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Business Income Dynamics and Labor Market Fluidity Cover

Business Income Dynamics and Labor Market Fluidity

IZA Journal of Labor Economics
Volume 10 (2021): Issue 1 (January 2021)
By: Henry Hyatt,  Seth Murray and  L. Kristin Sandusky  
Open Access
|Oct 2021

Figures & Tables

Figure 1

Shares of the population with income in a calendar year, by income source.Notes: A: CPS-DER W-2 and Schedule SE. B: Universe W-2 and Schedules C and K-1. Authors’ calculations of the CPS-DER W-2 and Schedule SE records, as well as universe-level W-2, Schedule C, and Schedule K1 records. Schedule C covers sole proprietors, and K1 covers partnership and S corporation income. Wage and salary income comes from W-2 records. CPS-DER, Current Population Survey-Detailed Earnings Record; SE, Self-Employment Tax.

Figure 2

Hire and separation rates vs. BI entry and exit rates.Notes: A: CPS-DER W-2 and Schedule C. B: Universe W-2 and Schedules C and K-1. Authors’ calculations of CPS-DER W-2 and Schedule SE records, as well as universe-level W-2, Schedule C, and Schedule K1 records. Entry indicates zero BI in the previous year and positive BI in the current year. Exit indicates positive BI in the current year but zero BI in the subsequent year. Denominators for each rate are the average of total number of owners of the given entity type at the beginning and end of the year. BI, business income; CPS-DER, Current Population Survey-Detailed Earnings Record; SE, Self-Employment Tax.

Figure 3

Hires and separations.Notes: A: Hires. B: Separations. Authors’ calculations of CPS-DER W-2 and Schedule SE records, as well as universe-level W-2, Schedule C, and Schedule K1 records. CPS-DER, Current Population Survey-Detailed Earnings Record; SE, Self-Employment Tax.

Figure 4

Employer-to-employer and nonemployment transitions.Notes: A: Employer-to-employer. B: Employment-to-nonemployment. C: Nonemployment-to-employment. Authors’ calculations of CPS-DER W-2 and Schedule SE records, as well as universe-level W-2, Schedule C, and Schedule K1 records. CPS-DER, Current Population Survey-Detailed Earnings Record; SE, Self-Employment Tax.

Figure 5

Secondary and short-duration job hires and separations.Notes: A: Hires. B: Separations. Authors’ calculations of CPS-DER W-2 and Schedule SE records. CPS-DER, Current Population Survey-Detailed Earnings Record; SE, Self-Employment Tax.

Figure 6

Regression point estimates over time.Notes: Authors’ calculations of CPS-DER W-2 and Schedule SE records. Plots show point estimates from a regression with the number of wage and salary jobs worked in a given year. Specifically, the year interactions for primary and secondary income from self-employment in a given calendar year. CPS-DER, Current Population Survey-Detailed Earnings Record; SE, Self-Employment Tax.

Figure B1

Total number of administrative records self-employed (millions).Notes: CPS-DER numbers from 1996–2010 are from Figure 1 of Abraham et al. (2018). Other totals are authors’ calculations on CPS-DER Schedule SE records, as well as universe-level Schedule C and Schedule K1 records. CPS-DER, Current Population Survey-Detailed Earnings Record; SE, Self-Employment Tax.

Figure D1

Schedule SE share of total consecutive-year employment.Notes: Authors’ calculations of CPS-DER W-2 and Schedule SE records. CPS-DER, Current Population Survey-Detailed Earnings Record; SE, Self-Employment Tax.

Figure E1

Hire and separation rates: wage and salary (W-2) employment.Notes: Authors’ calculations of CPS-DER W-2 records, as well as universe-level W-2 records. The denominator for all rates is the average of employment at the beginning and end of the year. CPS-DER, Current Population Survey-Detailed Earnings Record.

Figure E2

Annual hire and separation rates.Notes: A: Hires. B: Separations. Authors’ calculations of CPS-DER W-2 records, universe-level W-2 data, and published aggregates. The denominator for the W-2 rates is the average of employment at the beginning and end of the year. JOLTS, QWI, and CPS Gross Flows and Employer-to-Employer Transitions series sum rates within a calendar year. CPS-DER, Current Population Survey-Detailed Earnings Record; JOLTS, Job Openings and Labor Turnover Survey; QWI, Quarterly Workforce Indicators.

