Are W-2 Jobs a Scam? What Fed Data Shows About Getting Rich on a Salary

On October 26, 2026, citing a Bloomberg report that Microsoft was offering voluntary buyouts to as many as 60,000 employees, an entrepreneurship account on X posted “the truth about working in corporate” in fourteen points.¹ A salary is “the drug they use to make you forget about your dreams of independence.” Raises never match inflation. The only job titles that matter are Shareholder and Owner. Your real job is to use your pay to invest or build a business that replaces your employer. The post drew about 35,000 views in a day, and its theme, that W-2 employment is a trap for people who lack financial education, is a staple of the genre.

Some of the fourteen points are right and several are false, but the best reply is in the data on who actually builds wealth. That data is less flattering to employees than most rebuttals admit: in the Federal Reserve’s 2025 survey, families headed by a self-employed person had a median net worth almost four times that of families headed by an employee, on about the same median income. That gap has several causes, and only some of them are a cost of taking a salary.

The short version

In the Fed’s 2025 Survey of Consumer Finances, about 10.6 million families with a net worth of $1 million or more were headed by someone who works for someone else, against about 6.5 million headed by a self-employed person. The self-employed are much more likely to be rich, but they are also older, they count their business at their own valuation, and the ones who failed are now counted as employees. Tax records show self-employment pays more on average and less for most people who try it. A salary invested in index funds makes you an owner of thousands of businesses; running one of your own is a higher-variance bet that pays when you have an edge.

The fourteen claims, graded

Paraphrased, with the evidence covered later in this guide. Several of the claims are about office life rather than money and cannot be tested.

Claim (paraphrased)	Verdict	Why
Employees are completely replaceable	Mostly true	3.3 million long-tenured workers were displaced in 2023-2025. Replaceable does not mean worthless: replacement costs and scarce skills set pay.
People take salaries because they don’t know a better way	Overstated	In tax records, most self-employed people earn less than comparable employees. A salary is often the better expected deal.
The only titles that matter are Shareholder or Owner	False dichotomy	64% of employee-headed families own stock. A 401(k) is a shareholder title.
You won’t get a good raise; raises never match inflation	False as a rule	Real average hourly earnings fell 0.7% in the year to September 2026 and rose about 12% over the prior 20 years.
You’re paid exactly what shareholders want	Partly true	Pay is set by budgets and outside offers. Pay does rise with firm productivity, more for higher-paid workers.
A salary keeps you from independence	False	Among employee-headed families in the top tenth by income, about three-quarters have a net worth of $1 million or more.
Use your pay to invest or build a business that replaces your employer	Right	Building assets the employer cannot take away is the core of financial independence. “Invest” is enough; “build a business” is optional.
15+ years at one company means you’re underpaid	Unsupported	About half of long-tenured displaced workers who found new full-time jobs took a pay cut, consistent with many having been paid more than other employers would offer.
HR protects the company; coworkers aren’t friends; performance reviews are rigged; awards are worthless	Untestable	Claims about workplaces, with no bearing on wealth.

What the post gets right about job security

A paycheck can stop. In the Bureau of Labor Statistics survey of workers displaced from 2023 through 2025, 3.3 million had lost jobs they had held for at least three years. By January 2026, 66.1% of them were working again, and of those back in full-time wage jobs who reported earnings, about 49% earned as much as or more than before, down from about 62% in the 2024 survey.² Median tenure with the current employer was 4.1 years in January 2026.³

Real wages also do not rise every year. Real average hourly earnings for private employees fell 0.7% from September 2025 to September 2026.⁴ Over longer windows they have risen, by about 5% from September 2016 and about 12% from September 2006, using the same BLS series; the latest month is preliminary. “Raises never match inflation” is false, and “your pay will keep up with inflation” is not guaranteed either.

The post’s practical advice follows from this, and it is sound: do not treat current pay as permanent, and turn part of it into assets your employer cannot take back. Our guides on human capital risk and emergency fund sizing cover how much of that buffer to hold and where.

