Trading Places: Are You Ready for Self-Employment?
Thinking of chucking the security of a job to become a soloist? Make sure you understand the forces that keep most people trapped in cubicles and dreaming of independence.
Remember free agent nation?
It was a pleasant conceit of the late 1990s, made up of equal parts fantasy, a tight labor market, and pure media hype. Free Agent nationalists argued that Americans by the millions would soon be out on their own as independent businesspeople rather than as employees. They'd pick and choose what they did, when they did it, and whom they did it for. Sayonara, time clocks and cubicles. Hello, entrepreneurial independence.
The prospective citizenry of this nation included a whole raft of new-economy professionals. Web designers, computer geeks, marketing mavens. Financial consultants, project managers, engineers. And, of course, writers and editors, which probably explained why the media loved the concept so much. "Free Agent Nation is the shape of things to come in the Internet century," gushed AOL Time Warner chairman Stephen M. Case on the jacket of the book (by Daniel H. Pink) that christened the concept.
And it all made so much sense. The necessary technology -- laptops, fast Internet connections, and cell phones -- was suddenly widely available at reasonable cost. The labor market was so tight that professionals could quit their jobs, hang out a shingle, and sign up former employers (at top dollar) as their first clients. The traditional alternative to self-employment -- a stable job with a big corporation -- seemed less and less attractive amid all the mergers and downsizing. Who wanted to labor for a soul-deadening company that couldn't even offer job security? Before long, nearly everyone knew two or three colleagues who had forsaken the cubicle for the home office. It all seemed like just one more step in the entrepreneurial revolution, the new American economy.
Alas, Free Agent Nation was only an illusion, and not just because the recent slowdown put the kibosh on a lot of entrepreneurial plans. Its partisans somehow managed to ignore (or bleep right over) some awkward statistics -- numbers that make the whole concept seem as evanescent as Enron's earnings. Worse, those same partisans seemed only dimly aware of why anybody would work for a company at all, when the reality is that only the brave, the foolish, or the unusually fortunate are ever likely to leave the cozy confines of an organization to strike out on their own.
Every month the U.S. government gathers data about the number of self-employed business owners. The number is based on what's known as the Current Population Survey; government researchers call up or visit a random sample of the population and ask them if they or others in their households are self-employed. Granted, that isn't an unambiguous question. Say you're a contract programmer on a six-month gig with Microsoft. Or suppose you're holding down a part-time job while trying to get a new recruiting business off the ground. The survey forms don't allow for "Well, sort of" or "Let me explain." So it would be a mistake to take that number as any kind of gospel.
Even so, wouldn't you think that the self-employment rate as measured by this metric would have risen steadily over the past decade or two? In fact, it did rise a little in the 1980s -- but it fell again in the 1990s. And anyway, the changes weren't very great in either direction. To go by that statistic, 9% or 10% of people in the nonagricultural labor force are self-employed, year in and year out. Where is Free Agent Nation in those numbers? Ask Robert W. Fairlie, an associate professor of economics at the University of California, Santa Cruz, who follows the statistics so closely that he adjusts them to include business owners who are not counted by the government and puts the corrected version up on his Web page. "I guess it's just a misconception," he says of the sense that there were swarms of independents out there in recent years.
Then there's the opposite side of the coin: employees on payrolls.
In 1980 about 85% of the labor force was receiving a paycheck from a company or government agency. (The rest were either agricultural workers, self-employed, or unemployed.) By the end of 2000 the figure stood at nearly 94%. Even in 2001, as the economy slumped, it was 92%. This number also has its complexities -- people with two jobs, for example, get counted twice -- but it too is moving in the wrong direction for the proponents of free agency. The conclusion is hard to avoid: part-time or full-time, temporary or long-term, in boom time or recession, nearly all working Americans are on some organization's payroll.
So why haven't more of us been going into business for ourselves during the past several years? Overall, we Americans yearn mightily for independence. According to a survey by Dartmouth College economist David G. Blanchflower and his colleagues, 71% of Americans would prefer working for themselves to working for an employer. Even allowing for a big fantasy factor, 71% is a very large amount indeed.
But there are a series of obstacles -- call them the last barriers to entry -- that keep most of us toiling in the organizational vineyards. Take them one at a time (the cost of health insurance; the need to fix your own computer when it crashes) and they seem more like nuisances than true barriers. Take them as a group, however, and they're enough to make you -- almost -- give up the idea that anything remotely resembling Free Agent Nation will ever materialize.
The fact is, working for an organization has been and remains one of the best deals around in pretty much every other way you can think of. Want to go out on your own? No problem, so long as you're lucky enough to have a ton of cash in the bank or a supportive spouse with a secure, high-paying job. Otherwise you'd better be sure that what's driving you is courage rather than foolhardiness. In leaving the corporate payroll you're up against a century of history in which nearly everything in our society conspired to push people into, not out of, organizations.
Early in the last century, in fact, America was about to embark on a different but even more momentous social development: the creation of what you might call Employee Nation.
Back then, big companies like Carnegie Steel (soon to become part of U.S. Steel) and McCormick Harvesting Machine (soon to become part of International Harvester) were already operating mills and plants with thousands of workers under one roof and tens of thousands under one corporate umbrella. But the modern role of "employee" -- a person who is entitled to a variety of rights and social benefits in the workplace and in society -- had yet to be invented. Workers were hired, fired, deployed, and paid at the discretion of a foreman. Wage levels rose and fell with market conditions. Heaven help anyone who got sick, had an accident, or lost a job: there was no health or disability insurance, no workers' comp, no unemployment benefits.
