Are men or women more likely to be self-employed?
When I worked in a small tax practice in rural New Mexico in the early 2000s, I had a number of clients who made money selling Avon, or who had just started working for themselves. Some of these people had no clue that they had to pay self-employment tax on their net income and walked out indignantly when I told them how much they owed. A few even told me I had done their tax return wrong.
Since those days, the gig economy has grown tremendously, but the problems with tax compliance have not gone away. In an effort to help the IRS identify the kinds of people who may need help with tax compliance, the Tax Policy Center studied work and self-employment patterns among a cohort of workers In their early 30s, using data from the National Longitudinal Survey of Youth 1997.
Every year or two, this study checks in with a group of 9,000 individuals who were between the ages of 12 and 16 in 1997. The Tax Policy Center used data from the survey performed in 2014, when these cohorts were aged 30 to 34. This survey asked detailed questions about all their jobs since the previous survey, two years earlier. Let’s take a look at what they found.
Men more likely to be self-employed
The most common form of employment for both men and women was regular employment, with 85.7 percent of men and 87.8 percent of women in that category, versus 7.7 percent of men and 5.6 percent of women being self-employed. The remaining 6.6 percent of both men and women reported mixed employment. Mixed employment meant that a person might be working a side gig while holding down a regular job, or that they could be alternating periods of regular employment and self-employment.
Among all groups, men with the least education tended to be self-employed at the highest rate. More than one in 10 (11.6 percent) of the men with less than a high school degree reported being only self-employed, perhaps because these men have fewer options for regular work. This was not the case for women: only 3.9 percent of women without a high school degree reported self-employment.
Married women more likely to be self-employed than unmarried women
Overall, married women were more likely to be self-employed than unmarried women, at 6.4 and 4.8 percent, respectively. However, the reverse was true for men: married men were less likely to be self-employed than unmarried men, at 7.3 and 8.1 percent, respectively.
The study authors’ explanation for the difference was that “women are more willing to incur the greater risk of self-employment and potentially lower hours and earnings if the household has another earner,” while married men may be the primary breadwinners and, therefore, perhaps prefer the stability of regular income.
Self-employed women earn less, but work fewer hours
Self-employed women were the lowest earners in the survey, with average weekly earnings of just $461.50. Women with regular employment or mixed employment earned substantially more ($692.30 and $673.10, respectively), but were also more likely to work longer hours than self-employed women. The mean hours worked for self-employed women were 27.9 per week, compared to around 40 hours a week for women with regular or mixed income. This supports the authors’ thesis that women choose self-employment for the inherent flexibility to manage family and work responsibilities.
Men’s earnings showed much less variance across employment categories. At the top, men with regular income reported average weekly earnings of $864.40, just a bit higher than self-employed men and men with mixed employment, who reported $807.70 and $796.20, respectively. However, the weekly hours worked by men did not vary as much, ranging only from 42.8 to 50.7. The authors found evidence that some men chose self-employment as a means to reduce their work hours: around one-fourth worked less than 35 hours per week.
What does this mean for tax professionals?
Self-employed individuals are the ones most likely to need professional help with their tax returns. A friend of mine has added to her bookkeeping practice by asking every Uber driver she rides with how they manage their income and expenses. Being aware of the gender differences, and the impact of family dynamics on self-employment, can help you identify situations where you can be a true tax hero!