Each year, the U.S. Bureau of Labor Statistics publishes the results of its weekly and quarterly surveys of U.S. consumers. The survey is intended primarily to see how households of various types spend their money. It is used to adjust the Consumer Price Index so that it measures the prices of things people actually buy.

Examining the survey’s results provides interesting insights about how spending varies by type of household, by income level, by occupation, by ethnic group and by region of the country. It is a gold mine for market researchers.

Much in the survey is not surprising – households with children spend more than those without, single-parent households make less money than those with two parents, households whose primary income earner is a manager make more money than those whose primary earner is a clerical worker.

But in reviewing the 2008 results (the most recent available), one finding was surprising to me. Households whose ”reference person” – the person who pays the rent or owns the home where the household lives – said his or her occupation was ”self-employed” made substantially more money ($89,675) than households listing ”wage and salary” employment ($73,261).

I had, apparently erroneously, assumed that self-employment was financially, if not psychically, less rewarding than wage and salary employment. On a per-person basis this is true.

Taking total self-employment income and dividing by the total number of people reporting such income, the average – both in Maine and in the U.S. as a whole – is substantially less than the average income of wage and salary workers.

But assuming that what is true for an individual income earner is also true for her or his household living unit is clearly a mistake.

And that’s the point. It’s not the individual, but the household that counts.

The reason that households in which the ”reference person” is self-employed have higher incomes is not because that person is a Wall Street banker or a brain surgeon; it’s because self-employment adds to wage and salary income that someone else brings to the home.

Indeed, of the $89,675 average income of the approximately 5.6 million households whose ”reference person” is self-employed, less than half – about $38,300 – comes from self-employment. The other $43,000 comes from wage and salary income.

So the point of self-employment is not that it alone is the road to riches. Rather, it is that for those households where self-employment income is a significant part of the household’s sustenance – to the point that the self-employed person signs the rental lease or home mortgage loan – such income enables a significantly higher standard of living.

In households where the ”reference person” is a wage and salary employee, total wage and salary income averages over $67,000, far more than the $42,900 in the ”self-employed” household.

The difference is that the average self-employment income in the ”wage and salary” household is only $1,732, vastly less than the $38,327 in the ”self-employed” household.

The point is not just that two incomes are better than one.

The $67,000 average for the ”wage and salary” household includes many two-income families.

The point, rather, is that self-employment taken as a serious enterprise, not just a hobby for pin money, is a significant element of economic development and community prosperity.

While all garage inventors and kitchen table consultants will not become the next Steve Jobs or George Soros, they can help provide their families and their communities with a significantly more prosperous standard of living.

And it is in this vein that Maine ought to celebrate and support its nearly 200,000 self-employed entrepreneurs. 

Charles Lawton is senior economist for Planning Decisions, a public policy research firm. He can be reached at:

[email protected]


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