An important contributor to the regional economy that isn’t covered by the Quarterly Census of Employment and Wages data program is that of nonemployers, defined by the Census Bureau as “businesses without paid employees that are subject to federal income tax, originating from tax return information of the Internal Revenue Service (IRS).”  Sometimes referred to as independent contractors or freelancers, much has been written about this type of workers as this type of economy continues to grow nationally and regulation issues arise.  With data from the Census Bureau’s Nonemployer Statistics, we can analyze the trend of nonemployers in Northwest Minnesota and measure their impact on the regional economy with sales receipts.

The number of nonemployers in the region has seen increases the last few years but has yet to reach the pre-recession peak. In 2007, there were 44,383 nonemployers in Northwest Minnesota, but the following year saw a decrease of 1,727 nonemployers, a 3.9% decrease.  From 2008 to 2016 the number of nonemployers in the region stayed relatively stable, never falling below 42,000 nonemployers but never increasing above 43,000 nonemployers until 2017, when it recorded 43,223 self-employed businesses (Figure 1). 

Breaking down nonemployers by economic development region, we find that EDR 4-West Central has the most nonemployers in the Northwest region with 18,185 firms.  In fact, EDR 4 is the only region to have experienced growth in nonemployers since 2007 as it has showed a net gain of 309 firms, a 1.7% increase.  EDR 5-North Central had the next highest number of nonemployers in Northwest Minnesota with 13,019 nonemployers, but had a decrease of 1,160 firms since 2007, a 4.0% decrease.  EDR 1 and EDR 2 had similar amounts of nonemployers but the Headwaters has witnessed an 11.0% decrease in nonemployers over the last 10 years, while EDR 1-Northwest decreased by 187 nonemployers over the same time frame (Table 1). 

Because data is collected from IRS filings, an estimate of sales receipts generated by these nonemployers can be determined. Overall, the Northwest planning region generated nearly $2 billion in sales receipts in 2017 from nonemployers, while the state of Minnesota had over $19 billion in sales receipts (Table 1).

With the rise of the gig economy, people now have more choices in working for themselves and are discovering the benefits of being a nonemployer in that you get to be your own boss, with a more flexible schedule and the potential for better work and life balance, plus the potential to earn more money.  However, drawbacks include no unemployment insurance, no employer benefits like health care or retirement, and no guarantee of job security.  As the trend of nonemployers continues to grow in the region, any discussion of the regional economy ought to include this important segment of employment.

For more information, contact Erik White at erik.white@state.mn.us or 218-333-8253.