Wednesday, October 01, 2003

Self-Employed Work-at-Home Contractors?

There are way too many head scratchers of the breed dismalus scientificus who are experiencing a false Eureka moment . . . they’re excited 'cause they think they found the dark matter, the missing link, the identity of Deep Throat.

They think they found the “missing employed.”

Even worse, the meme has been spreading. All manners of tortured data have been trotted out; The two different survey methods (business and home) have been challenged. Hey, we know they both suck (most surveys do), and the data is not exactly reliable, but at least there’s a baseline to compare it with historically . . .

So now the latest brain droppings burst forth from both the Cato Institute and the AEI:

Its the self-employed, work-at-home contractors! Thats the missing employed, and they don’t show up in any of our data! Eureka, all is well again!

Ummm, in a word . . . No.

About those so called "self-employed work-at-home contractors contractors:"


Do you understand that? Nobody wants to say they are "not-working" at a cocktail party or a job interview or a networking event or on a date. Its awkward and leads to uncomfortable pauses. And, its a real interview killer (Ummm, yeah. . .o.k., we’ll get back to you).

Its the oldest dodge in the book. You adapt that phrase that allows you to power your way past the ackward pause that follows the “What are you doing at present?” question. There's different phraseology, depending upon your field: Attorneys claim they hung out their own shingle (“I have quite a few clients, but I’d like to get back to more challenging work than just closings and negligence litigation). On Wall Street, its called “Trading for your own account” (“Yeah, and I’ve been doing real well -- I can show you my P&L -- but I miss the cameraderie of working in a firm”)

Sure, plenty of people legitimately work at home. But anytime I ever knew anyway who was "looking for work," they invariably described themselves as "self-employed/independent contractors./freelancers ."

Apparently, the few remaining clueless who don't know what this euphemism really means are either jest plum ign'ant, or partisans trying to rationalize away the lack of job creation thus far in the recovery cycle.

(Sorry to blow you’re cover, everyone -- but I just had to . . . Hey, at least I didn’t out a CIA undercover operative).

Election Economics
Alan Reynolds, Cato Institute

A Jobless Recovery?
Allan H. Meltzer, American Enterprise Institute.

Posted at 06:49 AM in Finance, Media | Permalink


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Tracked on Oct 12, 2003 8:46:54 AM


Mind you, I'm not saying that "Self-Employed Work-at-Home Contractors" don't exist --

But I am saying that the Work-at-Home Contractors are not the 3 million missing jobs, as some economists have suggested (at least until the effect of whatever they were smoking wore off).

In some areas --Silicon Valley especially -- freelance coders in between full time gigs are real element of the work force. However, freelancers tend not to make large financial committments (new homes, cars, etc.) until they have a steady income stream. That's why understanding the number of employed people are so crucial to econometric forecasting an analysis . . . and why the continued loss of jobs potentially can derail the nascent economic recovery

Posted by: Barry Ritholtz | Oct 12, 2003 8:57:52 AM

If you've read anything about the death of the "job", Job Shift: How to Prosper in a World without Jobs by William Bridges or all the long stream of these articles over the last decade or more, I can't see how you would dismiss the self-employed.

For at least the last 30 years, people have been calling themselves consultants when out of work. The difference now is that (1) companies don't last long, (2) there is a definite decade or longer trend towards reduced permanent, full-time jobs and (2) the jobs that *are* out there don't last as long, so even when you find a *good job*, it doesn't usually last long.

As a self-employed software consultant and developer the last 17 years, I'm exploring this self-employment concept from many angles. I know we are talking economics here - large numbers and percentages (Free Agent Nation has some stats). And, maybe this is one of those emergent phenomena that isn't easily measured with accuracy.

In the end, I agree with you. #1 we have a large unemployment problem that is more structural that previous times. #2 perhaps the large majority of the self-employed are still underemployed compared to the full-time jobs they used to have.

And, of course, the administration and its affiliates want to gloss over the true seriousness of this unemployment situation that looks like its on its way to getting worse. Being in the software business, I'm especially attuned to the massive outsourcing efforts to India and China whose impact we are only beginning to experience.

