The Government Accountability Office calculates that 43 million people are part of the independent workforce which includes contractors, temp workers, self employed workers, freelancers and solo-entrepreneurs. This segment is only expected to boom in the coming years. Emergent Research, a labor research firm, calculates that independents will soon comprise 40 percent of the entire workforce by 2020.
It's not surprising why numbers are growing. With health insurance now more accessible through the Affordable Care Act, Americans increasingly choose to work independently. The switch to freelancing allows more flexibility and autonomy. Many self-employed workers have the freedom to choose their hours and clients, but also where they live.
Where self employed workers live can have a huge impact on how much they earn. Factors like cost of living, local health insurance premiums, and state income tax rates make a big difference for independent workers hoping to maximize their income.
We poured through the most up-to-date health insurance, housing, tax, and employment data to determine the best cities for independent workers looking to maximize their income relative to cost of living.
- Texas on the rise. Five of the top 20 towns are situated in Texas. The state's largest cities have a great combination of affordable housing and insurance plus a high number of residents already self-employed. In addition, Texas has no state income tax rate which allows independent workers to retain more of their earnings compared to workers in states like California and New York where income tax is substantially higher.
- Los Angeles still on top. The percentage of self employed workers in L.A. is among the highest in the nation. The size of L.A.'s creative workforce is incredible and the large infrastructure for self employed artists supports the sector's growth. Health insurance is more affordable in L.A. than most other California cities on the list.
- Warmer weather signals more savings. The majority of top 20 cities are in the Southeast and Southwest: from Miami and Nashville to Tucson and Albuquerque, southern towns have more affordable health insurance costs and typically lower tax rates.
Top 50 Cities for Independent Workers
To calculate each city's score, we weighed several factors concerning employment and cost of living for U.S. cities over 345,000 people. Here are the data sets we analyzed with weightings:
- Health Insurance premium data (weighted 15 percent): We found the monthly cost of the least expensive Bronze plan for a 40-year-old individual male non-smoker. Prices are from the 2014-2015 Open Enrollment period. Middle-aged men comprise the largest demographic among independent workers. Data from GetInsured health marketplace and the Kaiser Family Foundation.
- Median monthly housing costs for renters (weighted 20 percent): 2013 data from the U.S. Census American Community Survey on the median dollar amount residents pay for rental housing.
- Percentage of unincorporated self employed workers (weighted 50 percent): 2012 data on the percentage of unincorporated self employed workers in the local workforce. The higher number of people already working independently indicates that more resources, community and infrastructure are likely in place for independents.
- September 2014 unemployment rate (weighted 15 percent): Most recent data from the U.S. Bureau of Labor Statistics on unemployment per metro area to determine the likelihood residents are gainfully employed.
- State-Specific Individual Income Tax Rates (included but not factored into overall score): 2014 state income tax rates from the Tax Foundation.