between March (10.6%) and April (11%) with the highest levels of self-employment in June, July, and August.
In September 2020, the CPS reported that 13% of the self-employed workforce were men, while roughly 8.5% was made up of women. Women-owned businesses continue to represent a minority of the workforce in the U.S., particularly as women experience challenges in acquiring the funding they need, balancing their work and family lives, and building a support network to help them grow and succeed.
Although women may represent a significantly smaller portion of the self-employed workforce, CPS data indicates far less of an age gap among entrepreneurs in America. While workers between the ages of 40 and 69 make up the majority of the self-employed job market, CPS reports that 17% of self-employed people are between the ages of 30 and 39, and 6% are between the ages of 20 and 29.
One of the perks of being self-employed is the opportunity to control the hours that you work. On the other hand, being an entrepreneur also means that you likely wear multiple hats for your business, which can lead to higher levels of pressure, particularly during uncertain times.
Overwhelmingly, self-employed Americans in 2020 have been working more hours than those in 2019. Beginning in April 2020, after the COVID-19 pandemic began in March, self-employed workers reported clocking 56 hours a week, on average, compared to fewer than 25 hours in 2019. The workweek has gotten shorter for entrepreneurs as 2020 progressed, falling to 45 hours in May, and closer to 30 hours a week, on average, in September.
Looking at the amount of time self-employed workers are spending on the job before and during the pandemic, two industries have seen overall increases: agriculture (including forestry, fishing, hunting, and mining) and wholesale trade. In light of travel restrictions and social distancing measures, outdoor activities have surged in popularity in 2020. In contrast, decreases to the average hours worked each week have been highest in education services, information work, manufacturing, and retail trade. Small retail businesses continue to experience fallout from the COVID-19 pandemic with reduced levels of foot traffic and increased levels of online and e-commerce shopping.
Self-employed Americans have been clocking more hours in 2020 than they did in 2019, but their average income levels can run a wide gamut based on industry and occupation. Overall, self-employed workers earn less ($38,400), compared to the average employees’ salary ($57,000). Self-employed women earn even less, averaging $25,400 annually, while self-employed men earn $46,200. That gap widens even further in some industries. Self-employed women earn the highest salaries in legal services ($76,200), but male entrepreneurs in this industry earn over 33% more, averaging $105,000 annually.
Highly skilled employees also earn significantly higher annual salaries, compared to the average self-employed income. Self-employed dentists earn the highest overall salaries, averaging $162,700, followed by physicians ($138,200), those offering legal services ($94,800), chiropractors ($92,600), and individuals involved with computer systems designs ($87,300).
Since 2019, the percentage of self-employed Americans has increased from 10.3% of the total workforce to 10.8%. While the overall number of people who were self-employed fell in the early months of the COVID-19 pandemic, the increase in the overall percentage of the workforce during that time suggests self-employed Americans may have been less impacted by unemployment caused by the virus.
Despite these gains, women still account for a much smaller part of the self-employed workforce and continue to make less money than men, on average. Despite earning their highest salaries in legal services, men still earn nearly $29,000 more annually than women in the same industry. Self-employed workers are clocking more hours in 2020, on average, though a majority saw a decrease in their hours in September 2020, compared to the beginning of the year. Ultimately, a higher percentage of working Americans may be self-employed since the COVID-19 pandemic began, but many are still facing unique challenges in the number of hours they’re working and how much money they’re earning.
At Skynova, we’re passionate about providing in-depth analyses, like the findings in this article, that provide a unique perspective on what’s happening in the world of business. We understand how your work intersects with current events, technology, politics, health, and more, and our surveys, statistics, and research aim to bring new light to these connections. In addition to these articles, we provide invoice templates, accounting solutions, and other online software designed to help small businesses get paid and save time doing it.
This project was created using the Basic Monthly Survey Current Population Survey, conducted by the United States Census Bureau. The CPS surveys around 60,000 households across America, during which households are surveyed for four consecutive months, take a break for eight months, and then are surveyed again for an additional four consecutive months. After that point, a household leaves the sample permanently. The result is a continuous dataset that explores American life, from hours spent working to employment classification, salary, and the changes that can occur month to month. We found this especially interesting to study throughout the months in which COVID-19 broke out in the U.S. to explore its effects on work and life. In some analyses, similar industry categories were grouped due to sample sizes by month.
The effects of COVID-19 on the economy are impacting self-employed Americans in unique ways. We encourage you to share the findings from this analysis with your readers for any noncommercial use with the inclusion of a link back to this page in your story so they have full access to our research and methodology.