Posted by: Janet Tokerud | Oct 13, 2003 7:43:50 PM

I agree with Janet's characterization above. Yes, there are "contractors" who don't do so much actual, uh, work, but there are also a lot of actual self-employed people who work out of their home doing substantial jobs. It is the wave of the future, if for no other reason than it is a mechanism for companies to shift costs off site and reduce long term employment commitments. There are also a number of us who are tired of the 8-5 game, it doesn't fit our lifestyle. Being your own boss is the ultimate in flexibility.

Posted by: Larry Morris | Jan 14, 2004 8:38:22 AM

Anyone with a pickup can make a few bucks. But I wouldn't necessarily call it much of a living.

Posted by: Jeff Lawson | May 14, 2004 4:59:51 AM

While I agree with the premise of your article, there is another issue buried in the self-employed phenomenon that makes it hard to measure.

It takes at least two years for self-employment to begin to reach critical mass, to have enough clients and work to pay the bills and feel reasonably comfortable as you would with a full time job. Still, clients do go end of life and the sales process to find new clients always must go on.

Saying that x number of people are self-employed does not begin to describe the phenomenon. How many of those are stable in terms of years spent working for themselves and with enough clients? Do the stable self-employed have enough prospects in their sales pipeline? How much do they spend on marketing? How do you measure all of that, and more, enough to feel confident that self-employment is a valid phenomenon or one step shy of unemployment?

My hunch is that the difference between real self-employment and being a step away from full unemployment is simply the difference between viewing yourself as a business and viewing yourself as being between jobs. Someone between jobs probably will not do the constant hard work required to sustain their work and client base over time.

Posted by: Tim | May 27, 2004 2:45:11 PM

My issue with the self employed contractor is their impact on the macro economy: Without a regular, reliable, predictable paycheck, contractors tend to finance less purchases of homes, car etc. They pay cash whent hey put together a little pile of money.

What's my problem with this? There are partisan hack economists who want to count the so called Self-Employed Work-at-Home Contractors as ordinary jobs -- they aren't, and their impact on the economy -- 2/3s of which is driven by consumer spending -- is small.

Its a definitional thing.

Posted by: Barry Ritholtz | May 28, 2004 7:06:44 AM

The "self-employed" show up on the normal statistics, because almost everyone who is long term self-employed forms a corporation and starts paying themselves.

Posted by: Stirling Newberry | Aug 20, 2004 3:36:54 PM

I have close friends who are on the high-skill, high-pay end of IT and have worked for stretches as long as years for a single Wall Street employer: effectively as employees who handle their own health insurance and 401K. People in their category often resist offers of full-time employment from their contractee because they would take a pay cut and because they are unimpressed by the prospect of job security. None of this seems correlated to the economic cycle. I think you're arguing that the statistics correctly identify them as unemployed, but in their 20 year careers I've only known them to be without paycheck during extended world travels between gigs. Do you accept that the statistics should count them as employed, and how many like them do you think there are?

Posted by: John F. | Jul 8, 2006 5:29:58 PM

You people need to get out more often even if that means falling off your ivory tower.

It's documented that over 30% of Americans are private contractors, and if they were all "covering their butts" with a story to hide unemployment.. then how did America get built?

Certainly not from Licenced contractors.

And by the way, Dentists, Doctors, Accountants, Escrow agents,.. (the list goes on) are all considered private "at-home" contractors. They file Schedule C just like a Sign painters, (my profession), Carpenters, Home Day Care Centers and countless others as well.

It's a real tick to hear un-educated people making statements that not only are not true , but possess an air of superiority and prejudice in them.

I want to wake up to a world where people stop humiliating others for their religious beliefs, and/or carreers, and begin to trat this bigotry with as much attention as they do the color of ones skin.


Posted by: Andy | May 22, 2007 7:34:13 PM

Aside from the fact that you are 4 years late to this debate -- this post is from October 2003 -- where on Earth did you get the 30% number from?

If you state something is documented, then by all means, PROVIDE THE DOCUMENTATION. Do you have a URL, a report title, a study name? Merely claiming something as documented but failing to produce any specific sources is pretty shabby.

As to Doctors/Dentists/Accountants etc. -- most work out of offices. Those professionals who build a separate facility attached to their home is clearly not what this post was referencing....

Posted by: Barry Ritholtz | May 23, 2007 5:52:34 AM

I'm a self-employed, work-at-home
and I would not change that.

Posted by: Terry | Dec 2, 2007 3:06:27 PM

with the way the econnomy is were all going to be self employed

Posted by: dave | Jan 7, 2008 11:47:59 AM

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