How Self-Employment Creates a Stronger Economy

The election season has created a blizzard of political ads, overwhelming us with cheery messages on how Candidate A will lead us to the promised land, while the evil Candidate B (always shown in black and white) will take us straight into Hell. No one ever says exactly what they will do, but instead play on our emotions to sway us in their direction. But there was one ad for a local politician in New Hampshire who cited her record on promoting self-employment that stood out among the drizzle. That caught my attention because I’ve long believed that self-employment creates a stronger economy.

Yes, politicians talk incessantly about creating or preserving jobs, but without businesses to hire people, the promises are really just blowing smoke.

The Self-Employment/Economic Connection in New Hampshire and Other States

How Self-Employment Creates a Stronger Economy
How Self-Employment Creates a Stronger Economy
This past summer the CNBC Global CFO Council ranked New Hampshire #1 in business friendliness. In 2015, Entrepreneur ranked the state #2 among the 10 Best States to Start a Small Business. New Hampshire is also among the 21 US states that have a higher rate of self-employment than the national average.

According to the Bureau of Labor Statistics, New Hampshire’s unemployment rate at the end of August was the second lowest in the country at just 3.0%. This compares to a national unemployment rate of 4.9%.

Coincidence? I don’t think so.

In case you think that New Hampshire is exceptional, 13 of the 21 states that have higher self-employment levels than the national average also have overall unemployment rates that are lower than the national average. Those states include Montana (highest rate of self-employment in the country, but unemployment of just 4.3%), Idaho, Colorado, Kansas, Nebraska, South Dakota, North Dakota, Minnesota, Iowa, Florida, Maine, Vermont, and of course New Hampshire.

By contrast, of the eight states with the lowest rates of self-employment, five – Nevada, Pennsylvania, Kentucky, Alabama and the District of Columbia – have overall unemployment rates that are at or above the national level. Only three – Virginia, Delaware and Tennessee are below the national unemployment rate, but among the states with the lowest levels of self-employment. And given the high level of employment by the federal government, we can probably discount Virginia as an anomaly.

I think we can conclude that while there’s no certain mathematical connection between high levels of self-employment and low levels of unemployment, there is an obvious general correlation.

Why Self-Employment Leads to a Stronger Economy

There are several reasons why self-employment leads to a stronger economy, and some are not so obvious:

  • The business owner is now “employed” in his own business, which removes him or her from the job market. That means there is one less person competing for jobs. Multiply this by millions of small businesses, and the unemployment rate plummets.
  • As the small business grows, it will inevitably need to hire people as either employees or contractors. That creates obvious opportunities for both job seekers and freelancers.
  • The small business becomes a consumer. It purchases products and services from other businesses, increasing demand. This is often referred to as business-to-business sales, and it is a major contributor to the overall economy.
  • Small businesses can increase the number of businesses overall in a given geographic location. The more business entities the community has, the more stable the economy and job market will be.

What’s tragic is that support for small business growth is particularly weak in a country in which more than 90% of the working population are employed by others. That means that the majority of people – and the politicians they elect – have little interest in creating a pro-business environment.

In fact, most people believe that pro-business policies favor large corporations, the same organizations who are stripmining the economy and eliminating jobs. But closer to the truth is that pro-business policies are the lifeblood of small businesses. This is especially true in regard to tax policy and to regulatory environments at the local level.

As individual communities, and as a nation, we need to get serious about expanding and supporting small businesses. Even if you are not self-employed, and have no intention of ever becoming self-employed, it will be in your best interest to support pro-business legislation at every opportunity.

A larger number of prosperous small businesses is in everyone’s best interest. It will create a stronger and more stable economy, as well as more jobs for everyone.

What Self-Employment Has Done in My Own Life

Of course, I have a dog in this fight, and that’s why I’m such a strong advocate of self-employment. When I was 50 years old my career in the mortgage business came to an end, and there were no living wage jobs available. Self-employment was my only option. It virtually solved my my mid-life career crisis.

There were a lot of people in the same boat during the Great Recession – over 50, and facing disenfranchisement from career fields that were in serious downshifting modes. Many of them never recovered. I suspect that’s because they continued looking for career type positions that no longer exist.

I chose to start a blog, which was certainly a crapshoot at the time. But that eventually led to all kinds of good things, including and especially my career as a freelance blog writer. I’ve never worked in any career or job where I felt so secure and content. It taught me the value of doing work that you actually like to do.

No, it wasn’t a straight road in. In fact, it was a struggle. In the beginning there was very little income. I had to support that fledgling income with contract work in various capacities, wherever it was available. But you learn something when you’re struggling, and that’s how to survive no matter what’s happening. And that by itself is a critical skill for anyone who wants to become self-employed.

It was a struggle, and at times it looked like it wasn’t going to work. But in the end, it’s been more than worth it. I have more control over my time, my income, and my sanity than I’ve ever had in the past. A large part of that owes to the fact that it’s much easier to build a lifestyle around self-employment than it is to build around the job – especially in this economy and job market.

Can Becoming Self-Employment Help You?

Even if you know that becoming self-employed is the right direction for you, knowing it and doing it are very different undertakings. Before you take the plunge, you have to be mentally, emotionally, and financially prepared.

Here is a sampling of articles that I’ve written on this topic over the past several years. I hope they can help you become self employed, if that’s what you choose to do:

A major revelation for me has been the realization that becoming self-employed requires an entirely different way of seeing life. You have to embrace the adventure at the deepest levels of your being. That means being thoroughly committed to the goal. Until you develop that kind of determination, you’re unlikely to see success.

If you want to become self-employed, my best advice is to do it by starting a side business. You can do it while you’re still employed, so the risk of starting a new venture won’t be there. You can take as much time as you need to build the business cash flow until it reaches a point where you have enough income to make it your full time occupation.

Along the way, you’ll acquire valuable business skills, business experience, contacts and networks, and opportunities of all kinds. A side business is a natural start for a business, since most all of them start small and need time to mature and develop. By doing it as a side venture, you’ll be giving yourself that time, without taking on a lot of unnecessary risk.

And even if you never intend to become self-employed, please support those who are in every way you can. It’s in all of our best interests to have more entrepreneurs to drive this under-achieving economy.

Have you thought seriously about becoming self-employed? If so, what stops you from trying it?

( Photo by The Sales Whisperer )

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