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Trading Places: Are You Ready for Self-Employment?

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.

It wasn't a situation designed for social peace and productivity. Radical political ideas spread. So did unionism. In any given year from 1900 to 1920 there were anywhere from 1,200 to 4,500 strikes, many of them bloody. A handier form of protest was simply not to show up for work. "Many companies experienced monthly separation rates in excess of 10%," writes historian Sanford M. Jacoby. "Quitting was a form of resistance to the rigors of factory life."

But slowly, over several decades, Employee Nation lurched into existence, shoved along by a combination of enlightened self-interest on the part of employers, union demands, and pathbreaking legislation. Among the key developments:

Stable jobs. In large companies -- Goodyear Tire & Rubber was one of the early adopters -- an organizational innovation known as the Personnel Office began intruding on the foreman's turf. Now it was Personnel that screened job candidates, wrote down job descriptions, fixed pay rates, and meted out discipline. Suddenly, people knew what to expect at work, regardless of who their boss happened to be. Later, unions insisted on the same practices. Now more and more people expected to work for one company for a long time. Job stability was born.

Benefits. The realization was slow in coming, but come it did: companies saw that they could cut down on turnover (and lower the threat of unionization) if they offered what was then known as welfare and would now be called benefits or perks. John H. Patterson, founder of the National Cash Register Co., in 1884, was a pioneer of the new approach. Among many cutting-edge benefits, he constructed "Welfare Hall," which served as both an employee dining room -- short movies were shown at lunchtime -- and a convention hall. And he raised wages and shortened hours. "The more we do for employees," he declared, "the better work they can do."

Income (and other) protection. These days we take it for granted that if you lose a job or retire, you won't immediately be living on savings or charity. But the social safety net is only a few generations old. Unemployment insurance and Social Security, for example, date from the 1930s, the workers' compensation system from 1902. The Wagner Act (1935) legalized labor organizing and established the precursor of today's process for union election and certification. The Occupational Safety and Health Act (1970) created a federal agency responsible for protecting workers.

Of course, you only got those protections if you worked for an organization. The self-employed got no union contracts, no unemployment insurance, no workers' comp. Until 1951 they weren't included in Social Security -- and when they were included, they were expected to pay both the employee's and the employer's share of the payroll tax, a sort of double taxation that persists to this day. Self-employment dropped from 15% of the nonfarm workforce at the end of World War I to less than 10% in 1960, and would continue to decline over the next decade. A 1962 study of self-employment described it as a "shrinking world within a growing economy." By then we were all citizens of Employee Nation.

Today -- after years of hype about the possibility of going out on one's own, after months of a sluggish economy -- it's easy to forget just how amazingly good a deal Employee Nation turned out to be.