Is there evidence that wage and salary workers turned to self-

employment in the Great Recession?

William B. BeyersDepartment of GeographyUniversity of Washington

Seattle, WA 98195beyers@uw.edu

Pacific Northwest Regional Economic Conference, Portland OR., May 2014

Outline of Presentation

• Introduction• Background Literature• Data Sources• Results

– U.S. Total change, state patterns of self-employment, state change in wage & salary employment, joint patterns of change in wage & salary employment & self-employment

• Concluding Comments (There is a written version of this paper if anyone wants it)

Introduction

• Job growth globally has been slow in the wake of the Great Recession

• In the U.S. wage and salary employment is finally back to the level in 2007

• In contrast, self-employment has continued to grow, and has dramatically outpaced the growth of wage and salary employment since 1990.

Background Literature• Marshall & Wood lean on Christopherson’s work,

viewing self-employment as an aspect of flexibility in the labor force.

• Rubalcaba viewed it as an employment opportunity, especially for women

• Dickson argues “Lone Rangers” are related to declining sectors, but questions if there are bases to reverse these declines

• Beyers & Lindahl’s “Lone Eagles”• Various case studies• BLS work based on the Current Population Survey;

the U.S. Census nonemployer program; BEA proprietors/self employment estimates

Dawson, Henley & Latreille’s UK survey of motivations for self-

employmentReason (Percentage) All Men Women To be independent / a change 22.2% 23.6% 18.5% Wanted more money 9.3% 10.6% 6.0% For better conditions of working 4.0% 4.4% 3.0% Family commitments / wanted to work at home

5.6% 1.6% 16.0^

Opportunity arose-capital, space, equipment available

9.2% 9.3% 9.0%

Saw the demand / market 6.4% 6.4% 6.4% Joined the family business 5.0% 4.8% 5.6% Nature of the occupation 15.8% 15.4% 16.8% No jobs available (locally) 2.5% 2.7% 1.8% Made redundant 6.8% 8.4% 2.7% Other reasons 10.7% 10.1% 12.3% No reason given 2.5% 2.7% 1.9% N 23851 17227 6624

Data Source

• BEA data online• Series SA- 25 – Full & part-time employment by

industry• Series SA – 27 – full & part-time wage and salary

employment by industry• The difference between these two series is the level

of self-employment by industry• Data were developed for states in 1990, 2007, and

2011

Results

• First a national perspective• Then state level analysis

1990 2007 2011

% change 1990-2007

% Change

2007-2011

% Change 1990-2007

Wage and Salary 116,544,000 143,526,000 137,715,000 23.2% -4.0% 18.2% Self-Employed 21,786,900 36,373,700 38,119,700 67.0% 4.8% 75.0% Total 138,330,900 179,899,700 175,834,700 30.1% -2.3% 27.1%

National Industry Trends

• Table 2 in paper has three broad sets of data:• Documents trends of self employment by

industry – most services have fast growth• Reports the share of self-employed by industry

– highly variable in services• Coefficients of industry concentration report on

the spatial distribution – most services have low coefficients, suggesting relatively even spatial distribution

Location Quotients – All self-employment 2011

Alaska– 0.96Hawaii – 0.93

Location Quotients – Services Self Employment 2011

Alaska – 0.89Hawaii – 1.04

Location Quotients Producer Services 2011

Alaska – 0.73Hawaii – 0.99

Location Quotients – Arts, Entertainment and Recreational Services 2011

Alaska – 1.23

Shift-Share Analysis

• A technique that allows focus on changes in regions compared to national change

• Three models – 1990-2007; 2007-2011; 1990-2011

1990-2007 Change Self Employment

2007-2011 Change Self Employment

1990-2011 Change Self Employment

Industry Mix Shift

1990-2007

Competitive Shift 1990-

2007

Industry Mix Shift

2007-2011

Competitive Shift 2007-

2011

Total 14,586,800 1,746,000 16,332,800 +/-740,085 +/-1,989,215 +/-242,870 +/-451,238