Figure E3

Employer-to-employer and nonemployment transitions.Notes: A: CPS-DER W-2. B: CPS-DER W-2. Authors’ calculations of CPS-DER W-2 records, as well as universe-level W-2 records. The denominator for all rates is the average of dominant employment at the beginning and end of the year. CPS-DER, Current Population Survey-Detailed Earnings Record.

Figure E4

Annual transition rates.Notes: A: Employer-to-employer. B: Employment-to-nonemployment. C: Nonemployment-to-employment. Authors’ calculations of CPS-DER W-2 records, as universe-level W-2 records, and published aggregates. The denominator for the W-2 based rates is the average of employment at the beginning and end of the year. JOLTS, QWI, and CPS Gross Flows and Employer-to-Employer Transitions series sum rates within a calendar year. CPS-DER, Current Population Survey-Detailed Earnings Record; JOLTS, Job Openings and Labor Turnover Survey; QWI, Quarterly Workforce Indicators.

Figure E5

CPS-ASEC Multiple non-overlapping employers question vs. administrative records.Notes: Authors’ calculations of hires and separations using CPS-ASEC respondents who report multiple non-overlapping jobs in the prior year, as well as CPS-DER W-2 records. For the CPS-ASEC responses, the denominator is those who were in scope of the multiple non-overlapping employers question. For the employer-to-employer transition rate derived from administrative records, the denominator is the average of employment at the beginning and end of the year. CPS-DER, Current Population Survey-Detailed Earnings Record; CPS-ASEC, Annual Social and Economic Supplement.

Figure F1

Hires and separations.Notes: A: Hires. B: Separations. Authors’ calculations of CPS-DER W-2 and Schedule SE records, as well as universe-level W-2, Schedule C, and Schedule K1 records. CPS-DER, Current Population Survey-Detailed Earnings Record; SE, Self-Employment Tax.

Figure F2

Employer-to-employer and nonemployment transitions.Notes: A: Employer-to-employer. B: Employment-to-nonemployment. C: Nonemployment-to-employment. Authors’ calculations of CPS-DER W-2 and Schedule SE records, as well as universe-level W-2, Schedule C, and Schedule K1 records. CPS-DER, Current Population Survey-Detailed Earnings Record; SE, Self-Employment Tax.

Figure F3

Secondary and short-duration job hires and separations.Notes: A: Hires. B: Separations. Authors’ calculations of universe-level W-2, Schedule C, and Schedule K1 records.

Number of industries worked regressed on BI

Total industries
Intercept1.258*** (0.000) 1.258*** (0.000)
BI0.444*** (0.001)0.431*** (0.001)0.384*** (0.001)0.392*** (0.002)
BI*BI dom 0.163*** (0.002)0.116*** (0.002)
Worker fixed effectsNYNY
R20.0530.4060.0550.407

Regression of total number of jobs (including BI) on BI

CPS-DERUniverseCPS-DERUniverse
Intercept1.495*** (0.000)1.490*** (0.001)
BI0.117*** (0.001)0.567*** (0.001)0.404*** (0.001)0.748*** (0.001)
Worker fixed effectsNNYY
R20.0030.0260.3230.757

Number of wage and salary jobs worked regressed on BI

CPS-DERUniverse
Intercept1.420*** (0.000) 1.409*** (0.000)
Ever BI0.074*** (0.000) 0.081*** (0.001)
Ever BI* BI−0.143*** (0.001)−0.101*** (0.001)−0.088*** (0.001)0.013*** (0.001)
Ever BI* BI*BI dom−1.002*** (0.001)−0.818*** (0.001)−1.010*** (0.002)−0.817*** (0.001)
Worker fixed effectsNYNY
R20.0960.4460.1510.652

Measured decline in reallocation (percentage points) including vs_ including self-employed: 1994 vs_ 2014

Reallocation MeasureDecline in W-2Decline in W-2 & Schedule SEDifferencePercent offset (%)
Hires15.714.41.38.3
Separations16.114.71.48.7
Employer-to-employer0.70.60.223.8
Employment-to-nonemployment1.81.70.14.1
Nonemployment-to-employment1.31.10.215.6
Secondary/short-duration hires13.912.81.17.4
Secondary/short-duration separations.13.812.61.28.9

