Self employment is the new poverty

When I was in elementary school you could ask any one of a small cohort of boys what they wanted to do in life and it was always the same: be a professional basketball player. Common of elementary age boys, sure, but that line of thinking continued on through high school. Today most of them sell insurance and see a basketball court only when they drive by one.

Obviously at some point realities set in. There were more of them than possible jobs in the NBA. I was reminded of this when WFYI (NPR) reported that 80-90% of the businesses in Hendricks County, Indianapolis’ suburban westside neighbor, are small businesses. It went on to say that the majority of them are also “home based businesses”. That is to say, the majority of businesses are “self employed people”. I imagine the numbers are similar for people in Johnson County and a sizable chunk of Hamilton County.

That’s interesting, but could be a warning sign.

We know that in many impoverished economies people start small businesses like food stands or selling knick knacks out of necessity. It’s the only way they can either survive or have any chance of moving up. For Americans who do have some possible chance of getting a job, just “getting a job” will never make you CEO of McDonald’s by flipping burgers there today. But, theoretically, if you can sell more of your wares, you can at least make more money.

For a lot of young people, the idea of starting a business is the new “being an NBA star”. But we know the numbers behind unemployment rates for young people. The 20-somethings of today are largely entrepreneurial out of necessity. But like being in the NBA, there are only so many spots to work in.

It’s almost as if being self employed is the equivalent of opening a small food stand in Kenya. It’s often out of necessity, the only hope for growth, and it makes our self employment look like a new poverty, or maybe the ticket out of it.

But at the rate businesses fail of 80+%, that hardly seems plausible. But how many self employed people in an economy do you need to support the economy? It’s like we’re swinging back into a time when we traded cattle, horses, feed, chickens, and textiles with our neighbors, who were the blacksmiths and craftsmen. That’s not necessarily a bad thing — what could be more American — but it doesn’t support the middle class annual earnings most people came to enjoy in the 60s, 70s, 80s, or 90s.

Maybe our definition of “business” needs to change. Maybe our definition of “middle class” needs to change. Maybe few of us are destined or able to ever build the kinds of big businesses so many of us dream of? How does someone even start a bank or a telecom company today, for instance? One assumes with massive loans, but it’s awfully hard to be that indebted when so many people already have personal loans up the wazoo.

If everyone’s doing things they love, maybe it’ll make us happier and healthier despite lower wages. But it could also be a sign of serious decline in our ability to earn money at a rate we once found relatively easy.

About the author

Justin Harter

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