New report reveals major drop in self-employment over the past two decades
Self-employment in Australia plunged to a 20-year low as wage jobs became more attractive to the public, according to new research from the e61 Institute.
Its latest analysis, which used data from the ABS Longitudinal Labour Force Survey and the HILDA Survey, revealed that the share of self-employed Australians dropped from a 2002 peak of 20% to just 14% of employment today.
Sole traders also declined to under 9%, while employing businesses dipped to less than 5% today.
The fall is concentrated among self-employed people who hire workers ('employers'). By contrast, solo self-employment –including forms of platform-mediated work – has declined only modestly, the report read.
The headline decline therefore reflects a specific shift away from one traditional pathway into employership, rather than a broad fall in all forms of independent work.
Job benefits contribute to drop
According to the report, the drop in self-employment can be attributed to the structural changes in the labour market.
Skills that support running a business –judgement, problem-solving, and interpersonal capability –are increasingly rewarded within wage and salary jobs, the report read.
It found that the skill earnings premium has increased substantially in wage employment but not in self-employment over the past two decades.
By the 2020s, high-skill wage earners earned around 25% more than other workers. On the other hand, the report noted that there is little evidence of a similar growth in the self-employment premium for high-skill employees.
As a result, many high-skill workers face stronger incentives to choose wage employment rather than operate unincorporated businesses, the report read.
Employer superannuation contributions and other non-cash benefits have also increased to nearly 12% in 2025,according to the report.
Other benefits such as risk protection, workers' compensation coverage, paid annual and personal leave, and protections from termination, alsomade wage employment more securein Australia.
The incentives' influence can be observed in household structure patterns, according to the report.
The drop in self-employment is concentrated in couple households, especially for larger married couples and younger couples during child-rearing years.
As labour markets deepened and employment-based protections expanded, second earners increasingly faced stronger incentives to take wage jobs, gaining access to superannuation, paid leave, and other benefits, the report read.
Dual-earner households consequently became less risky than relying on business income alone.
Another factor contributing to the drop in self-employment is the costs and complexities of setting up a business.
Costs related to compliance, payroll systems, and workplace obligations that are largely fixed in nature andmay have increased over time.
They will disproportionately discourage entry into employership among small unincorporated businesses, the report read.
Implications of self-employment drop
Meanwhile, e61 Research Director Gianni La Cava discussed the implications of the drop in self-employment.
A fall in employing small businesses may matter for pathways into hiring and local job creation, but it does not mechanically imply weaker productivity growth, La Cava saidin a statement.
If activity reallocates toward more capital-intensive or scalable companies, aggregate productivity growth could remain the same or even increase. The relevant policy question is not how to lift self-employment in aggregate, but how institutions shape entry, hiring, and growth across organisational forms within the economy.
