it261: The On-Demand Economy Driving Growth of Nonemployer Businesses

Tuesday 30 May 2017

The On-Demand Economy Driving Growth of Nonemployer Businesses

The U.S. Census released their 2015 data on non-employer businesses last week.

Overall, the number of U.S. nonemployer businesses continued it's steady growth, increasing by 2.1% to 24.3 million from 2014 to 2015. Since 2003 the number of nonemployer businesses has increased by about 5.2 million.

Nonemployer businesses are businesses that have a business owner, but no traditional employees. Most nonemployers - 86% - are sole proprietors. In 2015 they generated over $1.1 trillion in gross receipts.

The average nonemployer business is small - the median nonemployer falls into the $10,000 to $24,999 gross receipts bracket.

But about 2.8 million gross over $100,000 and about 36,000 gross over $1 million.

These numbers, by the way, are very similar to findings from the MBO Partners State of Independence research series on independent workers who earn more than $100k. See their reports for more on high earning independent workers.

The U.S. Census press release this year focused on the fast year over year growth of nonemployers in transit and ground transportation.

This is, of course, due to Uber, Lyft and the broader ride share industry.

Key quote from the release:

Nonemployer businesses, establishments without paid employees, in the Transit and Ground Passenger Transportation subsector (North American Industry Classification System (NAICS 485) increased by 59.4 percent from 362,445 in 2014 to 577,809 in 2015, according to U.S. Census Bureau statistics released today. Receipts in this subsector increased 21.9 percent from $11.7 billion in 2014 to $14.3 billion in 2015.

The U.S. Census chart below shows the 10 states with the largest growth in the number of nonemployers working in transit and ground transportation.

The rapidly growing on-demand economy is also likely driving the overall growth in nonemployer businesses.

We've long tracked the nonemployer business statistics.

They tend to get less attention than other government data on self-employment. This is because they are messy and include a hodge podge of business entities including passive businesses, firms no longer in business and LLCs owned by major corporations.

But we find this data a useful general indicator of U.S. self-employment.