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When entrepreneurs list their principal reasons for launching a company, small business owners often cite being their own boss, flexibility in setting their working hours, and turning a commercial concept into reality as their main motivations. Now, new data identifies another incentive that may convince future entrepreneurs to take the plunge. According to a recent analysis by the Federal Reserve Bank of Minneapolis, the average self-employed person earns significantly more income during their career than people who work for someone else. However, the reports findings also note the widely varying levels of income among small business owners, and the length of time usually required before stronger earnings start flowing in. Those details may lead some less enterprising prospective entrepreneurs to stick with punching a clock after all. The analysis by the Minneapolis Fed differs from most research on small business owners, which often relies heavily on survey responses. The shifting makeup of participants in those inquiries often produces widely contrasting results, creating what Minneapolis Fed authors likened to the parable of the blind men and an elephant: Each poll was essentially touching only one part of the body, and led to researchers drawing different and incomplete conclusions. To establish a more complete picture of the nations entrepreneurs, the Minneapolis Fed used U.S. tax and Social Security Administration data from 2000 to 2015. That allowed it to determine the income those small business owners collectively generated for themselves, and identify why they stuck it out with companies that were often slow to reach profitability. And that wasnt due to setting their own hours. (W)e find that self-employed individuals have significantly higher income and steeper income growth profiles than paid-employed peers with similar characteristics, the report said, while also refuting frequent survey results that suggest many entrepreneurs stay in business for the perks of not having to answer to a boss. Contrary to earlier studies based on surveys plagued by underrepresentation in the right tail of the income distribution, we find that non-pecuniary benefits of self-employment are not substantial when considering the source of most business income, it said. What that means, in non-economist-speak, is that many entrepreneurs earn up to 70% more than people working for other employers over their careers, with their income increasing considerably faster than paid workers. That winds up vastly outweighing the advantages surveys often identify of founders setting their own work schedules or getting to ask employees to fetch their coffee. The study found that during the 15-year period, a 25-year-old entrepreneur earned on average about $27,000 per year in 2012 dollars, while an employee of the same age made $29,000. About five years later, that income disparity had typically reversed, and then continued growing larger in small-business owners favor. By age 55, our estimate is an average (entrepreneur) income of $134,000 in 2012 dollarsmuch higher than the estimate of $79,000 for the paid employed, the study said. It added that gap was probably even larger before government agencies adjusted small-business income declarations by 14% to 46% to account for presumed underreporting. These dierences in profiles for the self- and paid-employed would be even more striking if we were to (re)adjust reported incomes to account for business income underreporting. Not every small-business owner winds up earning as much as people working for salaries, howeveror as much as their more successful peers. The study said about 80% of the total income of entrepreneurs it identified was generated by people earning $100,000 annually or more. That means a lot of small-business owners fared less well than the more affluent minority at the top. As a result, the authors said in wonky terms, a minority of self-employed people made even less than workers working for someone else. IRS data shows that many of the primarily self-employed earned less over the sample years than paid-employed peers with similar characteristics, but in the aggregate this subgroup has a much lower share of the total income than those that earned more than their peers, it noted. The Minneapolis Fed noted some other interesting observations in its findings. One was that many entrepreneurs continued working salaried jobs, or had other income coming in as they supported their still unprofitable new ventures. Those supporting funds improved the cohorts overall positive revenue figures, even during early lean years. In other words, when starting a new business, owners rely on other sources of labor earnings, through either paid employment or other business enterprises, it said. Thus, even though most businesses have losses, few owners have negative individual incomes. Another significant detail was what the authors said was their use of official data to create a more precise collective financial portrait of entrepreneurscontrasting the results of many surveys that may simplify the motives and activities of limited samples of small-company owners. (T)he literature on entrepreneurship has an array of narratives, describing the typical business owner in many possible ways: as a gig worker seeking flexible arrangements, a misfit avoiding unemployment spells, an inventor seeking venture capital, a tax dodger misreporting income, it said, before noting its own use of official income statistics collected from millions of entrepreneurs. This data provides new insights into the central questions of the entrepreneurship literature and will hopefully prove useful for researchers interested in calibrating models of self-employment and business formation. Bruce Crumley This article originally appeared on Fast Companys sister publication, Inc. Inc. is the voice of the American entrepreneur. We inspire, inform, and document the most fascinating people in business: the risk-takers, the innovators, and the ultra-driven go-getters that represent the most dynamic force in the American economy.
