New York City’s Non-Employers

Data on non-employers is out from the 2007 Economic Censuses, conducted by the U.S. Census Bureau. I’ve briefly summarized a few findings for New York City as compared with the United States in the attached spreadsheet; one can download the spreadsheet if interested in particular industries. The data shows that (as expected based on other data) New Yorkers are more likely than other Americans to work for themselves while not employing anyone else. New York City accounted for 2.75% of U.S. private sector employment in 2007 according to Current Employment Survey data, but it accounted for 3.5% of non-employer establishments according to the Economic Censuses, some 765,857 that year.

The self-employed were not particularly well paid here, averaging just over $44,000 in receipts here, slightly less than the national average. For private sector wage and salary employees, in contrast, those working in Downstate New York typically earn about one-third more than the national average, and far more in Manhattan. Despite the discussion of “mom and pop” stores in New York, the city only accounts for 2.6% of all Retail Trade establishments without employees. By sector, non-employer establishments are particularly common in New York City in Wholesale Trade, Transportation, Information, Health Care and Social Assistance, Arts & Entertainment, and Accommodation & Food Services. However the Professional, Scientific and Technical Services sector account for most non-employers both in NYC and the U.S. as a whole. Although most of the city’s wage and salary jobs are located in Manhattan, moreover, the self-employed are as likely to be located in Brooklyn or Queens. More detailed background and discussion of these industries follows.

Rather than re-write, let me quote the Census Bureau to provide some background on this data.

“Nonemployer Statistics is an annual series of information about businesses without paid employees that are subject to federal income tax…Most nonemployers are self-employed individuals operating very small, unincorporated businesses, which may or may not be the owner's principal source of income. These firms are excluded from most other business statistics (the primary exception being the Survey of Business Owners).”

“Nonemployers account for a majority of all business establishments, but average less than 4 percent of all sales or receipts. For complementary statistics on the firms that do have paid employees, see the Economic Census, County Business Patterns, and Statistics of U.S. Businesses.”

The importance of small business is often exaggerated: in fact most people work for large establishments, or small establishments that are part of larger companies. On the other hand, the large businesses that employ most people tend to close over time at a pace more rapid than most people understand, and the firms that will replace them have to start somewhere. Most jobs are created by firms that start small and grow large, and are destroyed by firms that start large and shrink, close or move away.

“Nonemployer Statistics data originate from administrative records of the Internal Revenue Service (IRS). Data are primarily comprised of sole proprietorship businesses filing IRS Form 1040, Schedule C, although some of the data is derived from filers of partnership and corporation tax returns that report no paid employees. These data undergo complex processing, editing, and analytical review at the Census Bureau to distinguish nonemployers from employers, correct and complete data items, and form the final nonemployer universe.”

If they aren’t paying taxes, they aren’t included here, so this has nothing to do with the “informal economy,” “illegal immigrants,” etc.

“Most geography codes are derived from the business owner`s mailing address identified from administrative records. Because the owner's mailing address may not be the same as the physical location of the business, the resulting geography codes do not always represent where business is actually conducted.”

If the Halal guy drives in to Manhattan from Brooklyn, his non-employer establishment might be given a Brooklyn location in this data, even though the lamb Gyro is dished out in Manhattan.

The data is classified according to the NAICS system, which has different levels of detail. The spreadsheet shows data at the “sector,” “three-digit” and “four-digit” level of detail. The “sector” information is set to print on one page.

I was surprised to find New York City accounted for just 2.1% of self employed workers in the Construction sector, and that receipts per establishment in this sector were only half the national average. Particularly since when you call a plumbing or electrical company in Brooklyn, you typically get a plumber or electrician who works for themselves rather than being an employee, and pays the company a cut for referrals and office work. For those interested, 139 New Yorkers report they earn their living fishing on behalf of themselves.

