The New Look of Today’s Workforce: The Growing Impact of “Nonemployers”

by Dawn Rivers Baker

August 14, 2009 at 8:14 am · Filed under Change Management, Talent Management

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.

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Floyd Norris notes an astounding data point: “For the first time since the Depression, the American economy has added virtually no jobs in the private sector over a 10-year period. The total number of jobs has grown a bit, but that is only because of government hiring.

The accompanying charts show the job performance from July 1999, when the economy was booming and companies were complaining about how hard it was to find workers, through July of this year, when the economy was mired in the deepest and longest recession since World War II. For the decade, there was a net gain of 121,000 private sector jobs, according to the survey of employers conducted each month by the Bureau of Labor Statistics. In an economy with 109 million such jobs, that indicated an annual growth rate for the 10 years of 0.01 percent.”

So tell me how can US economy return to ‘bubble normal’ with all the systemic problems and when
1) Structural unemployment is skyrocketing. “Structural” is a polite way of saying there won’t be any jobs for the long-term unemployed this year, next year, or the year after that. 
2) annual job creation growth rate for past 10 years is essentially zero ?

I am so disappointed when no one ever seems to want to count the self-employed as creating jobs for themselves. And astonished when I see statements attributed to our Census Bureau officials as basically dissing most dissing most of the self-employed by suggesting that they are mere hobbyists or only work part-time, or other such misinformed statements.

My wife and I have been self-employed for 25 years and I’ve always wondered why more people don’t go out on their own. I guess it’s a mindset. Running your own business is certainly a more proactive mindset. I’m always amused at serial employees who are always “looking for a job”. I guess it takes a certain type of person to run their own biz. But you’re obviously seeing a trend. What choice will they have as layoffs continue and many brick-n-mortar businesses give way to web distribution. I am seeing this with my own larger clients. They are being forced onto the web….. and in many ways that levels the playing field for little guys like us. A time of transition, to be sure.

You are so right. Self-employment is the solution to so many problems with corporate America, including quiet age discrimination. For years before this recession hit, real boom years, I would see this happening: A worker would get older, his or her salary would go up, and then an executive in the company would decide to push said worker out in favor of younger, cheaper labor. This was always done with a very clever “group lay-off” strategy to prevent a lawsuit. In one case, the woman brought a suit, but the company settled (no bad publicity). If I saw this practiced, others must have witnessed it, too.

Workers without unions must protect themselves these days by coming up with “surviving corporate America” plans. I am a self-employed professional writer who did have such a plan in place, and I’m floating instead of sinking because I laid the groundwork for the day my corporate job would be over.

Being self-employed is not easy, but it’s incredibly fulfilling (much more so than working for someone who tells you what to do and think — sometimes in direct contradiction to what you know from experience will actually work!). Self-employment also gives you real options – geography, flex-hours, even the choice of who you work for because you have clients not overseers. Sorry to be so harsh, but I still remember the days when companies were proud of their philosophies of taking care of employees like family. These days corporate America is driven by profits to the exclusion of all else (certainly loyalty and, in some cases, decency). If you’re not part of the picture, you’re cast overboard. If workers are smart, they’re building rafts in their off hours – like I did – a safe place to jump your career when you get pushed off deck.

Love that data point, especially when juxtaposed against the 41% increase in nonemployer businesses over approximately the same period! Thanks for the link.

Preaching to the choir, my friend. You and I have both been lamenting the data and the prejudices of the data collectors for a long time now. Eventually, we’ll come to a point where nobody can ignore what’s happening anymore — not even the data wonks — but it seems to be a long time coming!

Truth to tell, I think there are two factors that have kept people from doing the self-employment thing. One is our school systems. Let’s face it, we were all educated to be employees, in ways both subtle and not-so-much. In addition, thanks to the way all our social safety nets are tied to employment, taking the wage-and-salary route is about security and not just because of the regular paycheck.

[...] etc.) are the wrong models for the emerging, networked workplace. This is a workplace with increasing numbers of free-agents and permanent employees who don’t have a job for life, especially as the average lifespan of [...]

The ramifications of these changes to the American working landscape are profound, to say nothing of the changes being wrought in our culture as a result of this Nonemployee Movement. When I launched my business in November of last year, I had voluntarily left a corporate establishment where rounds of layoffs, increased workloads, and general employee dissatisfaction finally inspired me to make “the move.” I agree with Bill in that “it takes a certain type of person to run their own biz,” but with our access to new tools and our growing awareness of job “insecurity,” this “certain type” is popping up in more and more industries, and with greater determination…

Have you compared this trend of “nonemployers” in America with other countries?

