The New Look of Today’s Workforce: The Growing Impact of “Nonemployers”
by Dawn Rivers Baker
The following is a guest post by Dawn Rivers Baker, a member of the Small Business Trends Expert Network.
At this point, you probably don’t need me to run through the litany of woes that hit the U.S. economy during the second half of 2008 and prompted fears of the End of Capitalism As We Know It.
Nothing quite so dire has transpired since then, of course, but I think it’s safe to say that we’re living through economically game-changing times. The challenge for all of us will be to evaluate what those changes are and respond appropriately — as consumers, as business owners, as policy makers, and as students of the economy.
Since I look at everything through a microbusiness lense, I’ve been understandably curious about how recent events might have changed the game for them. My conclusion: they have but they haven’t.
I think that the biggest changes for the largest segment of microbusinesses are still to come. I’m talking about nonemployers.
Nonemployers are outfits with no paid workers outside the business owner(s). There seem to be as many names for these firms as there are people to write about them: freelancers, independent contractors, the self-employed, sole proprietors, soloists, personal businesses, side businesses, SOHO businesses, and more. I prefer to use the term ‘nonemployer,’ for the simple reason that it is the most accurate.
From March 2006 through March 2007, the number of nonemployers rose from 20.8 million to 22.4 million, a 4.5% increase. In the context of U.S. business population growth, that’s a pretty large increase (the annual average for all U.S. firms is 2-3%) and it continues a trend that we’ve been watching since the turn of the century.
Almost all the growth in U.S. firms during that eight-year period has been growth in nonemployers. Their numbers are simply exploding, up 41% since the Census Bureau started its annual nonemployer nose counts back in 1997. As of 2006, they were 77.5% of all U.S. firms.
Now, what is interesting about those numbers is what they imply.. Back in January, I predicted in this article that, after a lackluster 1.6% increase in number during the 2005-2006 period, “we will see a return of the 4-6% growth in nonemployer numbers that we saw during the last recession” this year.
But that’s not what has happened. Instead, nonemployers had returned to those strong growth numbers by early 2007, before this recession had even started. Under the circumstances, it may very well be that we’ll be seeing annual increases of 5-10% in the 2008 and 2009 nonemployer numbers.
Policy makers and economists are inclined to ignore nonemployers at this point because the economic mantra is ‘jobs, jobs, jobs!’ The National Bureau of Economic Research based its declaration of the start of the recession in December 2007 on the onset of job losses and the assumption (probably erroneous) is that we won’t be out of this recession until we start growing jobs again.
And, of course, nonemployers are not going to help with that effort, by definition.
But nonemployer businesses are not just businesses. They are also newly-created jobs — self-created jobs. They represent the efforts of American citizens to solve their own economic problems without waiting for our would-be caretakers in either the public or privates sector to do it for them.
As of this moment, new nonemployers are almost the only still- functioning engine of job creation our economy has left. Our nation’s leaders seem to be having trouble wrapping their minds around the concept of self-created jobs and there are ways in which our government quietly discourages self-employment (as opposed to the creation of new employer firms).
So, what happens if businesses are faced with a need to expand capacity and turn to independent contractors and microbusinesses instead of creating full-time jobs? Because of the way the Labor Department collects and publishes employment data, it will look like the economy is still losing jobs when it’s not, really.
As of 2007, nonemployers comprised almost 15% of the civilian workforce and that percentage has probably increased significantly in 2008 and 2009 as more employees got laid off and more individuals started nonemployer businesses. What happens if the nonemployer business begins to jostle the regular, full-time worker in the labor market? What happens in the nonemployer model actually begins to replace the traditional employment transaction?
It’s worth thinking about because, for all we know, that may be happening right now.
About the Author: Dawn Rivers Baker, an award-winning small business journalist, regularly reports and analyzes small business policy and research as the Publisher of the MicroEnterprise Journal, where the nation’s business meets microbusiness. She also publishes the Journal Blog.
Thought...
