Self-employment week continues with a look at the differences between government definitions of self-employment and nonemployer businesses. And yes, it doesn't get much more exciting than this:).
Let's start with nonemployer businesses (we call them Personal Businesses). According to the U.S. Census Bureau:
"A nonemployer business is one that has no paid employees, has annual business receipts of $1,000 or more ($1 or more in the construction industries), and is subject to federal income taxes. Most nonemployers are self-employed individuals operating very small unincorporated businesses, which may or may not be the owner’s principal source of income."
The data comes mostly from tax returns filed with the IRS. So as long as we aren't looking at cabinet nominees or those buying and selling senate seats, it is probably pretty accurate.
According to the Census, there were roughly 21 million nonemployer businesses in U.S. in 2007, up from 20.8 million in 2006. We've posted a lot in the past on personal businesses and covered them in detail in our Changing Faces of Entrepreneurship research report.
Self-employment data comes from the Current Population Survey (CPS), which is a monthly survey of about 50,000 U.S. households. The CPS has been around over 50 years and is the primary source of information on the U.S. labor force. The widely followed monthly unemployment rate, for example, is derived from CPS data.
According to the CPS, about 16 million people were self-employed in 2007. This is total self-employment and includes unincorporated, incorporated and agricultural self-employed. Alert readers of the prior two posts in this series will immediately recognize why we need this qualifier.
So in 2007 the U.S. had 21 million personal (nonemployer) businesses and 16 million self-employed.
Because the data collection methods are so different, one should not try to draw a lot of conclusions from the combination of the two datasets.
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