A salary can buy ownership of thousands of businesses

An employee who buys a total-market index fund owns a slice of every company in it, including the profits the post says go only to shareholders. In the 2025 Survey of Consumer Finances, 56% of U.S. families owned publicly traded stock directly or through funds and retirement accounts.⁵ Among families headed by someone who works for someone else, the share was 64%, higher than the 54% for families headed by a self-employed person, whose savings are more often tied up in their own business.⁶

Economists also have a reason why employment exists that does not involve anyone being fooled. Jonathan Berk and Johan Walden model wage contracts as insurance: firms pay workers a steadier income than the business earns, and pass that risk on to shareholders who can diversify it.⁷ The employee gives up the upside of the business in exchange for not bearing its full downside. Whether that is a good trade depends on the person, which is the subject of the rest of this guide.

In Census data linking firms and workers, Nicholas Bloom and coauthors found that doubling a firm’s productivity was associated with about 11% higher pay for its highest-paid employee and 4.7% for its median worker.⁸ Workers share in productivity gains, though unevenly. That is the case for owning the stock of productive companies in addition to working for one.

For employees with high incomes the trade has often worked. Among families headed by an employee in the top tenth of the income distribution, 76.5% had a net worth of $1 million or more in 2025, and 30.7% of those in the 80th to 90th percentile did.⁶ High income does not turn into wealth on its own; our guide High Income Is Not Wealth covers the savings-rate side of that.

Self-employed families have more wealth on paper

This is the strongest evidence for the post’s side, and it is large. In the Fed’s 2025 tables, families headed by a self-employed person had a median net worth of $574,600, against $156,000 for families headed by an employee, with nearly identical median incomes ($93,500 and $95,700).⁹ In Summitward’s analysis of the same survey, 40.0% of self-employed-headed families had a net worth of $1 million or more, against 14.3% of employee-headed families. The self-employed head 40% of families worth $10 million or more while making up 12% of all families.⁶

Four things explain part of that gap:

Age. The median self-employed head is 54; the median employee head is 43. Wealth rises with age for everyone.
The business itself. Net worth includes the owner’s estimate of what the business is worth. It is not a market price, and much of it may not survive a sale (see below).
Survivorship. Someone whose business failed and who went back to a salary is counted as an employee. The self-employed group is weighted toward people for whom it worked.
Selection. People who start businesses had higher earnings before they started, so they were not typical employees to begin with.¹⁰

Splitting by age shows how much the first two matter. Medians below are for families headed by someone in each age band, 2025 survey, in thousands of dollars. “Ex-business” subtracts the value of privately held businesses.

Age of head	Employee: net worth	Self-employed: net worth	Employee: ex-business	Self-employed: ex-business	Employee: financial assets	Self-employed: financial assets
35-44	$171k	$201k	$164k	$157k	$42k	$15k
45-54	$253k	$1,011k	$243k	$495k	$92k	$120k
55-64	$398k	$899k	$371k	$756k	$104k	$79k

Source: Summitward analysis of the Federal Reserve 2025 Survey of Consumer Finances, all five implicates with sample weights; standard errors from the 999 replicate weights. Self-employed cells rest on 131 to 239 sample families and carry wide intervals: the 45-54 net worth median is $1,011k plus or minus about $278k. Under-35 self-employed cells are too small to report. Code and full output: summitward-research.

At 35 to 44, once the business is set aside, the two groups have about the same median wealth, and employees hold more in financial assets. By 45 to 54 the self-employed are well ahead, about twice the employee median even excluding the business, though the intervals are wide. Some of that later gap is likely survivorship: by middle age, the people still self-employed are mostly the ones whose businesses lasted. A cross-section cannot say how much. What it does say is that the self-employed edge is not a myth, and that it is concentrated among older owners with businesses that survived.

It also says that employee wealth is common in absolute numbers. Of the 29.1 million families worth $1 million or more, about 36% were headed by an employee and 23% by a self-employed person (most of the rest are retired). Only above about $3 million does the self-employed share match or pass the employee share.⁶

What the research says about whether self-employment pays

Survey data and tax data give different answers, and the difference is mostly about which entrepreneur you mean.

