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7 Reasons Why Self-employment is the Ultimate Career Solution

Reader Tim K. and I were having an email exchange a couple of weeks ago on the topic of universal basic income, or UBI. UBI is an idea advocated by some who see it as the solution to the problems in the job market. As technology increasingly displaces human labor, both unemployment and underemployment are going to rise, and salaries will fall. The basic idea of UBI is to provide everyone with a minimum level of income, to offset the loss of job income. I’m not an advocate of UBI, and instead believe that self-employment is the ultimate career solution.

7 Reasons Why Self-employment is the Ultimate Career Solution
7 Reasons Why Self-employment is the Ultimate Career Solution

America, once a nation of small farmers and shopkeepers – primarily self-employed – has morphed into the land of salaried employees. According to the Organization of Economic Cooperation and Development (OECD), the US has one of the lowest rates of self-employment in the industrialized world, at just 6.5% of the labor force.

By contrast, the self-employment rate in Canada is 8.6%. It’s 10.8% in Germany, 11.1% in Japan, 14.9% in the UK, and 24.7% in Italy. In fact, the only country in the developed world that has a lower rate of self-employment than the US is microscopic Luxembourg.

Is there a connection between the constrained job market and the lack of self-employment in the US? I sure think so. As self-employment has become less common in America, so are the alternatives to the constrained job market.

That needs to change if we’re going to see our way toward a better future, both as individuals and as a nation.

The Job Market is Inherently Unstable and it Only Promises to Get Worse

Despite the allegedly low official unemployment rate – 4.4% in April according to the Bureau of Labor Statistics (BLS) – it’s still difficult to find a full-time job with benefits in many and perhaps even most fields. Raises and promotions seem to be even more scarce.

While the job market is certainly better than it was back in 2009, the current low unemployment rate has become famous for what it is not showing. Perhaps the biggest driver in the low rate is the declining labor participation rate.

According to the most recent data, a record 95.1 million adult Americans are not in the labor market, an all-time record high. That has dropped the labor participation rate to 62.7%, which is very close to its 38 year low. The unemployment rate is dropping largely because fewer people are in the labor market.

There are technical reasons why this is true, and why it’s not likely to get better.

In 7 Reasons Self-Employment is More Secure than a Job I identified what I believe to be the most fundamental reality of the job market in the 21st Century:

”Employment Realty #1 is that employers are figuring out ways to eliminate people and payrolls through a relentless shift to cheaper workers offshore, the latest computer technology or a combination of both. Translation: as much as we want to buy into the economy-is-recovering projections, it’s becoming painfully obvious that if that is happening, it’s fully capable of doing so without employees. The stagnant employment picture has less to do with the state of the economy than it does with the progression of options available to employers.”

This development has given employers the solid upperhand when it comes to salary negotiations. As technology eliminates jobs in some fields, it creates an overabundance of applicants in other fields. That enables employers to both hire on the cheap, and to demand ever more production from their employees.

There’s even a word that describes the employment conundrum we find ourselves in: Monopsony (thank you Charles High Smith!)

Monopsony means that employers have the ability to set wages. Employees have little recourse. That can happen as a result of either a shortage of jobs, or some sort of loose cooperation between employers within the same industry to limit wages. I think that pretty much describes the situation in most career fields.

Technology is increasingly making that possible. Even if you are well employed and well paid in your career, it may just be a question of time before technology catches up with your industry. Right now, no one thinks that will happen in fields like education, healthcare, government, or certain IT occupations. But the technological progress has been relentless, and it threatens every nook of the job market.

You May Be “Climbing a Ladder that’s Leaning Against the Wrong Wall”

Even apart from the big picture pressures closing in on jobs and salaries, job satisfaction seems to be in short supply. Some of this has to do with the stresses caused by income and productivity pressures, but much of it is also personal.

For example, lot of people are stuck in jobs that offer very little chance of either promotion or a substantial increase in pay. Let’s face it – good people don’t always get the promotion. Many are also doing work that they don’t enjoy. No small number of people are in their current occupations to do little more than pay the bills. And many wandered into their current careers by accident, never giving the career question a serious analysis much beyond earning a paycheck.

The last point is particularly important. Even if you are making progress in your career, there’s more than a slight chance that you’re working in a field that you either don’t particularly care for, or isn’t exactly within your preferred skill set.

That can be a tough situation to break out of if you’ve been working in your current career or job for a long time. In addition to the fact that many employers either don’t offer or don’t encourage lateral career moves within the organization, many also prefer to have you exactly in the job that you’re in right now. The thought of you moving into a different capacity – particularly one that’s substantially different from what you’re doing now – is seen as disruptive to the organization.

Until a couple of decades ago, large employers in particular encouraged employee growth and development within the organization. The situation is radically different today. Quite the opposite in fact, in many organizations you’re hired to do a specific job or work on a certain project. Once that project ends, you’ll be out the door. Job tenure of 20 or 30 years or more has become a pronounced exception, at least if you don’t work in one of the preferred career fields – and sometimes even if you do.

