More than 23 percent of construction workers are self-employed

April 6, 2018

According to the 2016 American Community Survey (ACS), more than 23 percent of construction workers are self-employed compared with about 10 percent of the total U.S. labor force, according to the National Association of Home Builders. The high self-employment rates in construction reportedly reflect a common practice of builders and remodelers to maintain relatively small payrolls and rely on subcontractors for a large share of the construction work.

During the housing downturn, construction self-employment increased from 24 percent in 2006 to more than 26 percent in 2010. Builders and remodelers who were no longer able to maintain a steady work flow likely may have tried to manage costs by eliminating payroll positions and becoming self-employed. It also is possible some construction employees laid off during the downturn were able to stay in the industry by starting their own businesses.

Hiring trends reversed as the housing industry began to improve. The construction industry has been adding payroll jobs since 2011, and the number of self-employed construction workers continued to fall until 2015, dropping to 23 percent in recent years.

The ACS data show that from 2011 to 2016, construction gained close to 1.2 million private payroll jobs—a 20 percent increase—but the pool of self-employed workers grew by about 100,000, or 5 percent. This could explain why builders have reported more extreme labor and subcontractor shortages than suggested by commonly cited numbers based only on payroll employment.

In some states, homebuilding accounts for a higher share of the labor force, and these states also register higher shares of self-employed workers. Maine, Montana and Vermont have the highest shares of self-employed construction workers in the U.S., with 40 percent in Maine, 37 percent in Montana and 35 percent in Vermont being self-employed.