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A COVID-19 effect: Lost gigs can now be insured

A look at how unemployment benefits will impact self-employed workers in the Ninth District

April 2, 2020

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Lost gigs can now be insured key image
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Article Highlights

  • COVID-19 relief package gives self-employed rare access to jobless benefits

  • These jobs comprise around 20 percent of all jobs in Ninth District states

  • Unemployment insurance traditionally excludes self-employed even in tough recessions

A COVID-19 effect: Lost gigs can now be insured

As in the rest of the nation, about one in five jobs in Minnesota—or nearly 800,000—is a form of self-employment, whether accountants, house cleaners, or Uber drivers.

In ordinary times, none of them is protected by unemployment insurance, nor do they pay the taxes that support the insurance program.

But these aren’t ordinary times, and the massive economic relief package Congress passed March 27 to alleviate the economic impact of the COVID-19 pandemic has opened unemployment benefits to the self-employed for one of the rare times in U.S. history, signaling the coronavirus’ massive economic disruption.

The first time was in the aftermath of World War II, when 10 million service members were demobilized within a couple of years; that’s about 15 percent of the 1945 labor force. Unemployed veterans and self-employed veterans with low incomes were eligible for readjustment allowances.

In the third week in March 2020, when the spread of COVID-19 prompted many states, including Minnesota, to shut down restaurants and other gathering places, U.S. workers filed 3.3 million jobless claims. If each worker filed one claim, that’s about 2 percent of the labor force.

In the third week in March 2020, when the spread of COVID-19 prompted many states, including Minnesota, to shut down restaurants and other gathering places, U.S. workers filed 3.3 million jobless claims.

In the same week in Minnesota, 116,438 claims were filed, representing 4 percent of the labor force. That rate varies throughout the Federal Reserve’s Ninth District but is lower in the other states.

The claims were filed before Congress vastly expanded unemployment insurance coverage, not only by covering the self-employed but also by easing eligibility rules for all workers. Workers need only “self-certify” that their job loss was because of COVID-19, including if their children’s school closed and forced them to remain home.

When it began in the Great Depression, the unemployment insurance program left out many kinds of workers despite aspirations of universal coverage. Over the years, many of those workers have been brought into the fold, including state and local government workers and employees of nonprofit groups, except churches.

The self-employed remain excluded because they’ve long been considered to be in control of their employment. In recent years, gig workers such as Uber and Lyft drivers have argued that they’re actually at the mercy of their ride-hailing companies.

While the gig economy has captured a lot of attention, the number of jobs classified as self-employment has been growing at a faster rate than wage-and-salary jobs for decades. In 2018, the latest data available from the U.S. Bureau of Economic Analysis (BEA), the self-employed make up 23 percent of all jobs in the United States, a total of 46.4 million. In 1998, they made up just 17 percent of all jobs.

In 2018, the latest data available from the U.S. Bureau of Economic Analysis (BEA), the self-employed make up 23 percent of all jobs in the United States, a total of 46.4 million. In 1998, they made up just 17 percent of all jobs.

In Minnesota, 773,000 jobs are classified as self-employment, which is 20 percent of all jobs. It’s 28 percent in Montana, 22 percent in North Dakota, 25 percent in South Dakota, 19 percent in Wisconsin, and 21 percent in Michigan. Farmers are a big part of that, but those jobs make up no more than a fifth of all self-employment jobs; that’s in the Dakotas, where farmers had the highest share.

Note that the BEA data look at jobs, not workers. It’s possible for a worker to hold more than one job, for example, juggling multiple gigs or supplementing a full-time job with a gig. However, a recent Census study found that only 8 percent of U.S. workers held more than one job in 2013.

Self-employment jobs are especially numerous in real estate, professional services such as accounting, support services such as house cleaners, investment activities such as financial advisers, and personal services such as dog walkers. Other big industries include ground passenger transportation such as ride-hailing services and nonstore retailers such as Amazon vendors.

The path may not be clear for all self-employed workers to take advantage of the COVID-19 stimulus, however. Experts have warned that gig workers who don’t have some sort of formal paper records stating their income, such as tax returns, may not be able to get access to benefits.

Tu-Uyen Tran
Tu-Uyen Tran
Senior Writer