The typical self-employed person earns less. Barton Hamilton, using household survey data, found that people who had been in business for ten years had median earnings about 35% below what they would have been predicted to earn in paid work.¹¹ He concluded that the non-financial benefits of being your own boss are large enough that people accept the cut.

The average self-employed person earns more. Bhandari, Kass, May, McGrattan and Schulz, in a paper published in the Journal of Political Economy in June 2026, used IRS and Social Security records for people born from 1950 to 1975. Those who were primarily self-employed had average incomes almost 60% higher than paid employees, and by age 55 people who had tried self-employment averaged $134,000 against $79,000 (in 2012 dollars).¹² Yet the same study found that the majority of the self-employed earned less than paid employees with similar characteristics. The two findings fit together because self-employment income is extremely skewed: 80% of it went to people earning more than $100,000 a year, and the spread between the 90th and 10th percentiles of income growth was 2.5 to 3 times wider than for employees.¹⁰ In 2008, self-employed income fell about 10% below its prior average.

Two other findings narrow where the money is. In Ross Levine and Yona Rubinstein’s analysis, owners of incorporated businesses earned more per hour than comparable employees, while the median owner of an unincorporated business earned about 13% less.¹³ And survey data understate what the self-employed earn: Hurst, Li and Pugsley estimate they under-report income by about 25% in household surveys, which biases survey-based comparisons such as Hamilton’s against the self-employed.¹⁴

Gustavo Manso argues that earlier studies understate the return because they ignore the option to try a business and go back to paid work if it fails; in longitudinal data he finds returns more attractive than earlier research showed.¹⁵ Erik Hurst and Benjamin Pugsley found that more than half of new small-business owners gave non-financial reasons such as being their own boss for starting, and few planned to grow much.¹⁶ Lower pay is a reasonable price for autonomy, if autonomy is what you want.

Question	What the evidence supports
Can employees become wealthy?	Yes. About 10.6 million $1M+ families are headed by employees.
Are the self-employed richer on average?	Yes, in both survey and tax data.
Does the typical person who tries it earn more?	No. Most earn less than comparable employees; the average is pulled up by a minority.
Does becoming self-employed cause higher wealth?	Not established. Entrants are positively selected and failures leave the group.
Does private business equity beat public stocks?	Depends on the period studied; no reliable premium.
Is a salary safe?	No. About half of displaced long-tenured workers took a pay cut.

Much of what owners earn is pay for their own work

The post treats “owner” as the opposite of “worker.” For most business owners, the line is blurry. Matthew Smith, Danny Yagan, Owen Zidar and Eric Zwick used U.S. tax data to study pass-through businesses (S corporations and partnerships), which generate much of the income of top earners. They classify about three-quarters of that profit as a return to the owner’s own skills and effort, and they found that a firm’s profit falls by about three-quarters when its owner retires or dies.¹⁷ For a typical owner, the business is largely a job that the owner cannot be laid off from and also cannot easily sell.

It is also a job that often ends. Of private-sector establishments that opened in 2015, 79.6% were still operating a year later, 50.2% after five years and 34.7% after ten.¹⁸ The counts are of business locations, and some closures are sales or retirements. A salary that ends after four years and a business that closes after five both leave someone looking for new income.

As an investment, concentrated private business equity has not reliably paid more than public stocks, despite far more risk. Our guide on buying a small business vs. index funds covers that research and works through how much of a listed business’s cash flow is really the owner’s wages.

Compare the full package before comparing incomes

A salary and a business profit of the same size are not the same amount of money. In June 2026, private employers spent an average of $46.89 an hour per worker, of which $32.82 was wages and salaries. Paid leave ($3.54), insurance ($3.69), retirement contributions ($1.57) and legally required costs such as the employer half of payroll taxes ($3.40) added $12.20, or 37% on top of wages.¹⁹ For a worker with that average package, a $100,000 salary corresponds to about $137,000 of self-employment earnings before the self-employed person pays for health insurance, retirement contributions, unpaid time off and both halves of payroll tax. Individual packages vary a lot around that average.

