Self-Employed Americans Earning Less Than Traditional Employees Amid Pandemic

Self-Employed Americans Earning Less Than Traditional Employees Amid Pandemic

Entrepreneurs report lower average salaries despite an increase in hours worked since 2019
A freelancer working late

The COVID-19 pandemic has left an indelible mark on the landscape of work. Though the crisis has posed challenges to businesses and workers alike, it has also presented enterprising individuals with an opportunity to set out on their own.

A recent analysis by Skynova, an online invoicing company based in West Chester, Pa., found that self-employment and entrepreneurship is on the rise. But even though self-employed people have worked more hours in 2020 compared to the year before, they’re still making less than the average employee’s salary.

Here’s what else Skynova learned about the state of self-employment in the United States today.

COVID-19 pandemic has impacted hours for self-employed workers

Millions of Americans became acquainted with some of the benefits that freelancing and entrepreneurship offer when they transitioned to remote work at the beginning of the pandemic. As a result, Skynova reported that the percentage of self-employed Americans rose from 10.4% to 10.9% between 2019 and 2020.

However, this lifestyle comes with challenges as well.

Self-employed individuals worked more hours last year than they did in 2019. Compared to the less than 25 hours a week that self-employed individuals worked on average in 2019, respondents reported working an average of:

  • 56 hours a week in April 2020
  • 45 hours a week in May 2020
  • 30 hours a week in September 2020

With more consumers taking part in outdoor activities since the start of the pandemic, those working in the agriculture, forestry, fishing, hunting and mining sectors have seen a five-hour increase in average hours worked per week — the most of any industry.

In contrast, self-employed workers in retail trade, manufacturing, information and education services saw the most cuts in weekly hours worked, down three hours on average.

Entrepreneurs earning less than traditional employees

Despite their hours increasing, Skynova found that the average self-employed American earns less than their traditionally employed counterparts. While those who are traditionally employed earn an average of $57,000, those who are self-employed bring in $38,400 on average.

The salary gap becomes even more pronounced when self-employed income is broken down by gender. Specifically, the analysis found that self-employed women earn an average of $25,400 a year compared to the $46,200 made by self-employed men.

This difference in earnings is likely exacerbated by the unique challenges that women are facing as a result of the pandemic. A survey from investment banking company UBS found that 61% of women are experiencing setbacks in their career, caused in part by the increase in household and child care duties they must attend to during this crisis.

Additionally, the Skynova report found gaps in self-employed income depending on their industry. The analysis showed that self-employed people working in positions requiring intensive technical skill and knowledge report report much higher annual salaries than the average entrepreneur and employee, with the following five roles at the top of the list:

  • Dentists ($162,755)
  • Physicians ($138,202)
  • Legal service providers ($94,805)
  • Chiropractors ($92,601)
  • Computer systems services ($87,324)

Methodology: This report was created using data gathered by the U.S. Census Bureau’s Current Population Survey (CPS), in which participants ages 15 and up from about 60,000 households nationwide were questioned every month during the calendar week that includes the 19th of the month.