Self-Employment, Dreams versus Reality

October 3, 2024

A unique lens into the world of self-employment for low-wage workers and those without a college degree reveals a wide range of views, according to the latest paper from the Federal Reserve System's Worker Voices project, Self-Employment, Dreams Versus Reality.

Workers say that upsides of self-employment include greater control over work schedules, while downsides include precarious income. The paper's discussions about temporary gig work are similar to those under debate in the broader workforce.

The paper is the fourth in a series from the Worker Voices project, a nationwide effort led by the Atlanta and Philadelphia Feds and supported by all 12 regional Reserve Banks to assess the sentiments of workers without a college degree. Most participants were unemployed or in low-wage jobs, women, or people of color. Twenty focus groups were conducted in pandemic-era 2022.

To date, the project shows the COVID-19 pandemic as a game-changer for some low-wage, low-skill workers. Some participants had felt marginalized in the workforce before the pandemic, leading to job instability as some traditional employer-employee relationships ended. However, as the global economy shut down during the pandemic, some workers gained a sense of autonomy, and even agency, as they came to recognize their own value while working jobs that policymakers and businesses deemed essential.

The first three papers in the series capture workers' outlooks on job quality, barriers to employment, and training. In general, workers said they wanted a quality job, one in which they are "adequately compensated, treated well, secure in their position, given flexibility around hours and location, and engaged with the work." Participants talked of being locked out of jobs by barriers that include a lack of affordable childcare, immigration status, and criminal convictions. Many viewed skills training as a pathway to competencies that could improve their positions.

The fourth paper, Self-Employment, Dreams Versus Reality, was written by Merissa Piazza, a lead policy analyst at the Cleveland Fed, and Ashley Putnam, director of the Economic Growth and Mobility Project at the Philadelphia Fed. The authors observe that, overall, roughly one-third of Worker Voices participants discussed self-employment and independent work. Participants cited various reasons for their interest in this type of work. Some described being compelled by personal convictions to quit jobs where they had felt disrespected. Others said their job wasn't stable or they had concerns over immigration status. For many, the lure was to achieve greater prosperity. As one participant observed:

"If anything, COVID really just taught me that there's no limitation on what I can do as far as being an entrepreneur."

Their experiences often did not live up to expectations. Self-employment brings challenges not always immediately apparent. For instance, driving passengers or delivering food as a contractor for an app-based company may look manageable but not after factoring in the vehicle and insurance costs, idle time between jobs, gas and maintenance, plus scheduling, bookkeeping, and tax preparation. As one participant reported:

"I wasn't making enough money to make up for how much I was hemorrhaging, and also, the emotional well-being of just being [mistreated] by customers kind of reached a breaking point with that. And I've seen that with a lot of folks in my community, trying to get by on gig work. It's not sustainable at all."

Raphael Bostic, Atlanta Fed president, has written that information gleaned in the Worker Voices project provides "grist for research to deepen our understanding of cyclical and structural changes in workers' labor market behavior."

As Bostic wrote in an essay published in May, "workers' views provide a more holistic view of how people feel about the economy and thus add important nuance to monetary policy discussions. Given the uncertainty of the pandemic, conditions can change so quickly-often before showing up in the data-that I can't imagine not using anecdotal reports from employees and employers in our policy formulations at the Atlanta Fed."

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