Taxes cut both ways. The self-employed pay 15.3% self-employment tax (12.4% Social Security on earnings up to $184,500 in 2026, plus 2.9% Medicare), and deduct half of it.²⁰ Against that, owners of pass-through businesses may deduct up to 20% of qualified business income under Section 199A, subject to income limits and exclusions for many professional service businesses; wages do not qualify.²¹ They can also deduct ordinary business expenses and contribute to a solo 401(k) or SEP. S corporation owners who work in the business must pay themselves a reasonable salary before taking distributions, so the payroll-tax savings that influencers advertise have limits.²²

When owning a business is the better bet

You have an edge that is hard to buy as an employee: a customer base, a license, an operating skill, or knowledge of a market that competitors lack.
The business can grow without your hours growing with it. A practice that bills only your time is a job with extra risk.
You can survive the bad years: savings outside the business, a spouse’s income, or a fallback career you could return to.
You value control over your work enough to accept a lower expected income. That is a legitimate trade, and the research says most owners make it.

When a salary and index funds are the better fit

Your skills command a high salary. Among employee-headed families, the share worth $1 million or more was 10% in the 60th to 80th income percentiles, 31% in the 80th to 90th and 77% in the top tenth.
You want diversified ownership: thousands of companies, daily liquidity, and no single customer or lease that can end the plan.
You would start a business only for the money and have no particular edge. That describes the group that tends to earn less than it would have as an employee.
Your household depends on employer health insurance or steady income for a mortgage.

The two paths also combine. About 10% of employee-headed families own a business, which can be a side business or one run by a spouse, and an employee with equity compensation is a part-owner of the employer. Our FU money and Coast FIRE guides cover how a portfolio built from a salary buys the option to leave it.

Frequently asked questions

Are W-2 jobs a scam?

No. A W-2 job is a contract that trades the upside of a business for a steadier income, and employees can buy that upside back through stock ownership. About 10.6 million U.S. families worth $1 million or more were headed by an employee in the Fed’s 2025 survey.

Do entrepreneurs make more money than employees?

On average, yes: tax records show self-employed incomes averaging almost 60% more. But most self-employed people earn less than comparable employees, because a minority of very high earners pulls up the average.

Why are so many millionaires self-employed?

Partly because some businesses succeed spectacularly, and partly because of who gets counted. The self-employed are older, value their own businesses, started with higher earnings, and exclude people whose businesses failed. Excluding business equity, employees and the self-employed aged 35 to 44 had similar median wealth in 2025.

Can you become a millionaire on a salary?

Many people have. About three-quarters of employee-headed families in the top tenth of incomes had $1 million or more of net worth in 2025. It depends on income and on saving a large share of it, and on time in the market.

Is self-employment more tax efficient?

Sometimes. The self-employed pay both halves of payroll tax but may get the Section 199A deduction of up to 20% of qualified business income and can deduct business expenses. Whether that nets out ahead depends on income, entity type and industry.

Should I quit my job to start a business?

Only if you have an edge, a cushion, and a reason beyond expected income. Keep diversified savings outside the business, and price in the benefits, paid leave and payroll taxes your employer currently covers.

Key takeaways

Employees can be owners. 64% of employee-headed families own stock, and about 10.6 million millionaire families are headed by an employee.
The self-employed have more wealth on paper. Their median family net worth was about 3.7 times the employee median in 2025, on about the same income.
Much of that gap is age, business valuation and survivorship. At 35 to 44, excluding the business, the medians are about equal.
Self-employment pays more on average and less for most people. The average is driven by a skewed minority.
Compare full compensation packages. The average private benefits package adds about 37% to wages.
Turn pay into assets. On this point the viral post is right.

Related guides

Buying a Small Business vs. Index Funds: what a laundromat’s cash flow pays once the owner’s labor is priced in.
High Income Is Not Wealth: how a salary becomes a portfolio.
Human Capital Risk for Tech Workers: when your job, your equity grants and your portfolio all depend on one sector.
Savings Rate vs. Investment Returns: which one matters more at your stage.
Rental Property vs. Index Funds: another way to own an operating asset.