So what’s the alternative in a highly constrained job market? This is where self-employment shines as the ultimate career solution.

7 Reasons Why Self-employment is the Ultimate Career Solution

So why do I say that self-employment is the ultimate career solution? Well, largely based on personal experience. It’s proven to be the ultimate career solution for me. I can offer seven reasons why I believe this is true:

1. Flexibility. I remember back in the 1970s and 80s that if a person needed to get a few hours off to go to the doctor or take care of something for their children, they could do it. Today, employees are made to feel that they’re committing a crime. Being self-employed, I might work more hours in a week than the average employee, but I can rearrange my schedule to better blend my personal life. That’s a significant reason why self-employment doesn’t always feel as much like work as a job is – it’s just less constraining.

2. Doing what you do best. In a job situation, your work schedule and assignments are determined by your employer. Those assignments might be what your employer needs you to do, but it might not represent the kind of work that you do best. When you’re self-employed, you can choose to do the work that you do best. And when you do, you’re usually more efficient, and you earn more money.

3. No layoffs. Many employees in a large number of occupations work under the perpetual threat of layoffs and firings. That’s an incredibly stressful way to work. When you’re self-employed, there’s always the possibility that you could lose a client or an important customer, but since you usually have multiple customers, you’re not out on the street. In addition, you’re always free to pursue new customers and clients.

4. No forced retirement. Many employers impose a mandatory retirement age. Even more have informal ways of forcing you out the door when you reach a certain age. Some employers are even preoccupied with youth movements in an attempt to keep the organization young and vibrant. But what happens if you either don’t want to retire, or if you’re not in a position to afford it?

That’s not usually an issue when you’re self-employed. I’ve known many self-employed people who work well into their 70s or 80s, or even right to the grave. That’s not saying that you have to, but it’s always a nice option to have.

5. No income ceiling. In most jobs, you can only earn so much money. After that, you’re either stuck at that income level, or you have to move on to another job or occupation. And given the reality of monopsony in today’s job market, there isn’t always a higher paying job at another employer.

But when you’re self-employed, you can earn as much money as your time, talents, and energy level can provide. There’s no artificial income slot for you to fill – there’s literally nothing but open sky in front of you.

6. No artificial social situations. Employers don’t just control what happens on the job. They often exert strong – if subtle – influence and pressure on your off-the-job existence (please read White-Collar World – What the office has done to American life if you doubt this is true). True, office comaraderie is a definite benefit, but what about when someone – or several someone’s – in the office turns against you? It happens in the real world.

There’s also the social conformity factor. That’s where employers exert influence off the job. In certain jobs, and in certain organizations, an employer may have a substantial impact on where you live, how you live, how you maintain your social life, your behavior in the social media, and even your politics.

When you’re self-employed, none of those artificial social situations exist. You enjoy a level of freedom – both in your work and in your personal life – that are frequently impossible to have when you’re on someone’s payroll.

7. Playing your own game. This is probably the part about self-employment that I like best. Not only can you choose the kind of work that you want to do, but if your preferences change over time, you can make adjustments and outright changes. Each of us have unique talents, abilities, capacities and desires; self-employment is just a better way to weave those into both your work and your lifestyle.

Breaking the Self-employment Barrier – You Can Do It

There is something of a wall that separates self-employment from salaried work. I think that wall is the reason why more people aren’t self-employed. There’s a well-deserved fear that either the business venture will fail, or that you will find yourself unable to generate an income consistently (and therefore fail). Eight years into self-employment and I still wrestle with those fears. I think that most self-employed people do, the honest ones anyway. I’ve heard it from many of them.

Those are certainly possibilities, but if you really want to try your hand at self-employment, there are ways that you can reduce those risks considerably:

  1. Make sure the business centers on your abilities and desires – In short, make sure you’ll be doing work you’re naturally suited for, and preferably work that you actually like. Self-employment is all about taking what you already do, and finding a way to monetize it without a job.
  2. You should be able to build the business from the ground up – Your business should be driven by your ability to generate new business, which also means you’ll be able to keep it going in the future. Buying a business and hoping to make it work is much higher risk (and higher cost).
  3. Start your business as a side venture – You should start as a side business while you still have your job. That will ensure that you have a cash flow during the development stage of your business.
  4. Set achievable income goals – Self-employment isn’t about storming the gates, it’s more of an evolution into a different way to work. An achievable goal might be reaching $100 in self-employment income in one month. If you do that, you can raise the goal to $200 the next month, and $300 a month after that. Self-employment is mostly about creating an income generating venture, and then building on it gradually.
  5. Prepare your finances for the move – You’ll increase the likelihood that your business will succeed if you prepare your financial life for the transition. Self-employment should never be a flight of fancy, but a series of calculated steps.
  6. Be prepared for failure – Failure is a constant traveling companion of the self-employed. Even if your business succeeds, there will be moments along the way when it will appear as though you’re about to crash. You have to be mentally prepared for that possibility and…
  7. Don’t quit – A bout of rough sledding doesn’t necessarily mean that your business or your business idea is a failure. It just means that you have to try again, and make a few adjustments until you find the ways that work. That’s the best way to avoid a complete failure of the venture.