That NYC Retail Trade establishments are less likely than average to be mom and pops is not a surprise when you think about it. It takes quite a bit of sales to cover the cost of renting a store here, compared with some rural town in Nebraska, and it would generally require at least a few employees to cover those sales. New York City, however, did account for 8.3% of the non-employers in the Food and Beverage Store” industry, and 11.7% of non-employer establishments in the more specific Grocery Store industry. Just under 9,000 NYC Food and Beverage stores operate without employees.

Which may also be a reason that New York accounts for 4.4% of non-employer establishments in the Grocery Store wholesaling industry. “Buying a route” distributing to small stores is a common source of self-employment in New York. Independent apparel brokers, however, are the Wholesale industry most concentrated in New York; NYC accounts for 8.0% of non-employers in the Apparel, Piece Goods and Notions wholesaling industry, with a total of 1,879 such establishments.

Nationally, however, nearly half of all non-employers in the Retail Trade sector do not have stores. They service vending machines, and sell directly. Surprisingly, given the number of peddlers, NYC accounted for only 1.5% of all non-employer non-store retail establishments in the U.S. Perhaps all those folks on the corner come from New Jersey, or earn less than $1,000, the cut off for filing with the IRS.

NYC’s high share of non-employers in the Transportation sector is accounted for by the taxi and limousine industry, of which the city’s share of U.S. non-employer establishments is 28.3%. This is a result of most taxi and car service workers being self-employed (without benefits) here. Prior to the 1970s, most worked as employees of taxi companies.

NYC’s high share of non-employer establishments in the Information sector is accounted for by the Motion Picture (8.5% of the U.S.) and Sound Recording (6.2%) industries, although the city also has an above average share in Publishing and Broadcasting (5.3% each). Similarly, in the Arts, Entertainment and Recreation sector, NYC accounts for 6.3% of U.S. non-employer establishments – some 70,619 – and 8.5% of U.S. receipts. Among the specific portions of this industry concentrated in NYC are the Promoters of Performing Arts, Sports, and Similar Events industry (6.2% of the U.S. total), Agents and Managers for Public Figures (7.6%), and Independent Artists, Writers, and Performers (8.3% or 58,312).

When one adds that 58,312 people who work in studios, to 104,848 “professionals” in offices, to 37,977 people working in the Ambulatory Health field (like physicans and dentists without employees), and 19,277 in the education field (as long as they don’t teach too many at once), and 49,370 in the Child Care Services field, you pretty much have everyone authorized to work at home under the NYC zoning resolution. That’s about 35 percent of the total non-employer establishments here. The rest either rent commercial space (just for themselves) or are zoning criminals. There’s some real good regulations there.

Professionals tend to be non-employers everywhere, so while Professionals are the largest group of non-employers by sector in NYC, NYC is does not have a disproportionate share of Professional non-employers in the U.S. The city’s 104,848 non-employer establishments in the Professional, Scientific and Technical Services sector are 3.5% of the national total in that sector, equal to the city’s share of all non-employers.

In case you are wondering, 321 people said they worked for themselves running a rooming and boarding house in NYC. In a surprise, while just 187 claimed to work for themselves as gamblers in New York City, 21,809 claimed to work for themselves in the Finance and Insurance sector. Might that be a case of rationalization? According to the Census Bureau although this data is not subject to a “margin of error” because it is a census rather than a sample, “the data are subject to nonsampling error such as errors of self-classification by industry on tax forms, as well as errors of response, nonreporting and coverage.” Perhaps the city in reality had 22,000 self-employed gamblers.

Despite the number of people you may see picking up cans, just 102 people claimed to work for themselves in the recycling industry. On the other hand NYC had 53,687 non-employer establishments in the “other personal services” industry, or 4.9% of the national total. As to what that means, consult the definitions.

We await that most interesting (but underpublicized) portion of the 2007 economic censuses, the finance phase of the 2007 Census of Governments.

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Economic Census Non-Employer Data NYC-US 2007.xls272 KB