Construction Self Employment Rates are on the Rise

Construction is known for employing a relatively high share of self employed workers. In fact, according to the 2010 American Community Survey (ACS), the construction sector registers the second highest share of self-employed among all industries, more than 26 percent of the employed labor force, i.e. more than one in four construction workers are self employed.  Only agriculture has a higher share of self-employed, close to 34 percent, while a national average for all industries stands at 10 percent.

It has always been common for some builders and remodelers to maintain relatively small payrolls and rely on subcontractors for a large share of the construction work.  Interestingly, self-employment rates in the construction industry started to rise during the housing downturn and increased from 24 percent in 2006 to 26 percent in 2010. At the same time a national self-employment rate fell from 11 to 10 percent, and self employment in agriculture declined from 41 to 34 percent. Moreover, states known to have been hit hardest by the housing downturn – Florida, California, Nevada, and Arizona – registered some of the highest jumps in the construction self-employment rates. According to the ACS, the share of self-employed construction workers rose in Arizona from 16 to 21 percent and in Florida from less than 24 to 29 percent. Similarly, the share of self-employed construction workers increased by more than 4 percent in Nevada and almost 4 percent in California. It is likely that during the downturn builders and remodelers who were no longer able to maintain a steady work flow may have tried to manage costs by eliminating payroll positions and joining the ranks of the self-employed.  It is also possible that some construction employees laid off during the downturn were able to stay in the industry by striking out on their own.

The 2010 ACS data also show that five New England states have the highest shares of self employed construction workers.  Maine, Vermont, New Hampshire register shares in excess of 40 percent – 43.1 percent, 41.1 percent, 40.3 percent, respectively – well above a national average. Connecticut and Rhode Island follow with 38.5 and 36.9 percent. Montana registers the sixth highest construction self employment rate in the nation, 34.9 percent, i.e. more than one in three construction workers in Montana are self-employed.  Interestingly, Maine, Vermont, New Hampshire and Montana also stand out for having relatively high shares of residential construction workers in their state employed labor force.

Residential construction employment and construction self-employment rates for all states can be found in NAHB: Residential Construction Employment across States and Congressional Districts (Table 1).

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