Are the Self-Employed Really Their Own Boss?

• In Event: Beyond Wages: Worker Choice, Autonomy, and Wellbeing in Flexible and Nonstandard Work

Abstract

Self-employment is commonly equated with being one’s own boss. Compared to employees, the self-employed are assumed to have greater independence, flexibility, and autonomy in their work, including freedom to make their own decisions on how they do their work and when they work. We show, however, that the situation is quite different for many self-employed.

Understanding the quality of self-employment work is important partly because the self-employed workforce is larger than generally recognized, comprising workers in a diverse set of “non-employee” arrangements including both traditional business owners and independent contractors who receive 1099s or work on an informal, cash basis. We use data from the American Job Quality Study (AJQS), a large, nationally representative survey that is designed to accurately categorize workers as employees or one of several self-employment types. The AJQS captures many independent contractors and informal workers who are likely miscoded as employees in most household surveys. We show that the share of workers who are self-employed on their main job is nearly 50 percent higher than traditional household surveys suggest.

We examine the degree to which the self-employed do, in fact, have control over their work. Although the self-employed are more likely than employees to have a lot of input into how and when they work, more than 40 percent lack such autonomy over how they work, and 40 percent lack strong control over when they work. Self-employed workers who lack control over how and when they work are disproportionately in independent contractor and informal work arrangements, have low earnings and experience financial distress, and lack health insurance or are on Medicaid. Moreover, most self-employed workers who lack strong control over their work schedules also experience unpredictable schedules, volatile hours, or both—implying that, for many self-employed, their schedules do not reflect their choices. Unpredictable and volatile work schedules are linked to low job satisfaction, unhappiness, anxiety, and work-life conflict, especially when the worker has little control over their schedule.

Reflecting the premise that self-employed workers are their own boss, state and federal employment laws and programs do not provide them with basic protections afforded employees: they are not covered by minimum wage and hours laws; are not eligible for employee benefits such as health insurance and retirement plans; and lack access to unemployment insurance and workers’ compensation. Because employers partially or fully bear the direct costs of such protections, they may have strong financial incentives to (mis)classify employees as independent contractors. Our findings are consistent with prior research showing that worker misclassification is widespread in the United States.The rise of new types of independent contractor arrangements, such as work mediated through online “gig” platforms, has raised concerns among policymakers about the adequacy of existing laws and programs to protect these workers, spurring high-profile debates at the state and federal levels over how to address the problem. While some advocate tightening and better enforcing laws governing worker misclassification, others favor expanding independent contractors’ access to benefits and programs currently available only to employees.

Authors

• Susan N Houseman, W.E. Upjohn Institute for Employment Research
  Presenting Author

• Katharine G Abraham, University of Maryland, College Park
  Non-Presenting Co-Author

• Beth C Truesdale, W. E. Upjohn Institute for Employment Research
  Non-Presenting Co-Author