% Change 67.0% 4.8% 75.0% x x x x

% of Change x x x 5.1% 13.6% 13.9% 25.8%

Competitive Shift 1990-2007

Alaska –0.9%Hawaii –0.6%

Percentages are of total positive ornegative shift values

Competitive Shift 2007-2011

Alaska -1.0%Hawaii -1.2%

Percentages are of total positive ornegative shift values

Cluster Analysis• Used Ward’s algorithm to define clusters of

6 industry groups for the year 2011

Cluster Resources Construction Mfg-

Utilities Trade Producer Services

Arts, Entertainment, &

Recreational Services

Other Services

1 0.29 0.87 0.79 0.87 1.17 1.21 0.98 2 0.96 1.72 1.62 0.95 0.85 1.21 1.00 3 0.77 1.00 1.07 1.01 1.03 0.97 1.02 4 1.73 0.89 1.60 1.05 0.83 1.27 1.01 5 1.64 1.19 1.04 1.08 0.86 0.80 1.00 6 2.87 1.04 0.90 1.06 0.74 0.74 0.90

*

*

* Small clusters – only 3 states each

Cluster Classification of State Self-Employment 2011

Correlations Location Quotients 2011- Wage & Salary and self-employment

Industry Correlation & significance Resources 0.626 (.01**) Construction -.253 (NS - .073) Manufacturing-Utilities 0.159 (NS - .266) Trade/Transportation Services 0.623 (.01**) Producer Services 0.804 (.01**) Arts, Entertainment, and Recreation 0.335 (.05) Other Services -.018 (NS - .902)

Correlations - 2011Rural Rural % - 1 % - 2

Resources

Construction 0.142

Mfg.-Utilities 0.002 .342*Trade-Transport

.473** 0.243 .311*

Producer Services

-.857** -.436** -0.228 -.619**

Arts -.615** -0.265 .277* -.453** .561**

Other Services -0.236 0.055 -0.072 -0.037 -0.155 -0.047

Over 65 Age 0.12 0.266 -0.021 0.204 -0.242 -0.136 0.126

Rural % - 1 .788** .379** 0.118 .360** -.806** -.428** -0.062 0.155

Rural % - 2 .741** .439** 0.266 .383** -.814** -.426** -0.004 0.234 .874**

Bachelors % -.526** -0.236 0.085 -.662* .640** .671** -0.0194 -0.206 -.408** -.470**

ArtsOther

ServicesOver 65

AgeBachelors

%Resources Construction

Mfg-Utilities.

Trade & Transport

Producer Services

Red – positive sig. 01; yellow – positive sig. .05Green – negative sig. 01, blue negative – sig. .05

Wage & Salary Employment Change 2007-2011 – competitive shift

U.S. Lost 4% of wage & salary employment over this time period

Change in Wage & Salary and Self-Employment 2007-2011 (1)

Change in Wage & Salary and Self-Employment 2007-2011 (2)

Change in Wage & Salary and Self-Employment 2007-2011 (3)

Change Wage &

Salary

Change Self Employment

r-square change

absolute

sig. Evidence r-square

percent change

Sig.

Manufacturing -2140000 11800 -0.026 0.855 none -.373 .007 Finance -369000 1077100 -0.495 0 Strong .153 .285 Real Estate -229000 306600 -0.236 0.095 weak .658 .000 Administration -583000 395900 -0.752 0 Strong -.263 .062 Arts -5000 145600 0.358 0.01 inverse -.099 .489 Accommodation -22000 92500 0.533 0 inverse .244 .084 Other Services -238000 14800 -0.04 0.78 none -.204 .151

Financial Services Change 2007-2011

California

Texas

Administrative Services Change 2007-2011

Texas

California

Florida

Manufacturing Change WS & SE

Finance Change WS & SE

Real Estate Change WS & SE

Administrative Services Change WS & SE

Arts, Entertainment and Recreation Industry Change W&S and SE

Accommodation and Food Services Change – WS & SE

Other Services Change – WS & SE

Concluding Comments

• This paper used BEA self employment data; different results are possible if BLS or Census data had been used

• There are some industries where self-employment gains occurred and wage & salary employment declined, at the state level

• Micro-data would be needed to tease out the paths of individual workers

• Given the long-run gains in self-employment in the U.S., more research is needed to understand the dynamics of wage & salary and self-employment at the industry and occupational level