By: Kelly Asche, Senior Researcher
Every January, the Center for Rural Policy and Development releases the “State of Rural,” a report that reviews the important demographic and economic trends in Greater Minnesota. We usually have to wait until December—that is when the U.S. Census Bureau releases the newest batch of data for the American Community Survey, which many of our trends rely on. But there are a few that get updated earlier in the year, and it’s always fun to see those statistics.
One such dataset is the Census Bureau’s “Nonemployer Statistics.” Nonemployer statistics is defined as data: “… for businesses that have no paid employees and are subject to federal income tax” (https://www.census.gov/programs-surveys/nonemployer-statistics/about.html).
Our last blog post focused on the number of nonemployer establishments and the trends in rural Minnesota. In this post we will focus on the “receipts” of these businesses.
To recap from our last post, nonemployer data consist of people who are self-employed, operating an unincorporated business (also known as a sole proprietorship), have no paid employees, have paid federal income taxes for revenue earned, and have earned more than $1,000.
In everyday terms, this could be anything from a consultant hired to help organizations with strategic planning to your accountant operating a solo business to your neighbor selling AVON. It covers a large spectrum of businesses.
So let’s dive in and see what receipts (or revenues) look like for these establishments and how they have changed over time.
Trends in nonemployer receipts
Figure 1 provides the total annual receipts for nonemployer establishments by rural-urban county groups. Receipts have grown steadily each year outside of the Great Recession years. There was also a slight downturn in receipts during the pandemic but 2021 saw a very large increase in receipts.
Figure 1: Total annual receipts of nonemployer businesses has increased steadily for all rural-urban county categories.. Data: U.S. Census Bureau – Nonemployer Statistics
Interestingly, if we compare the amount of nonemployer receipts per establishment, we see very similar values by 2021. In the early 2000s there was a significant gap in nonemployer receipts per establishment in entirely urban counties compared to the other county groups. But, by 2021 that gap barely exists with each group averaging somewhere between $50,000 and $54,000 per establishment.
Figure 2: There’s been a steady increase in the nonemployer receipts per establishment as well as a shrinking difference between urban and rural values. Data: U.S. Census Bureau – Nonemployer Statistics
Nonemployer receipts vs. personal income
The Bureau of Economic Analysis tracks the total personal income earned in each county. To get a sense of the role nonemployers have in the overall economy, we can look at the percentage of total income these businesses represent.
Figure 3 shows that the nonemployer receipts make up a higher percentage of total personal income in our most rural counties compared to more urban ones, but the percentage has been decreasing across all county groups since 1997. In that year, nonemployer receipts represented nearly 11% of total personal income in the entirely rural county group, but by 2021, the percentages ranged from 5.8% in the entirely urban county group and 6.9% in entirely rural.
Figure 3: There’s been a steady decline in the percentage that nonemployer receipts make up for
Figure 3 may seem to contradict Figure 2, but the decline in the share of personal income coming from nonemployer receipts is due to the faster growth rate in personal income. Figure 4 shows that for all rural-urban county groups there is about a 100 percentage point difference in growth rates between personal income and nonemployer receipts. The growth rate for personal income really took off after the pandemic.
Figure 4: The growth in nonemployer receipts has not been as robust as the growth in personal income since 1997. Data: U.S. Census Bureau – Nonemployer Statistics | Bureau of Economic Analysis – Personal Income
This data tells us that nonemployers are an important piece of the rural economy. Although they are not keeping pace with growth in personal income, they still make up 7% of the total rural income pie, which means it’s important for economic and community developers to understand who these business owners are and what needs they have in their local region.