Who Are the Self-Employed?

S or entrepreneurship, is commonly held to provide an important avenue for individuals to advance up the income ladder. For some, it may provide a better route than paid employment, while for others, who may be disadvantaged when pursuing paid employment, it may provide the only route.1 The perceived importance of selfemployment is reflected in government programs such as the U.S. Small Business Administration’s loan programs and the Self-Employment Assistance programs that several states have used to help the unemployed to open their own businesses.2 Despite the perceived importance of self-employment, there has not been a great deal of basic data analysis to identify who the self-employed are and what they do. As a partial remedy, this paper uses data from the 1998 March Supplement to the Current Population Survey (CPS) to provide a snapshot of self-employment in the United States, with particular focus on the differences between self-employed men and self-employed women. The purpose of this is to inform more-rigorous analyses that try to identify the determinants of self-employment. It supplements and updates earlier looks at CPS selfemployment, particularly Bregger (1996), who looked at self-employed men and women combined, and Devine (1994a), who compared male and female self-employment for the years up to 1990. Because men and women face vastly different costs and benefits to self-employment relative to other labor market options, the self-employment decisions of men and women differ a great deal. Unsurprisingly then, self-employed men and selfemployed women tend to do different things and have different labor market characteristics. Nonetheless, most studies that try to explain the decision to be self-employed use data for men only or they combine men and women into one data set. The most recent study that uses combined data on men and women is Blanchflower (2000), which estimates the determinants of self-employment for 23 Organization for Economic Co-operation and Development (OCED) countries.3 Of the few studies that examine women’s decisions to become self-employed, the most prominent are Macpherson (1988), Connelly (1992), and Devine (1994b). To our knowledge, Georgellis and Wall (1999) is the only study that has direct comparisons of the determinants of men’s and women’s self-employment decisions. There are many factors that make a woman’s self-employment decision differ from a man’s. First, differences in male and female labor-market opportunities due to things like discrimination, experience and skill differentials, and labor-market segmentation may be more pronounced in some types of self-employment than in others.4 Also, due primarily to child-care concerns, a woman may have a different lifetime occupational strategy than a man with otherwise identical characteristics. Consequently, some types of self-employment may be more preferable to some women because they reduce the costs of child care or allow for more time-flexibility or work from home (Connelly, 1992, and Macpherson, 1988). To some extent, for women, self-employment can be considered a closer substitute for part-time paid employment or being out of the labor force than it is for men. This is consistent with Georgellis and Wall (1999), who found that German women are less responsive to the difference between the wages in paid employment and self-employment and are more likely to have been out of the labor force or in part-time paid employment immediately prior to becoming self-employed.