MEDIAN INCOME

While the self-employed may be holding their own numérically, this is not to say they are doing well financially. On the contrary, men working for themselves earned about as much as wage and salary workers but they put in longer hours. Self-employed women, moreover, made less than other women, although their workweeks were about the same. This disparity is even wider when one considers that the use of unpaid family workers-a class-of-worker group closely identified with the self-employed-adds a substantial unmeasured portion to the average work week.3

The range of income levels of the self-employed is much wider than among wage and salary workers. In 1972, the proportion of self-employed men in nonfarm industries earning $3,999 or less was 16 percent, compared with 5 percent for the wage and salary worker. But in the higher income levels, 32 percent earned $15,000 or more, compared with only 19 percent of the wage and salary workers. This disparity in the higher brackets stems from the fact that a disproportionate number of self-employed persons are in the professional and technical occupations, where nearly 40 percent had earnings exceeding $25,000 a year. Self-employed women had a similar tendency to be more concentrated at both ends-of-the-income spectrum than other working women.

Despite severe problems, many enterprises have been able to survive due in part to their owners' tenacity as well as the extensive use of unpaid family labor. Many are willing to "pay a price" in terms of reduced income for the freedom to set their own hours and working conditions. Some of their income, moreover, is implicit rather than included in income statistics. Examples of the receipt of noncash income are the owner of the corner grocery who consumes some of his own goods at wholesale prices, and, of course, the farmer who produces his own food. These understated economic benefits, when considered with personal amenities, have helped keep the poorer self-employed in business rather than working for somebody else.

OCCUPATIONAL DISTRIBUTION

The self-employed are widely distributed across occupations, ranging from highly skilled professionals such as architects, lawyers, and physicians to occupations requiring little formal education such as shoe repair, oystering, and sharecropping. Many of these activities-tutoring or sewing, for example-can be performed within the home. Others are very seasonal in nature; the self-employed typically varying their seasonal production by adjusting their hours rather than trying to find other work. A listing of occupations which have significant proportions of self-employed persons appears in a box elsewhere in this article.

To be classified as an unpaid family worker, one must work at least 15 hours a week in a farm or business owned and operated by a member of the immediate household who is related by blood or marriage. The extent and importance of such services is difficult to estimate since the somewhat arbitrary cutoff of 15 hours invariably leaves out many contributing workers. (Other worker classifications are listed as employed if the person works more than 1 hour a week.) Data for 1973 show that for every 10 nonfarm selfemployed there is one supporting family member; in farming the involvement was considerably greater-one unpaid family worker for every 3.5 self-employed.

"Money Income in 1972 of Families and Persons in the United States, Current Population Reports, Consumer Income," Series P-60, No. 90 (Bureau of the Census, 1972), tables 57 and 60.

In spite of this diversity, some occupational traits are clearly associated with self-employment. In 1973, almost 50 percent were concentrated in the white-collar accupations-particularly as professionals and managers. A second large component was in farming (23 percent). The remainder were distributed between blue-collar and service occupations, craftworkers having the largest proportion at 13 percent. Since 1967, non farm self-employment has grown by about 4 percent, while farming has declined an equivalent amount. (See table 3.)

In the farming sector, however, there are some recent signs that employment may be stabilizing. Since 1970, the number of farmers working for themselves has remained steady at 1.8 million, due principally to two factors. First, the ranks of marginal farmers have already been thinned, almost 3 million having departed since 1948. Second, the recent higher farm prices have made it easier for poorer farmers to remain in business, thus retarding the secular decline in farm employment.5

PERSONAL CHARACTERISTICS

It takes money (often savings) to go into business and thus the selfemployed tend to be older than the average worker, the difference in median age exceeding 10 years in 1973. To operate successfully, a wide range of managerial skills is also required.

The overall trend toward a younger labor force, as a result of the post-World War II baby boom, was evident among the nonagricultural self-employed as well, their median age declining almost 2 years from 1967 to 1973. By contrast, the median age of farmers remained unchanged.

Self-employed women have increased at a rate comparable to their overall increase in the labor force. Their greatest increase occurred in the more skilled, white-collar occupations, particularly as professional workers. The only occupation in which the female self-employed substantially declined since 1967 was clerical.

Traditionally, women have been less inclined to set up their own businesses than men. It should be pointed out, however, that female contributions to self-employment go far beyond the measures of their participation, because the majority of unpaid family workers are women. Their importance is probably greatest in farming where many family farms would fail without the help of women workers.

6

Black workers like women, are underrepresented in self-employment. Unlike many whites who inherit a family business, blacks usually must start from scratch. Public training and assistance programs initiated by the Small Business Administration have not resulted in an overall increase in the number of blacks who are self-employed but may have led to a modest increase in the number of black managers (from 4.0 to 5.8 percent since 1967). The increase in black professionals since 1967, from 2.0 to 3.7 percent, results from the fact that more blacks are going to college.

