One of the more interesting findings from the 9 years of data from the MBO Partners State of Independence study series is how many Americans enter and exit independent work.
As the study chart below shows (click to enlarge), the number of new full-time independent workers/freelancers entrants has stayed steady at around 1.5 million annually since 2011.
But the number of people exiting has varied widely. In 2012, only about 800,000 exited, but in 2016 2.4 million did. And since 2016 the number of exits has steadily declined.
The main reason the entrants' data is consistent is the aspirational nature of self-employment. Simply put, millions of Americans want to be self-employed.
Every year MBO Partners has done this survey between 12%-14% of Americans who aren't self-employed said they plan on becoming self-employed over the next couple of years.
And while most won't, each year about 1.5 million take the plunge and become self-employed full-time.
The reasons people exit independent work is more complex and tied to cyclical economic forces and the state of the traditional job market.
Early in the economic recovery, relatively few independent workers exited. This was because there were few alternatives since the traditional job market was relatively weak.
But as the job market gain strengthed, a growing number of independent workers returned to traditional employment.
This was especially true for the group we call "reluctant independents", which are independent workers who report preferring a traditional job.
In fact, over the past five years, our research has found that four out of five independents who left the full-time independent workforce were reluctant independents. This resulted in the percentage of reluctants falling from 34% of full-time independent workers in 2012 to just 19% in 2019.
The declining number of reluctants is also why the number of exits peaked in 2016 and has declined since. There are simply fewer reluctants left to exit.
Going forward we anticipate the number of new full-time entrants to continue to run in the 1.5 million range.
We also expect the number of exits to continue to decline and drop below 1 million per year by 2021.
This forecast assumes the economy continues to slow (2020 GDP in the 1.5% range and 2021 in the 2% range), but doesn't all into a recession.
We'll have our recession outlook in another article in the near future.
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