Sources

Lazy Canadian Entrepreneur (@JimChuong) on X, October 26, 2026, “The truth about working in corporate”. View count as displayed on October 27, 2026.
U.S. Bureau of Labor Statistics (August 27, 2026), Worker Displacement: 2023-2025. Long-tenured means three or more years with the employer.
U.S. Bureau of Labor Statistics (September 24, 2026), Employee Tenure in 2026. Median 4.1 years for wage and salary workers, up from 3.9 in 2024.
U.S. Bureau of Labor Statistics, Real Earnings, September 2026 (October 14, 2026), and series CES0500000013, real average hourly earnings of all private employees in 1982-84 dollars: $10.06 (September 2006), $10.69 (September 2016), $11.24 (September 2026, preliminary).
Board of Governors of the Federal Reserve System (October 2026), Changes in U.S. Family Finances from 2022 to 2025: Evidence from the Survey of Consumer Finances.
Summitward analysis of the 2025 and 2022 Survey of Consumer Finances public extracts by work status of the family head, summitward-research/w2-vs-self-employed. Net worth includes home equity and business equity. The SCF excludes the Forbes 400.
Berk, J. B., and Walden, J. (2013), “Limited Capital Market Participation and Human Capital Risk,” Review of Asset Pricing Studies 3(1), 1-37. NBER working paper 15709.
Bloom, N., Ohlmacher, S., Tello-Trillo, C., and Wallskog, M. (2021), “Pay, Productivity and Management,” NBER working paper 29377.
Board of Governors of the Federal Reserve System, 2025 SCF historical tables, real dollars (Excel), median net worth and income by work status of the family head, 2025 dollars.
Horwich, J. (September 19, 2025), “Tax data reveal rewards and risks of self-employment,” Federal Reserve Bank of Minneapolis.
Hamilton, B. H. (2000), “Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment,” Journal of Political Economy 108(3), 604-631. doi:10.1086/262131.
Bhandari, A., Kass, T., May, T. J., McGrattan, E. R., and Schulz, E. (2026), “On the Nature of Entrepreneurship,” Journal of Political Economy 134(6), 1609-1665. Minneapolis Fed Staff Report 670. Sample: ages 25 to 65, born 1950 to 1975, IRS and SSA records 2000-2015.
Levine, R., and Rubinstein, Y. (2017), “Smart and Illicit: Who Becomes an Entrepreneur and Do They Earn More?” Quarterly Journal of Economics 132(2), 963-1018. The hourly-earnings comparison is from NBER working paper 19276 (revised 2015).
Hurst, E., Li, G., and Pugsley, B. (2014), “Are Household Surveys Like Tax Forms? Evidence from Income Underreporting of the Self-Employed,” Review of Economics and Statistics 96(1), 19-33. NBER working paper 16527.
Manso, G. (2016), “Experimentation and the Returns to Entrepreneurship,” Review of Financial Studies 29(9), 2319-2340. doi:10.1093/rfs/hhw019.
Hurst, E., and Pugsley, B. W. (2011), “What Do Small Businesses Do?” Brookings Papers on Economic Activity, Fall 2011. Brookings.
Smith, M., Yagan, D., Zidar, O., and Zwick, E. (2019), “Capitalists in the Twenty-First Century,” Quarterly Journal of Economics 134(4), 1675-1745. NBER working paper 25442.
U.S. Bureau of Labor Statistics, Business Employment Dynamics, Table 7: Survival of private sector establishments by opening year, March 2015 cohort.
U.S. Bureau of Labor Statistics (September 9, 2026), Employer Costs for Employee Compensation, June 2026, Table 1, private industry workers. The 37% excludes supplemental pay such as overtime and bonuses ($1.88), which is part of earnings.
Internal Revenue Service, Topic 554, Self-Employment Tax, and Topic 751, Social Security and Medicare Withholding Rates.
Internal Revenue Service, Qualified Business Income Deduction.
Internal Revenue Service, S Corporation Compensation and Medical Insurance Issues.