This article focusses on the group of self-employed people who own unincorporated businesses, the regions they live in, the industries they work in and the income they earn from their businesses. Because there are several sources of regional data about owners of unincorporated businesses, this article is also intended as a guide to the available data and an example of its use. Owners of unincorporated businesses represent a small but distinct category of regional labour markets and understanding this group can provide useful information for regional planners and policy makers who seek to address regional employment and economic issues.
Throughout this article, owners of unincorporated businesses are referred to simply as "business owners." It is important to note that there are also owners of incorporated businesses, who are not analysed in this article. Legally, owners of incorporated and unincorporated businesses are quite different. Incorporated enterprises have a separate legal identity and are owned by shareholders, who have limited liability for business debts. In contrast, unincorporated businesses are not separate legal entities, so their owners are personally liable for any business debts incurred. Different sources of data are useful for analysing owners of incorporated and unincorporated businesses and links to further information about owners of incorporated businesses are provided at the end of the article.
Starting a business can benefit people by allowing them to create a source of employment that suits their skills and aspirations. For some people, owning a business may represent an opportunity to earn more money, have more independence over their work, or pursue greater opportunities than might otherwise be available (Endnote 1). Some people own their own business in addition to working for another organisation, using the income from their own business to supplement their salary or other source of income.
Business owners can benefit regional economies, not just through the outputs they produce and employment opportunities they provide, but also by contributing innovation to the local business community. Research has suggested that workers with higher managerial and entrepreneurial abilities are more likely to choose self-employment (Endnote 2), and fostering these abilities can contribute to economic growth by enabling innovative ideas to be brought to the market (Endnote 3). Business activity can add to the range of employment opportunities in a region, and has been identified as an important issue by Regional Development Australia Committees in many regions (A Review of Regional Development Australia Committee Regional Plans, 2013 (cat. no. 1381.0)).
This article begins by introducing the two main sources of regional data about business owners: Estimates of Personal Income for Small Areas (cat. no. 6524.0.55.002) and the Census of Population and Housing. Next, Estimates of Personal Income data are used to examine which regions business owners live in and how much income they earn from their businesses. Finally, Census data are used to describe the average age and sex of business owners in regions across Australia and identify the industries they work in. Two types of regions, Greater Capital City Statistical Areas (GCCSAs) and Statistical Areas level 4 (SA4s), are analysed. GCCSAs show the differences between greater capital cities and the rest of each state or territory. SA4s provide further breakdown of the GCCSAs and represent labour markets or groups of labour markets.
This article is part of a series looking at different aspects of human capital in regional labour markets. Human capital - the knowledge and skills with which people contribute to society and the economy - is considered a key determinant of regional economic development (Endnote 4). Human capital can be developed in various ways, including through education and training, by improving one's health and by obtaining new skills at work (ABS Research Paper: Measuring Human Capital Flows for Australia: A Lifetime Labour Income Approach, Feb 2008 (cat. no. 1351.0.55.023). Running a business is one way in which people can develop and use their knowledge and skills. Other articles in the series look at the industries people work in and non-school education.
Across Australia, more than one in every seven (15%) income earners earned some income from an unincorporated business in 2009-10. In some regions, however, including rural regions in Queensland, Western Australia, South Australia and New South Wales, business owners made up over a quarter of income earners. On average, people tended to earn much less from an unincorporated business than from all sources of income. Census data indicates that less than half of the people who earned income from an unincorporated business did so as their main job. Of the people who ran an unincorporated business as their main job in 2011, approximately two-thirds of them (66%) were male and their median age was 47, about 7 years older than the average worker. Business owners who ran their business as a main job tended to work in construction, agriculture, forestry and fishing (especially business owners outside of the greater capital cities), and professional, scientific and technical services (especially those in the greater capital cities).
In Australia, there are many different types of unincorporated businesses. Some are run by individuals, while others are owned by groups of people through a partnership or a trust.
In the Australian Status in Employment Classification, used by the ABS, business owners are considered self-employed and can be either own account workers or employers (Labour Statistics: Concepts, Sources and Methods, 2013
cat. no. 6102.0.55.001). Business owners who do not hire any employees are considered own account workers and commonly include consultants and tradespeople. Unincorporated businesses which employ staff include many law and accounting firms (which are often run as partnerships), some tradespeople and some primary producers (such as farmers).
Some business owners, such as those who receive income from a partnership or trust, may receive income from their business without being involved in day to day work for the business.
REGIONAL DATA ABOUT BUSINESS OWNERS
This article analyses two sources of regional data about business owners - the Census of Population and Housing and Estimates of Personal Income for Small Areas. There are, however, major differences between the two collections, including differences in definitions and timing, which are important to consider when interpreting the data.
As the table below shows, the number of business owners according to Estimates of Personal Income is over 1 million more than the number provided in the Census. The main reason for the large difference is because the Census only includes people who work as a business owner in their main job
, while the Estimates of Personal Income figure includes everyone who earned income from an unincorporated business income category in the financial year, according to their income tax assessment. This comparison suggests that there are many people in Australia who earn income from an unincorporated business, but do not work as a business owner in their main job.
For further explanation of the differences between the two collections, see the explanatory notes.
BUSINESS OWNERS, Selected Sources
|State / Territory|
Estimates of Personal Income 2009-10(c)
|New South Wales|
|Australian Capital Territory|
1 860 729
|(a) Australia includes Other Territories.|
(b) Applies to persons whose main job in the week before Census was as an owner-manager of an unincorporated business.
(c) Applies to all persons who earned income from an Own Unincorporated Business income category during the financial year, sourced from Estimates of Personal Income for Small Areas (cat. no. 6524.0.55.002).
1. Daly, A 2011, Vocational qualifications, employment status and income: 2006 Census analysis, National Centre for Vocational Education Research, Adelaide. <Back
2. Shomos, A., Turner, E. and Will, L. 2013, Forms of Work in Australia, Productivity Commission Staff Working Paper, Canberra. <Back
3. Macroeconomic Policy Division, Economic Roundup Summer 2008, 2008, Australia Government The Treasury, viewed 19 June 2013, <http://archive.treasury.gov.au/documents/1352/HTML/docshell.asp?URL=02_Entrepreneurship.asp
4. Regional Australia Standing Council,
Communiqué, 5 - 6 July 2012,
Department of Regional Australia, Local Government , Arts and Sport, viewed 19 June 2013, <http://www.regional.gov.au/regional/councils/rasc/communique-5-6-july-2012.aspx