- Census data highlights the major impact of non-employer businesses on the economy
- More than four out of five businesses in the United States had no employees in 2018
- Minorities were more likely to own non-employer firms
Summary by Dirk Langeveld
Recent data from the U.S. Census Bureau and the U.S. Small Business Administration Office of Advocacy highlights the outsized role non-employer firms play in the business landscape. At the same time, these businesses only account for a small fraction of business revenues.
The Census Bureau recently released its non-employer statistics for the year 2018. This report offers annual statistics on the number and receipts of non-employer business owners by race, ethnicity, sex, and veteran status.
“The data set illustrates how different groups fare in an important type of entrepreneurship,” the SBA Office of Advocacy said in a press release. “While much has changed since 2018, this annually released data is an important benchmark for tracking impacts of the COVID-19 pandemic on differing owner demographics.”
The Census report estimates that there were 32.2 million firms altogether in the United States in 2018, with non-employer firms accounting for 82.2 percent of this total. While the combined sales of U.S. businesses totaled $39.7 trillion, non-employers accounted for just 3.3 percent of this sum.
A total of 9.7 million firms were owned by minorities and generated $1.79 trillion in sales. Minority-owned businesses were also more likely to be non-employer firms. A total of 96.2 percent of the 3.2 million businesses with Black owners had no employees, along with 92.2 percent of Hispanic-owned businesses. Non-employer firms accounted for 36.2 percent of sales generated by Black-owned businesses and 24 percent of sales generated by Hispanic-owned businesses.
Women were also more likely to own non-employer firms, with 90.5 percent of female-owned businesses having no employees.
The Census data closely aligns with a report from the SBA Office of Advocacy that looked at the state of the small business economy after the start of the COVID-19 pandemic. This report determined that there were 32.5 million businesses with 500 or fewer employees, accounting for 99.9 percent of all firms and 99.7 percent of firms with paid employees. It also determined that non-employer firms accounted for 81 percent of small businesses.
The Census data predates a surge in entrepreneurship that followed the start of the pandemic. This trend was sometimes driven by necessity, such as when people who lost their jobs opted to start their own business. Other contributing factors included workers reassessing their situation and goals, a drop in startup costs, and platforms making it easier to start an online business.