Australia’s self-employment rate has fallen sharply since the early 2000s, pointing to a shift in how business activity is organised. Unincorporated businesses that employ workers experienced the greatest decline, while solo self-employment fell only modestly, partly reflecting the expansion of gig work. Over the same period, the share of company owners grew. 

This report shows that the fall in unincorporated self-employment aligns closely with changing labour market incentives. These patterns are interpreted as reflecting two broad trends:  

1. technological change has increased the returns to non-routine cognitive skills (such as problem solving and interpersonal ability) in wage jobs, while the costs and complexities of setting up a business have risen.
2. wage employment has become more financially secure as employee-linked benefits – including superannuation and paid leave – have risen as a share of labour income.

Overall, the decline reflects a reallocation across forms of work and business organisation rather than a uniform fall in entrepreneurial activity. Policies that support business creation may be more effective when they focus on easing hiring, scaling and transitions across business structures.