If you can follow these steps into creating your own business, I think you’ll find as I have, that self-employment is truly the ultimate career solution. I started a side hustle as a freelance blog writer and it grew to be my main thing in life. It hasn’t always been a smooth ride, but I can’t imagine being in a different career or business. And I never, ever contemplate returning to a traditional job – and informal job maybe, but not a traditional one.

Just remember that problems and obstacles only lead to failure if you allow them to. But choose the right business for you, and build your life around self-employment, and it won’t be long before you’ll be checking out of the monopsony of the office and cubicle universe forever. Then you can say goodbye to job interviews, puny raises and being passed over for promotions.

Imagine how that will feel!

( Photo by shinya )

8 Responses to 7 Reasons Why Self-employment is the Ultimate Career Solution

  1. There was an article in our local newspaper about the number of small businesses that closed. Two reasons given by the owners were taxes and regulation. One person mentioned local sales taxes. The city council was noticing a decline in sales tax receipts so the {democrat} mayor proposed the solution to be…..wait for it….enacting higher sales taxes. You can’t make this stuff up.

    Additionally, and we have discussed this in the past, about 40 years ago, malls built on the edge of town drove the small, locally owned retailers out of business, leaving the downtowns a virtual waste land. All the mall stores are chain stores, each one having the same stores as every other mall in the country. Now, online shopping is driving the malls out of business.

    I’m somewhat hopeful that the new anti-regulatory climate in our current administration will make it easier for small businesses to keep operating. I always try to buy local if I can, but too often there is nothing local that satisfies my needs.

  2. Hi Kathy – I’m not surprised about your mayor, not even a little bit. Democrats seem genetically predisposed to believing the more/higher taxes are the answer to all the problems that plague humanity. They see them as either an eternal wellspring of cash, or as punishment to be rendered against certain interests (which are usually certain/all businesses and individuals). At worst, they see more/higher taxes as benign in regard to negative consequences. If taxes go up, and the downtown area becomes a ghost town, they simply blame white flight or greedy corporations, with both assertions serving other, related political agenda. (OK, coming down off my soapbox…slowly, but I’m still hyperventilating…)

    I don’t know how much mileage we’ll get out of the anti-regulatory climate, but the carnage that’s turning up all over the economy opens a lot of doors for small businesses. For one thing, it will eventually lower costs, like rents. It’s also thinning out the competition. But more important, small businesses can operate on a shoestring, which is something that large businesses can’t do. All kinds of opportunities are opening up all over, especially with the internet (for example, a friend of mine is running a trash collection service on the web as a one man operation). A sole proprietor can do the work of several people (computer software and apps) and whatever can’t be done on an individual level can be done by a vendor online, who can usually do it cheaply for the same reasons.

    It’s really a matter of flying low enough that you’re just under the corporate and regulatory radar. I’m getting more optimistic about small business prospects as larger businesses implode and disappear. Now if we could just do something to fix that health insurance/care mess, we might make some progress.

  3. Excellent article. I’ve been a proponent of small business, self-employment for years. I teach people how to start window washing, lawn care, home and office cleaning businesses; either on a part-time or full-time basis.

    You’ve covered about all the reasons I believe in self-employment!

  4. Hi Rod – I suspect that most self-employed people would agree with large chunks of this article. It’s all borne of experience. I’d like to know more about what you do. Please drop me an email and let’s discuss, I may ask you to write an article, or I may write one based on an interview with you. Thanks!

  5. That self-employment number is just appalling. All employees need to consider what monopsony really means for them in the long term. It won’t be pretty.

    Embrace the technologies that exist today for your own benefit. Create your own entrepreneurial venture that leverages outsourced talent. Add real value in some way. Control your future.

    Really great piece Kevin!

  6. Hi Kevin. As a self-employed person, I wholeheartedly agree with everything you’ve said here. I think you’ve hit all the bullet points accurately. The only thing I can add here is to be very disciplined with your finances. And you did state that already, but I think it’s important to emphasize. Sometimes, when you see a large amount of money in a business checking account, you think you’re rich. But, in reality, most of that money is already spoken for with payroll, taxes, insurance, healthcare, etc., all the things you weren’t responsible for previously, even if only partially. It’s hard for some people to maintain that discipline when they believe that next check is coming in, but suppose that customer doesn’t pay on time, or has a problem with your product and wants it corrected before they pay. You always have to have a buffer. So, yes, I love being self-employed, too, but it’s a learning curve to be sure. Another great article.

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