Self-Employment Patterns for Men and Women and Implications for Tax Compliance

The rise of the gig economy has increased interest in the self-employment sector and highlighted the benefits and costs of these types of jobs. One understudied issue is that self-employment (which overlaps substantially with the gig economy) concerns a part of the tax code that is difficult for workers to comply with and for the IRS to administer. Using the 1997 cohort of the National Longitudinal Survey of Youth, we analyze the prevalence of self-employment and patterns of hours and earnings in 2014 for workers ages 30 to 34. These data are better than other survey data for tracking self-employment because workers may report information on multiple jobs at any given time and throughout the year; most surveys collect information only about a particular point in time or only about a worker’s primary job.

We focus on three research questions: (1) What characteristics are associated with being self-employed; (2) What are the patterns of self-employment for a worker within a year (e.g., those working regular employment and self-employment concurrently versus those moving from regular to self-employment) and across years; and (3) What is the variability in earnings and hours for workers, comparing those who only work in regular jobs, those whose who only work in self-employment, and those who combine self-employment and regular employment within a year?

We find that men are a little more likely to be self-employed than women and married women are more likely to be self-employed than nonmarried women. However, regular wage employment is by far the most common type of employment for both men and women. Among workers with both self-employment and regular employment within the year, we find that this happens most often when people are holding multiple jobs at the same time rather than changing jobs from one sector to the other. We also find different patterns in the variability and levels of hours and earnings across different employment types and for men and women.

The complexity in the patterns of earnings shown in the data for those who have self-employment, as well as the fact that self-employment earnings are more difficult to document and verify, demonstrates the tax compliance issues inherent in self-employment.