Self-Employment: Dreams vs. Reality

Over the past few years, we’ve witnessed a boom in startups and growing interest in self-employment.   Is this a good thing for workers, communities, and local economies?  An excellent new issue brief from the Atlanta Federal Reserve, “Self-Employment: Dreams vs. Reality,” takes a deeper dive.  The study is based on extensive interviews with self-employed entrepreneurs  and gig workers, and asked them to comment on the pros and cons of self-employment.  The study notes that the pandemic spurred a boom in interest in self-employment, largely driven by the negative experiences many people faced during that time as well as pull factors such as a desire for independence and a need for more income.

The study offers a framework around four types:  informal businesses, formal businesses, specialized gig work, and generalized gig work, typically dependent on a platform such as Uber or DoorDash.  For all categories, workers identified independence and a sense of agency as primary benefits.  They all also noted the precarity of gig work, and these fears were especially pronounced among those in the generalized gig work category, where income streams may be more unpredictable and upfront costs are higher.  In general, these experiences suggest a clash between dreams and reality, especially for lower-income and lower-skilled workers, where the downsides of self-employment may outweigh its benefits.  However, this equation could shift with policy changes to address the social safety net offered to these workers and business owners.