Administrative records data on U_S_ wage and salary and BI

Legal designationTax Form/Info. ReturnFiles Schedule SE?Survey-based dataUniverse data
EmployeeW-2 Wage and Salary StatementN/ASocial Security Administration MEF, DER extract, 1991–2015W-2 Records 2005–2015
Sole proprietorship1040 Schedule C Profit or Loss from BusinessIf total self-employment income >$400Social Security Administration MEF, DER extract, 1991–2015Census nonemployer and employer Business Registers 2007–2015
PartnershipSchedule K1: Partner's Share of Income, Deductions, Credits, etc.If total self-employment income >$400Social Security Administration MEF, DER extract, 1991–2015Schedule K1 filings 2007–2015
S corporationSchedule K1: Partner's Share of Income, Deductions, Credits, etc.NoN/ASchedule K1 filings 2007–2015
C corporationOutside the scope of our analysisNoN/AN/A

Regression of total number of jobs worked on BI, by dominant earnings

CPS-DERUniverseCPS-DERUniverse
Intercept1.456*** (0.000)1.409*** (0.000)
Ever BI0.077*** (0.001)0.081*** (0.001)
Ever BI * BI0.829*** (0.001)1.251*** (0.001)0.899*** (0.002)1.805*** (0.002)
Ever BI * BI * BI dom−1.002*** (0.001)−1.080*** (0.001)−0.818*** (0.002)−0.841*** (0.002)
Worker fixed effectsNNYY
R20.0280.0740.3510.768

Regression of number of wage and salary jobs worked on BI Intercept from any wage and salary employer in the year_

CPS-DERUniverseCPS-DERUniverse
Intercept1.495*** (0.000)1.490*** (0.001)
BI−0.883*** (0.001)−0.757*** (0.002)−0.596*** (0.001)−0.313*** (0.001)
Worker fixed effectsNNYY
R20.1480.1460.4210.618

Share of business owners who receive wage and salary payments

Schedule C Sole ProprietorsForm K1 PartnershipsForm K1 S Corps.
W-2 Data
Share of owners: (%)
Owners of EIN firms in W-27.41.140.4
Owners of employer firms in W-212.511.270.3
Owners of employer firms, top 310.37.959.7
Share of firms: (%)
Any owner of EIN firms in W-27.53.848.8
Any owners of employer firms in W-213.224.384.8
Any owners of employer firms, top 311.020.278.5
LEHD Data
Share of owners: (%)
Owners of EIN firms in UI7.31.139.4
Owners of employer firms in UI12.39.369.0
Owners of employer firms, top 39.86.959.4
Share of firms: (%)
Any owner of EIN firms in UI7.84.548.6
Any owners of employer firms in UI13.626.583.0
Any owners of employer firms, top 310.822.477.0

Share of owners who receive wage & salary payments: first year, single establishment

Schedule C Sole ProprietorsForm K1 PartnershipsForm K1 S Corps.
W-2 Data
Share of owners: (%)
Owners of employer firms in W-216.114.361.5
Owners of employer firms, top 313.911.457.1
Share of firms: (%)
Any owners of employer firms in W-217.026.974.6
Any owners of employer firms, top 314.623.571.1
LEHD Data
Share of owners: (%)
Owners of employer firms in UI15.513.859.6
Owners of employer firms, top 313.511.355.4
Share of firms: (%)
Any owners of employer firms in UI16.427.272.7
Any owners of employer firms, top 314.223.869.3
DOI: https://doi.org/10.2478/izajole-2021-0004 | Journal eISSN: 2193-8997
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Language: English
Accepted on: Apr 26, 2021
|
Published on: Oct 18, 2021
Published by: Sciendo
In partnership with: Paradigm Publishing Services
Publication frequency: 1 issue per year
Keywords:
labor reallocation,
employment dynamics,
self-employment,
business ownership
Related subjects:
Business and economics,
Political economics,
Microeconomics,
Macroeconomics,
Economic policy,
Mathematics and statistics for economists,
Econometrics

© 2021 Henry Hyatt, Seth Murray, L. Kristin Sandusky, published by Sciendo
This work is licensed under the Creative Commons Attribution 4.0 License.

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