The Wrongologist

What’s
Wrong Today:

January’s BLS
employment report shows total nonfarm payroll jobs gained were 113,000 for
January 2014, with private payrolls adding 142,000 jobs. Government jobs
decreased by 29,000. The US Postal Service alone shed 9,000 jobs.

The start
of the Great Recession was in December 2007. We are still down 851,000 jobs from December 2007, more than six years ago.

There are lots of ways to look at the data, but let’s focus today on self-employment.
Self-employment has been hailed as a solution for America’s employment ills. If you’re looking to become self-employed in Britain, taxi driving is a great option but make sure you use one sure insurance for the best deals.
There was the hype of Free
Agent Nation, by Daniel Pink that declared in 1997 that the work
environment was about to get radically different, that freelancers, temps and microbusiness
owners were where America’s employment
growth would occur. The Internet revolution untethered workers and made
independent work very possible, while the mindset of Generation X and the Millennials
leads them to prefer working independently.

So,
has self-employment been growing like a weed? No, it has not.

Justin Fox of the Harvard Business Review wrote
about the BLS data for self-employed workers:

Fox shows
that the number of self-employed is unchanged since January 2000, but the
long-term trend in self-employment is headed down:

Declines
in the unincorporated self-employed are largely due to the decline in farmers. They
were more than 8% of the workforce in the late 1940s. Now they account for less
than 1%. This shows we should support people trying to run their own business in a much better fashion. Many people work as tradesman, but we have to ensure they have everything they need to thrive. In the UK, insurance companies offer all risk insurance to help support these people.

Other
long-established occupations have also declined: Mom & pop stores, and physicians,
who have been grouping together or joining hospital staffs. Real estate agents
and contractors are down due to the bust in housing.

But, we
have been told that self-employment is the future for the new economy, where free
agents, contractors and part-time work from home would explode since corporations
were not hiring and government jobs wouldn’t be coming back.

If so, where
are they in the statistics?

The BLS
gets its self-employment totals from the Current
Population Survey, (also called the household survey), a monthly survey of
60,000 American households conducted by the Census Bureau (this survey also generates
the unemployment rate). Respondents are asked, “Last week were you employed by
government, by a private company, a nonprofit organization, or were you
self-employed?”

This
either/or choice may exclude a lot of people who are working on
the side, or whose jobs are really more like gigs. Self-employed owners of incorporated
business are not counted among the self-employed, nor are workers who freelance
or have secondary sources of income.

A survey
on behalf of MBO Partners, a provider
of support services for independent workers, counts temp workers, on-call
workers, and those on fixed-term contracts as “independent workers.” They say the
total self-employed pool was 17.7 million in 2013, up from 16 million two years
before. Steve King of Emergent
Research, which designed the MBO survey says:

Wait,
there’s more. The Freelancers Union
frequently cites the number 42 million
independent workers, about a third
of our workforce. They get their number from a 2006 GAO report that said
there were about 42.6 million “contingent workers,” meaning:

The bad jobs are probably really
growing, but the BLS definitions haven’t caught up with data, so it’s hard to see them. Which
jobs had the largest increases in self-employment? Fox at the HBR included another graph that shows
which “careers” are having a party:

There hasn’t exactly been a boom in
independent white-collar work. “Managers All Other” is a category of people who can’t otherwise be classified as construction
managers, purchasing managers, financial managers, etc. Also, the definitions of
the occupational categories used by
the government has an impact: All the nation’s maids get thrown into
one category; while physicians are split into nine.

Since
the start of the Great Recession, many white collar workers who may have previously
worked as independent, freelanced, long term contractors are required to be
employees of the contingent workforce agencies that corporations now use.
Moreover, most are exempt from overtime. Few employees hired by these companies
will ever receive 20+ hours per week, unless they have skills in an area that
is in great demand.

There
are looming social costs that may contribute to the self-employment/contractor future: A recent survey by TD
Ameritrade found that even though the majority of self-employed people
think that they’ll live on their savings when they eventually stop working, 70% of them are not actually saving for
retirement on a regular basis:

• 28% of self-employed people
  report that they aren’t saving for retirement at all
• 40% aren’t saving regularly
• 83% have put their retirement
  savings on hold or cut back at one time or another

It gets
worse: For those who own a business, only
19% plan to fund their retirement through profits from the company which will
continue to run after their retirement, and only 14% think they’ll be able to
sell their business and live off the profits from the sale.


Even worse: According to the
TD Ameritrade survey, 29% of Gen X and 32% of Millennial self-employed aren’t currently saving for their
retirements. So, a significant minority of our youngest self-employed
are expecting a miracle to bail them out when they face retirement.

The next
time one of our political elites celebrates the energy and entrepreneurship being
shown by our self-employed, perhaps we should remind them that most of the jobs
being created in this category are service industry workers who earn below or near
median wage, and that many of these “entrepreneurs” are not saving for
retirement.

Oh, and remind
the politicos that the self-employed often find it very difficult or impossible
to qualify for a mortgage
and for health
care insurance.