The world changed in many ways last year. One of them is the face of employment, or rather, self-employment.

The pattern first appeared in the third quarter of 2020, when there were a record number of business formations, as I wrote in an article. The Internal Revenue Service received nearly 1.6 million applications for new employer identification numbers (EINs). Those are the equivalent of Social Security numbers that individuals use in filing taxes.

Some percentage of these formations are for corporate mergers and acquisitions, purchase of assets, real estate deals, and more. Corporation, investors, and others regularly create legal structures that isolate transactions from an individual or main business.

But a great many, probably most, looking at the baseline, are likely from individuals starting a business. When I spoke to individuals starting new businesses as well as economists then, the assumption was that people were scrambling after the first half of the year, with plummeting GDP and soaring unemployment.

But the figures have only grown. Here’s a graph with the most recent numbers by month from the Census Bureau. I’ve included both seasonally adjusted (or SA, manipulated by economists to smooth out the patterns and try for a more systemic view of what is happening) and non-seasonally adjusted (NSA, or raw numbers).

These figures are stunning. Notice that the SA line, while down from the 551,657 peak in July, are still far and away above anything the country has seen since 2004, when the data started to be collected.

However, the NSA is jaw-dropping. The first quarter of 2021 shows formations at 1,562,792. Compare that to the NSA numbers for the “record” 2020 Q3: 1,475,998.

This trend is accelerating in real time, which means that it’s probably running ahead of the ability of economists to adequately understand what seasonal adjustments should be.

Now look at the comparison between NSA high-propensity business formations (those deemed likely to result in a payroll of created jobs) and non-high-propensity (more likely solo businesses).

Far and away, people are starting businesses that will largely be self-employment. That may be independent contractors to corporations or individuals providing services or goods to consumers.

This also is unlikely to be a sudden rush to the gig economy. People who casually pick up work in rideshare driving, deliveries, odd jobs, dog walking, or other platform-centered activity don’t seem likely to be the ones anticipating an actual business structure.

The business formations may be an emergency choice—if a business someone worked for has folded or there’s the possibility that it might. Or this could largely be so-called side hustles, with someone trying to start a new venture on the side.

But it’s clear from these figures that a lot of people are actively pursuing self-employment. It shows an entrepreneurial spirit, but there are many issues that will get in the way and discourage those who want to create businesses, which will expand the economy and open more jobs for those who need them:

• As I’ve written before, the Biden administration and Democrats are focused on reducing this type of business creation. They want employees, not independent contractors. Given the existing number of self-employed, with a lot more coming, such ambitions aren’t reckoning with changes in the economy and society. If the attempts succeed, this movement will run into a brick wall. It’s bad policy and needs to change.
• That’s only the start of what government needs to do. I still remember how long it took for self-employed people to gain the right to deduct their own healthcare insurance from their income, the way corporations had been able to. There needs to be an examination of all the privileges that bigger companies get and a consideration for whether there should be a small/solo business equivalent.
• Few people have the existing skills to run a business effectively. If we want a vibrant self-employment and expanding small business culture—which would help undercut the grasp that corporations have on so much in this country—those who want to try need opportunities to learn the basic skills. In my own area of media creation and consulting, I cannot count the number of people I’ve seen jump in, only to think of themselves as unworthy and unwanted employees. They need to learn marketing themselves, sales, planning, and more.
• Having enough capital is a regular problem for people starting out, particularly if they’re not from an economically advantaged background. Cut unnecessary subsidies to large industries (so many, who can count?) and direct the cash into a fund for loans at low interest rates.

If the world of business and economics is changing, whether anyone asked it to or not, it makes sense to understand what is happening, why, and develop policies and programs to address the new reality.