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E-Commerce
Theres a scene in Office Space where Peter sits across from two consultants during a company downsizing. They ask him, What would you say you do here? He hesitates, smirks, and admits he only works about 15 minutes a week. The rest of the time, hes pretending. It was comedy in 1999. Its confession now. That question has come back to us. For years, we filled our calendars, stayed visible, and kept the machine moving. Our worth was measured in hours, output, and presence. It had to be. Humans were the system, and the system required us to keep it running. We didnt question it because that was how things got done. AI has changed that. It can now do many of the things we once did to keep things moving: the summaries, the reports, the follow-ups, the updates, the spreadsheets. It can organize, calculate, write, and execute at a pace we cant match. That realization feels strange at first, but its also freeing. Now we get to hand that part over. We can give the robotic work to the robots and return to the human work. The work of thinking, deciding, designing, and connecting. So what does that look like? For one, it means our conversations are changing. When the noise quiets, the meetings sound different. Theres more space to ask better questions. We can finally talk about what matters: What is the business really trying to accomplish? Whats next? What do we need to build the product, craft the strategy, organize the team, and align around purpose? Its fantastic, really. Because when people stop being buried in repetitive work, they start showing up differently. They bring curiosity. They tell the truth. They collaborate in new ways. Im hearing it everywherein companies that are deep into their AI transformation and in those that are just starting. The tone is changing. The conversations are more human. Were still in the waiting room of this transition. Some are pacing the floor, some are seated patiently, some are already being called in. Wherever a company sits on that curve, the shift has begun. Deloittes 2024 Global Human Capital Trends report describes this moment as a readiness gap. Most leaders recognize that AI and technology will transform their organizations in the coming years, yet few say they feel prepared to lead their people through that change. The tools are ready. The humans are still catching up. For leaders, this is the moment to adjust the focus. The work still needs watching, but the focus of that attention is different. Its no longer about overseeing tasks; Its about overseeing direction. How we design. How we execute. How we build and with whom. Leadership now is about being intentional and accountable for how work is created, not just how it is completed. Many leaders are rebuilding, or at least redesigning, how they lead. The language is changing. The tone is shifting. Its not a different language, but it has a new accent. And those who thrive in this era will be the ones who can translate it. Theyll know how to take complexity and turn it into clarity. Theyll bring forward a sharper vision, a stronger purpose, and a deeper ability to communicate the why. Theyll be what I call full-stack leaders: people who can support the front, the back, and the middle layer. They understand product, people, and process, and they move fluidly across them all. AI has taken the repetitive pieces off our plates and has given us back the chance to think, create, and build with intention. It gives us room to lead.
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E-Commerce
When an X user recently pointed out the eye-popping increase in billionaires wealth since 2015, entrepreneur Mark Cuban, a billionaire himself, responded with his opinion on why, but he urged followers to consider a different question: Why are we not giving incentives to companies to require them to give shares in their companies to all employees, at the same percentage of cash earnings as the CEO? Cuban said. It is the right question to be asking. Because while the debate over wealth inequality continues, the solution has been hiding in plain sight for decades. The top 10% of U.S. households now control 67% of all wealth, while the bottom half holds just 2.5%. The typical American worker approaches retirement with about $4,000 in savings, which is less than the cost of one month in an assisted living facility. That imbalance is not sustainable, economically or socially. The fix does not require new legislation or another corporate responsibility pledge. It lies in a proven model that has been quietly transforming companies and communities for 50 years: employee ownership. From Silicon Valley to Main Street Silicon Valley figured this out long ago. Equity compensation has been the foundation of the tech sectors innovation economy since the 1970s. Stock options allowed startups to attract world-class talent without paying top-tier salaries, align employee incentives with company performance, and build wealth for workers who might otherwise never own an asset. Yet outside of tech, broad-based ownership remains rare. Fewer than 7,000 U.S. companiesmostly in traditional sectors like manufacturing, construction, and distributionoperate under an employee stock ownership plan (ESOP). The results, however, mirror the Valleys success. Employee-owned firms grow more than 2% faster per year than their peers and are half as likely to go bankrupt. During the 2008 financial crisis, they laid off workers at only one-third the rate of conventional firms. For employees, the impact is just as powerful. ESOP participants hold 92% higher median household wealth, twice the retirement savings, and 33% higher median income than comparable workers. This is not philanthropy. It is a durable, market-tested strategy that drives growth, resilience, and equity at the same time. The Timing Could Not Be Better Today, several powerful trends make this the perfect moment to bring ownership to scale. A massive generational handoff is underway. Ten thousand baby boomers retire each day, many of them owners of successful small and midsize businesses with no succession plan. Transferring ownership to employees keeps those businesses rooted in their communities, preserves good jobs, and rewards founders with fair market value. The retirement crisis demands new solutions. With average savings at historic lows, workers need wealth-building tools that go beyond 401(k) plans. Ownership creates an asset base that compounds over time, restoring what traditional pensions once offered. Labor shortages are reshaping industries. As skilled workers grow scarce, companies that offer ownership will win the competition for talent, not only by paying well but by giving people a reason to stay. Economic volatility favors resilience. Employee-owned companies outperform during downturns because people at every level have a stake in the outcome. Ownership builds both financial and cultural strength. Beyond Good Intentions America has no shortage of programs designed to help workers. What it lacks is awareness and adoption of the ownership mechanisms that allow employees to share in the value they create. As long as labor and ownership remain separated, inequality will continue to deepen. When employees have an equity stake, their focus shifts from completing tasks to building lasting value. They think like owners because they are owners, and that mindset fuels innovation, strengthens loyalty, and creates a powerful cycle of trust and accountability. The impact case is clear, and the business case is even stronger. Broad-based ownership builds companies that last. It keeps wealth circulating within communities instead of extracting it, and it turns employees into long-term investors in the enterprise they help build. The Moment to Act We are standing on the edge of a once-in-a-generation opportunity to reimagine capitalism for shared prosperity. Employee ownership will not fix every inequity in our economy, but it addresses one of the most fundamental: who benefits from the value a company creates. Cubans challenge should not disappear into the social media ether. It should become a call to action for policymakers, investors, and business leaders to make employee ownership the standard, not the exception. America does not need another wealth redistribution debate. It needs a wealth participation strategy. Employee ownership represents capitalism at its best: fair, inclusive, and fiercely competitive. It aligns profit with purpose and ensures that the people who build our companies share in their success. If we scale it now, we can turn todays inequality into tomorrows shared prosperity.
Category:
E-Commerce
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