For a recent study of the farm sector, see Deborah Pisetzner Klein and Daniel S. Whipple. "Employment in agriculture: a profile," Monthly Labor Review, April 1974, pp. 28-32.

These statistics include other minority races as well as blacks. According to the 1970 census, blacks constitute 89 percent of all members of minority races.

DUAL JOBHOLDING

Dual jobholding, commonly called "moonlighting," is an important factor in self-employment. More than a third of all wage and salary workers who moonlight are self-employed on their second jobs. This means that counts of primary employment understate the extent of self-employment in the economy. More than 5 percent of all self-employed hourly work is performed in a secondary capacity, compared with approximately 1 percent of wage and salary work. The degree of understatement is even greater when the number of workers doing selfemployment work during the year is considered, nearly 1 in 6 terming such employment secondary."

When Internal Revenue Service data were compared with the Current Population Survey, the number of self-employed Americans was almost double that reported for any 1 month. This stems from two factors. First, self-employed persons with more than one farm or business are included only once in the multiple jobholding count, but all reporting businesses are included in IRS counts. Second, all movement into self-employment during the year is counted in the IRS survey, while the CPS provides only a snapshot view-the month of May.

CONCLUSION

The fact that nonfarm self-employment has expanded slightly since 1967 can be viewed as encouraging. However, the proportion of selfemployed in the labor force did continue to decline, reflecting the increasing importance of corporations and Government in the work force. In the agricultural sector, the increase in output per man-hour has meant an exodus from the farm, because fewer farmers are needed to meet the relatively inelastic demand for agricultural goods. In the nonfarm sector, the causes of the proportional decline are more complex. Certainly, corporations enjoy advantages of financing and returns to scale over most self-employed businesses. Often small businesses have incorporated for tax purposes.

In addition, consumer buying patterns may have been affected by public policies. The multiple decisions on the part of State and local governments after World War II, particularly in the expansion of highway systems, have greatly expanded regional markets. Consumers were able to easily purchase goods at establishments at greater distance from their local community. As a result, local self-employed tradesmen with small establishments undoubtedly suffered from the increased competition.

Thus there are a number of explanations for the fall in importance of self-employment in the American economy. Since 1970, however, both the farm and nonfarm self-employed have remained stable in absolute numbers. Given the past history of downtrends in both sectors, the present stability can be considered a heartening change.

For additional information on the extent of moonlighting, see Kopp Michelotti, "Multiple jobholding, May, 1973," Monthly Labor Review, May 1974. pp. 64-69.

SIRS data appear in "Business Income Tax Returns, 1971" (U.S. Government Printing Office. 1973).

"Work in America," p. 21.

DOCTOR, LAWYER, AUCTIONEER

Occupations in which 15 percent or more of the employed total were classified as self-employed in 1973 include: Architects; lawyers; physicians and related practitioners; writers, artists, and entertainers; buyers and shoppers; funeral directors; building managers and superintendents; restaurant, cafeteria, and bar managers; managers and administrators (not elsewhere classified); auctioneers and demonstrators; hucksters and peddlers; insurance agents, brokers, and underwriters; newspaper carriers and vendors; real estate agents and brokers; real estate appraisers; carpenters; brickmasons and stonemasons; painters; paperhangers and plasterers; roofers and slaters; tile setters; automotive body repairers; radio and television mechanics; cabinetmakers; carpet installers; decoraters and window dressers; jewelers and watchmakers; shoe repairers; upholsterers; dressmakers, except factory; dry wall installers and lathers; taxicab drivers and chauffeurs; fishers, hunters and trappers; timber cutting and logging workers; child care workers except private household; hairdressers and cosmetologists, and farmers.

Year

1948. 1949

1950

1951.

1952.

1953.

1951

1955.

1956.

1957.

1958.

1959.

1960.

1961.

1962.

1963.

1964

1965.

1966

1967 1

1968.

1969.

1970.

1971.

1972.

1973.

TABLE 1.-DISTRIBUTION OF SELF-EMPLOYED AND UNPAID FAMILY WORKERS, 1948-73

[Number in thousands]

1 Not strictly comparable with previous years due to changes in procedures and definitions introduced into the Current Population Survey (CPS) in 1967. For an explanation of these changes see 1st page of the text.

TABLE 2.- SELF-EMPLOYED AND OTHER WORKERS, BY SEX, RACE, AND AGE, 1967-73

TABLE 3.-SELF-EMPLOYED AND OTHER WORKERS, BY OCCUPATION AND INDUSTRY, 1967-73

In general, most labor force groups respond to business fluctuations by a reduced or negative growth in employment during contractions in the economy. This procyclical response undoubtedly affects many selfemployed, their business failing as profit margins shrink or disappear. However, a competing countercyclical effect might result if laid-off wage and salary workers must rely on what was formerly "moonlighting" self-employment or drift into (probably marginal) self-employment for the first time."

1 The tendency for the self-employed sector to react countercyclically to the business cycle was also noted by John E. Bregger, "Self-Employment in the United States, 1948–62," Monthly Labor Review, January 1963, pp. 37-43.