Self-Employment and Class of Worker

Self-employment is a subcomponent of total employment in the United States. Officially designated as a “class of worker” along with private and public employees, self-employment is often the focus of labor market research. Generally, people who are self-employed work for themselves as opposed to a company, but this definition is too broad to fully capture the way self-employment is measured in the Current Population Survey (CPS).

What variable(s) measure self-employment?
Self-employment is measured in several variables. In the most recent format of the CPS, self-employment was measured in some form in the following variables: PEIO1COW, PEIO2COW, PRCOW1, PRCOW2, PRDTCOW1, and PRDTCOW2. All of these are “class of worker” variables that attempt to discern whether a respondent is self-employed, employed by the private sector, employed by the public sector, unpaid, or employed in the agriculture sector.

Why are there two types of self-employment?
In earlier versions of the survey, there was only one type of self-employment. Since 1989, the many variables have broken self-employment into two subcategories—incorporated and unincorporated. The difference between these two categories is as simple as it looks. Respondents are asked ““Last week, were you employed by government, by a private company, a nonprofit organization, or were you self-employed?” Those who respond that they are self-employed are then asked if their business is incorporated. Those whose businesses are incorporated are the incorporated self-employed. Those whose businesses are not incorporated are the unincorporated self-employed. A self-employed individual often decides to incorporate their business for tax or legal reasons, a fact that may be important for research or other policy analysis.


Source: Hipple, Steven F., and Laurel A. Hammond. 2016. "Self-employment in the United States." Spotlight on Statistics. Available at https://www.bls.gov/spotlight/2016/self-employment-in-the-united-states/pdf/self-employment-in-the-united-states.pdf