Data from the IRS shows that sole proprietor small businesses spent $69.2 billion on contract labor in 2018 (the most recent data available). Contract labor refers to nonemployee labor, such as freelancers, gig workers, etc.
This is up from $64.8 billion in 2017 and just $34.4 billion in 2010. Over the period from 2010 to 2018, contract labor spend by sole proprietors increased by an annual growth rate of 9.1%.
Spending on salaries and wages grew from $73.7 billion in 2010 to $97.9 billion in 2018, or an annual growth rate of 3.61%.
In other words, spending on contract labor increased at 2.5x the spending on traditional employee salaries and wages from 2010 to 2018.
In 2003, contract labor was about 20% of total labor costs of sole proprietors. By 2010 it had risen to 31%, and in 2018 it reached 41%.
We expect the trend towards contract labor use by small businesses to continue.