[...] week, an article I wrote for AppGap (as a member of the Small Business Trends Expert Network) about nonemployers and the new role they [...]

You know, I might agree about that “certain type” theory if it weren’t for the fact that there was a time in this history of our country when it was the norm to look to self-employment to sustain yourself, before there was such a thing as a ‘labor market’ as we understand that term. I think it only takes a certain type of person to be a small biz owner to the degree that we are all subject to societal norms and the expectations set by our education. If society were friendlier to self-employment and if we weren’t educated to be employees, it might be a different story.

No, I haven’t but that would make an interesting study, wouldn’t it? Can you clue us in on what is going on there in Sweden?

“* 56,9 per cent of the enterprises operate as private firms and 28.6 per cent as limited companies.
* About 10 per cent of the enterprises changed their address during the year 2007.
* 99.7 per cent of the enterprises are private.
* 2 622 Swedish enterprise groups have subsidiary companies abroad.
* 1 372 limited companies (total 270 086 limited companies) are owned by municipalities.

“With a business employment you work via a business employment company, Uppdragshuset. We are a flexible organisation, tailor-made for those who want the freedom of being self-employed without having to start their own company registered for corporation taxation. Uppdragshuset is simply a staffing company in reverse.”

New Post “The New Look of Today’s Workforce: The Growing Impact of “Nonemployers”” http://bit.ly/1RZkFd

The New Look of Today’s Workforce: The Growing Impact of “Nonemployers” – http://adjix.com/iytr (@smallbiztrends) (@DawnRiversBaker)

How the self-employed are playing a bigger role in the economy: http://adjix.com/iytr By @DawnRiversBaker

RT @smallbiztrends How the self-employed are playing a bigger role in the economy: http://adjix.com/iytr By @DawnRiversBaker

RT @smallbiztrends: How the self-employed are playing a bigger role in the economy: http://adjix.com/iytr By @DawnRiversBaker

RT @smallbiztrends: How self-employed are playing a bigger role in economy: http://adjix.com/iytr By @DawnRiversBaker No surprise here!

http://tinyurl.com/opesmz growth in “nonemployers” Recruiters should use in mkting messages-how can co’s find talent if it leaves the pool?

RT @mgbdesigns How the self-employed are playing a bigger role in the economy: http://adjix.com/iytr By @DawnRiversBaker

RT
smallbiztrendsHow the self-employed are playing a bigger role in the economy: http://adjix.com/iytr By @DawnRiversBaker

RT @smallbiztrends How the self-employed are playing a bigger role in the economy: http://adjix.com/iytr By @DawnRiversBaker

The New Look of Today’s Workforce: The Growing Impact of “Nonemployers” http://bit.ly/1RZkFd

RT @smallbiztrends How the self-employed are playing a bigger role in the economy: http://adjix.com/iytr By @DawnRiversBaker

Spot on! RT @smallbiztrends How the self-employed are playing a bigger role in the economy: http://adjix.com/iytr By @DawnRiversBaker

How the self-employed are playing a bigger role in the economy: A Trend toward the Micro. http://adjix.com/iytr via @smallbiztrends

The New Look of Today’s Workforce: The Growing Impact of “Nonemployers” http://cli.gs/vT7TMm via @DawnRiversBaker

RT @smallbiztrends How the self-employed r playing a bigger role in the economy http://adjix.com/iytr (By @DawnRiversBaker)

Self-employed impact–RT @BusinessDotGov New Look of Todays Workforce:Growing Impact of Nonemployers http://cli.gs/vT7TMm @DawnRiversBaker

Thanks, all, for the RTs of my article ‘The New Look of Today’s Workforce: The Growing Impact of “Nonemployers” http://adjix.com/iytr

Read “The New Look of Today’s Workforce: The Growing Impact of “Nonemployers” http://bit.ly/6C4Iq by @DawnRiversBaker @TheAppGap

Gr8 blog about “nonemployer” small businesses: http://bit.ly/2iS0C Much overlooked but very impt part of the economy #thefutureofwork

This is huge. RT @thefutureofwork: Great blog abt “nonemployer” small business: http://bit.ly/2iS0C overlooked but critical part of economy

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