Many Americans want to be in business for themselves. A 2007 Organization for Economic Cooperation and Development (OECD) survey shows that 61 percent of Americans said they would prefer to be self-employed than to work for someone else.
The preference for self-employment is not surprising given the significantly higher rate of job satisfaction that self-employed people have over those who work for others. As I have discussed elsewhere, studies show that people need to earn more than twice as much to express the same level of job satisfaction working for someone else as they do working for themselves.
However, relatively few people become self-employed right out of school – self-employment is, in fact, relatively uncommon among people under the age of 25. Most people go into business for themselves after having worked for someone else.
Americans’ preference for self-employment combined with their tendency to work for others before going into business for themselves raises the question: which jobs have the greatest odds of leading to self-employment?
According to data from the Bureau of Labor Statistics (BLS), the occupation with the highest odds of leading to self employment is “door-to-door sales worker, news or street vendors, and related worker.” Almost 95 percent of people in this occupation are self-employed. The next two occupations with the highest odds of leading to self-employment are agricultural manager and construction manager, which have self-employment rates of 79.9 and 60.9 percent, respectively. (Click here for the BLS data on self employment rates by major occupational group in 2008 – Excel spreadsheet).
There are roughly 90 occupations – from actuaries to fish and game wardens to nuclear technicians to procurement clerks – that the BLS data show have no self-employment. (Before someone posts a comment or sends me an email saying that they know a self-employed actuary or game warden, let me point out that the BLS relies on surveys to figure this out and no one in their sample was self-employed. The actual incidence of self-employment might be a small fraction above zero.)
The difference across occupations in the odds of being self-employed is quite large – much bigger, in fact, than the variation across psychological traits or demographics. For instance, the odds of being self-employed are 369 times higher for writers and editors than for human resource assistants, but the odds of being self-employed are only twice as high for men as for women.
At this point, I’m sure that at least one of you is now thinking that one’s occupation may have big effect on whether a person is self-employed, but self-employment is different from owning a business. That’s true, but self-employment and business ownership are a lot more similar than you might think. These days, 36 percent of the self-employed run incorporated businesses and nearly 80 percent of U.S. businesses have no employees (as compared to about 87 percent of the self-employed).
Researchers, policy makers, and practitioners shouldn’t forget how important occupation is to explaining whether or not someone is in business for him or herself.
I find these labor market trends to be both empowering and a little scary at the same time. Of course, there’s no more job security at big companies today; that myth has been shattered. Why not embrace the risks and benefits of working for yourself? It’s not like you need a tremendous amount of seed money.
Work experience is the big factor from what I see. Most of the industries with high rates of self-employment are industries where a person could get hands-on experience early in their career and then move out on their own. Industries that require a lot of training and “putting in your time” to reach certain levels will naturally tend to have fewer self-employed people because they spend more time getting qualified.
That was the paradox for me coming out of college. I couldn’t get a job without experience, but I couldn’t get experience without a job. You can’t become self-employed until you’ve acquired a minimum skill set and getting that skill set is just easier in some industries.
Steven | Business Diaries
It makes me feel good to know that most entrepreneurs are 25 or older. I am only 22, and I am making things happen NOW, so I definitely have some time to get my game together.
Scott, this is really cool info. I find it really interesting to hear what sparks someone to start their own venture. Thanks for sharing this.
There’s a thin line then between self-employment and entrepreneurship. I guess, one must not limit him/herself and find ways to make what one has now – even better. I wonder if self employment is becoming popular these days when people are getting laid off from work, losing the security of their jobs. I think, older people are more inclined to being self-employed as the younger generation wants to explore the world first and make meaningful experiences that can help them later. Thanks for sharing the stats.
I believe that everyone has a calling, you can either be an entrepreneur or a worker. Whatever you choose to be, it is important that you always do your best to be successful.
I always appreciate Scott injecting reality into entrepreneurship statistics.
The reality is that many people who are self employed consider that they are business owners. They technically may be when they are not truly creating any equity value- they are only creating a job for themselves.
More needs to be done to educate aspiring entrepreneurs about the difference between self-employment and owning a bona-fide business as well as showing people that they can be entrepreneurial without taking the financial risk of going out on their own.
It’s funny, my 61 year old father fits the stats. His first career was door to door sales and I can count on one hand the number of years that he spent working for someone else.
Thanks for sharing that.
Agreed! I have been in business for myself for the better part of my life. I started out with door to door sales. I also agree with Carol, many who are self-employed consider themselves to be business owners. Thanks for this post – it is good to get statistics on this topic.
I don’t think it depends to much on occupation to become self employed. Its just one of the factor. You can even start your self employment journey now buy learning and investing about a particular business.