Where Self-Employment Should be Strong over the Coming Eight Years





People often ask me to predict the sectors of the economy where we should see a big expansion in entrepreneurial activity over the next few years. Those predictions are difficult to make because “entrepreneurial activity” has a variety of meetings, and because we don’t have a great deal of data to use to make forecasts. But I can make some predictions for self-employment using data from the Bureau of Labor Statistics (BLS).

Before I give you my take, let me tell you how I’m figuring this. My prediction is based on two factors. First, what parts of the economy are forecast to grow the most between 2008 and 2018? More people will be attracted to self-employment in growing sectors of the economy than shrinking ones.

Second, in what sectors of the economy is self-employment common? If self-employment doesn’t work well in a particular part of the economy, then expansion of the sector won’t trigger much growth in it. For instance, the utilities sector might be expanding, but it’s difficult to be self-employed in utilities. Therefore, growth in the sector won’t translate into a lot of expansion in self-employment. By contrast, self-employment is effective in retail trade, so expansion of that sector should lead to significant growth in self-employment.

To identify the sectors of the economy where expansion is expected, I looked at the BLS’s projections for growth in economic output from 2008 through 2018 and selected those sectors with expected expansion rates that exceed the median for all sectors. To identify the sectors in which self-employment tends to be effective, I looked at the BLS’s figures on self-employment’s share of jobs and selected those sectors where the share was above the median for all sectors.

Below are the sectors (as named by the BLS) which look best for future self-employment:

  • Construction
  • Retail trade
  • Transportation and warehousing
  • Securities, commodity contracts, and other financial investments and related activities
  • Real estate, rental and leasing
  • Professional, scientific, and technical services
  • Administrative and support and waste management and remediation services
  • Social assistance

What’s noticeable about the list is what’s missing. Agriculture, utilities, manufacturing, information, and arts and recreation aren’t there. These sectors don’t look as good as the others for future self-employment.

For some sectors, the reason is the difficulty of engaging in self-employment, as is the case for utilities. For others, like agriculture, it has to do with the absence of projected output growth.

Of course, not all industries within each sector will follow the same patterns. For instance, most of manufacturing is not expected to be very favorable to self-employment over the coming years, but the subset of manufacturing focusing on durable goods and furniture and related product manufacturing is.

Similarly, the information sector isn’t expected to be attractive for self-employment in the near future, but the motion picture and sound recording industries are. And the arts, entertainment and recreation industry is predicted to be unattractive for self-employment over the next eight years, but the amusement, gambling and recreation industry looks favorable.

What are some of the other industries (as named by the BLS) that look good for self-employment going forward, at least over the next eight years?

  • Truck and other transportation and support activities
  • Securities, commodity contracts, and other financial investments and related activities, particularly finance and insurance
  • Computer systems design and related services
  • Miscellaneous professional, scientific, and technical services
  • Health care, particularly ambulatory health care

Keep in mind that this analysis is only as good as the data on which it is based. Given the failure of many people to predict what has happened to real estate and finance during the financial crisis, the BLS growth projections for many sectors and industries may be wrong. In addition, if something transforms an industry to make self-employment appropriate where it hadn’t been before or inappropriate, or vice versa, the predictions will be off.

But those caveats aside, I’d bet on seeing a lot more growth in self employment in computer systems design and ambulatory health care over the next decade than in agriculture and wholesaling.

7 Comments ▼

Scott Shane


Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

7 Reactions

  1. Martin Lindeskog

    Scott,

    Do you have a link to the Bureau of Labor Statistics data?

  2. Based on the current climate I agree with you that agriculture doesn’t hold much potential. However, I think their is potential as more and more people become aware of how fragile our current food supply can be. So much of our food is being transported thousands of miles to reach our grocery stores and as we become more environmentally conscious I believe people will increasingly turn to local producers. In this situation I think that there is potential for self-employment.

  3. TJ McCue

    Hi Scott, this is great. Do you know of any sources that drill down deeper? It would great to see some examples of small companies in computer systems design or ambulatory health care as you mention. Plus all the others.

  4. I’m in the construction industry and even though most disagree, the economy has turned for the better for us, we we’re busier this year than we have been in a long time. I think people are worrying less about holding onto money because they see a little light at the end of the tunnel. I agree, construction does look like a good trade to be in for the future.

  5. @RobertBrady: Actually I don’t think our food supply has ever been less fragile. Ocean shipping means the whole earth is available for the food supply of any one who can pay, and it’s a lot easier to find some way to pay for food then to guarantee that any particular locale can produce it.

    In comparison to the nonsense (e.g. Irish potato famine) that was business as usual just 100 years ago, we’re pretty well off.

  6. Hi Scott,

    When exploring possible market expansion during bad times we investigate the government services that are being privatised. Recession is always followed by a period of government lay-off and this is both a huge influx of highly qualified staff and also some pretty vacant business opportunities that the government will be looking to source from the private sector. So for the entrepreneur it becomes a great time to head hunt the best staff at very competitive prices and then make bids for government contracts with these price savings factored in.

    We have found opportunity to fit all sizes of business. As small fry we look to benefit from local supply of qualified staff, but if you have the resources to manufacture and supply … the sky is the limit.

    Best Wishes

    Bev 🙂

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