The incidence of self-employment has increased in the United States since the mid-1970s, both among men and women. Unincorporated self-employment rose from 6.9% in 1970 to 7.5% in 1990 (Hipple 2004). This phenomenon is well documented by Blau (1987), Devine (1994a, 1994b), Lombard (2001). Hipple (2004), and many others. Devine (1994a) reported a 3 percentage point increase in female self-employment between 1975 and 1989, whereas the male self-employment rate registered a 2 percentage point increase over the same period. Her data is reproduced in Table 1. Although there was some controversy over whether this represented a sustained increase for men, there was a general consensus that this represented a long-term trend for women, with the self-employment rate increasing both absolutely and relative to total female employment (Budig 2003). Moreover, Devine (1994a) and Lombard (2001) emphasized the prevalence of married women in self-employment.
Self-Employment Rates of Women and Men in the Nonagricultural
Sector, 1975-1989 (%)
Year Total Women Men
(975 7.4 4.1 10.0
1979 8.6 5.3 11.3
1989 9.4 6.6 11.9
Notes: Includes individuals 16 years and older. Includes workers
in both incorporated and unincorporated businesses.
Source: Devine (1994a).
The absolute increase in the numbers of self-employed women is not surprising in itself. This could simply be a consequence of their labor force participation, which rose from 43% in 1970 to 58% by 1990, according to the Bureau of Labor Statistics (BLS).(1) Moreover, the share of employment in the service sector rose from around 16% in 1970 to 24% in 1984 (Personick 1985). This large increase in service sector employment expanded the opportunities for self-employment, thus potentially accounting for the relative increase in self-employment rates. These factors were, however, common to the most industrialized economies and yet, trends in self-employment were far from uniform across these countries.
Schuetze (2000) documented declines as well as increases in self-employment rates across OECD countries during the 1970s and 1980s. He compared male nonprimary self-employment rates in Canada and the United States during the 1983-1994 period. These two countries are similar in terms of the overall institutional structure, including labor markets, but differ considerably in their income tax policies and macroeconomic conditions. Importantly, Canada had increasing income tax rates and a deteriorating macroeco-nomic environment relative to the United States over this period. His data indicate that self-employment rates for prime-age males were higher in Canada than in the United States during this period. Moreover, the self-employment rate for this group fell in the United States while it increased in Canada. Thus, he argues that country-or region-specific factors were primarily responsible for the evolution of self-employment rates. One institutional feature that sets the United States apart from other OECD countries is the linkage between the labor market and health care provision.
In the United States, employment-based health insurance is the dominant form of financing health care; over two-thirds of nonelderly Americans receive health insurance through employers, either their own or that of a family member (Cutler 2003). This is because of the fact that the tax code in the United States subsidizes employer payments for health insurance, by excluding these payments from both income and payroll taxes. However, employee contributions for health insurance are paid with after-tax dollars. Thus, employers have an incentive to finance insurance premium costs rather than shift these costs to employees. This is especially the case in large companies where employers have greater bargaining power with insurance companies, and risks can be spread over more people.(3) Even if employees bear the full incidence of these costs in the form of lower wages. …