This document summarizes a research paper that examines the work hours of unincorporated self-employed workers in the US using data from the Current Population Survey (CPS) and American Time Use Survey (ATUS). The paper finds that (1) work hours of the unincorporated self-employed are procyclical and correlate with GDP and unemployment rates, and (2) the ATUS data provides a more accurate measure of work hours for this group than the CPS, though both surveys have limitations. The paper also discusses two competing theories about how self-employment relates to the business cycle and aims to determine which theory the data supports.

1. Sabrina Wulff Pabilonia
U.S. Bureau of Labor Statistics
Pabilonia.Sabrina@bls.gov
Presented by: Qin Gao
Fordham University
aqigao@fordham.edu

2. Measuring work hours (and nonfarm
business sector labor productivity) in the US
 U.S. Bureau of Labor Statistics (BLS)
 Hours worked by wage and salary employees – Current
Employment Statistics (CES) program
 Includes the incorporated self-employed
 Hours worked by non-employees – Current Population
Survey (CPS)
 Unincorporated self-employed workers (the majority
and focus of this paper)
 Unpaid family workers
 Workers at government enterprises (?)

3. Research Questions
 Hours worked by the unincorporated self-employed have
varied considerably each quarter, and this volatility is a
source of much of the quarterly movement in overall labor
productivity.
 This paper:
1) examines how closely the volatility in the unincorporated
self-employment hours series correlates with the changes
in macroeconomic conditions during 1979–2013.
2) Compares weekly hours worked by the unincorporated
self-employed from CPS with time diaries from 2003–2013
American Time Use Survey (ATUS).

4. Findings
1) Work hours of the unincorporated self-employed are
procyclical
 Associated with increases in GDP and decreases in
unemployment rate
 GDP or unemployment rate, along with a time trend can
explain a great deal of the variation in work hours
 Growth rate in work hours is also procyclical
2) ATUS more accurate than CPS in capturing work hours of
the unincorporated self-employed
 Over report in CPS prior to Great Recession, and under
report since (though statistically non-significant)
 Less accurate reports than wage and salary workers

5. Business Cycles and Self-Employment:
2 Competing Theories
The “push” theory and countercyclical hypothesis:
 Self-employment is chosen when it is difficult to find a job as
an employee (i.e. unemployment high and GDP not
growing).
The “pull” theory and procyclical hypothesis:
 Entrepreneurs have certain abilities that make them
particularly suited for self-employment, but there is less
incentive for them to start up a business when there is higher
risk of failure.
 Outcome depends on whether the “push” or “pull” is
stronger.

6. Current Population Survey (CPS) Data
 Monthly household survey 1979-2013
 Respondents aged 15+ report hours worked on main job and
secondary jobs.
 “Last week, were you employed by government, by a private
company, a nonprofit organization, or were you self-employed?”
 If self-employed, “Is this business incorporated?”
 Secondary job not asked about prior to 1994 redesign, but asked
about in 1994-2003
 BLS applied adjustment to pre-1994 hours to account for the lack of
information from multiple jobholders.
 OLS regressions
 DV=log quarterly unincorporated self-employed hours (N=140)
 IVs=macroeconomic condition (GDP or unemployment rate); time
trend

13. American Time Use Survey (ATUS)
 Sample drawn from households who have completed their final month-in-
sample in CPS; representative of the U.S. civilian population.
 Respondents interviewed 2-5 months following their final CPS interview
 Interviews conducted every day throughout the year except for major
holidays (12/23-1/2, day after Thanksgiving).
 Survey weights adjusted for these missing days.
 Respondents asked to report activities between 4am on diary day and 4am
on interview day.
 Also asked whether any non-wage/salary work activities were done as part
of job or business  unincorporated self-employed
 Comparison between ATUS and CPS: 2003-2013
 Average weekly hours worked on the main job for nonfarm self-employed
 Workers aged 15+ who likely had the same job and hours at the times of
their ATUS and final CPS interviews, holidays excluded
 N=1,442 unincorporated self-employed workers

15. Comments
 Important topic addressing a knowledge gap
 Little prior research: Only one study on question #1,
using CPS and PSID data among male workers; supports
the procyclical hypothesis
 Any evidence from other countries?
 Pre- vs. post-recessions analysis, DD?
 Trends and effects among female workers, considering
work-life balance debates

16. Other macroeconomic/policy factors?
 State labor market indicators
 Industry sector trends
 Female labor force participation rate
 Minimum wage
 Welfare policy variations, esp. for low-income groups
 State, industry, household fixed effects

17. Fuller use of data
 CPS: possible to do individual level analysis?
 ATUS: more nuanced analysis pre- vs. post-recession
 Subgroup analysis could be revealing and policy-relevant
 By gender, considering parenting roles
 By marital/cohabiting status
 By education/skill level
 By age groups/cohorts
 By industrial sector
 A more detailed, dynamic picture and a more rigorous
test of the hypotheses