Here’s how it can work for the economy, and for you
When the going gets tough, the tough … start their own businesses. Entrepreneurship has long been one of the cornerstones of the American dream, and a lot of people have taken the challenges and opportunities presented by the pandemic to go to work for themselves. They may have more or less been forced into self-employment when their employers laid them off in the spring of 2020. They may be among the millions who have quit their jobs in search of greener pastures during “The Great Resignation.” Starting your own business offers the opportunity to set your own schedule, run things your way, and determine your own success. Of course, entrepreneurs also bear all the risk. If your venture doesn’t succeed, you’re back looking for work and possibly out of a substantial investment.
Be Your Own Boss
Still, many find self-employment worth the risk. At the end of June, there were 16.8 million Americans registered as self-employed. At 10.2% of the workforce, it’s the highest level of entrepreneurship in the U.S. since before the Great Recession. In two years, 1.4 million workers joined the ranks of the self-employed, accounting for more than a third of the labor force expansion in that time.
Construction, real estate, and transportation have some of the highest rates of self-employment. Construction already had the highest percentage of self-employed people of any industry, and that trend has continued since the onset of the pandemic.
Considering the high demand for housing, construction makes sense as a choice, but supply chain woes in the last two years have wreaked havoc on the price of lumber and caused monthslong delays in some areas of the industry.
Selling real estate offers brokers the flexibility to take on more or fewer clients. They can choose to work evenings and weekends while holding down another job as they build their business. Given the record high prices as inventory and interest rates were low, there have been some high commissions for those fortunate and good enough to come through for their clients.
As for transportation, a shortage of truck drivers and a huge demand for goods created logjams at ports and ample opportunities for logistics entrepreneurship. The auto industry is also in the midst of a massive transition to electric vehicles, creating all manner of opportunities in the field.
Women bore the biggest share of the childcare load the pandemic spurred, with 2.65 million women permanently leaving the workforce between March and September 2020. Many are testing the waters of self-employment, allowing themselves the flexibility to work around caring for their children.
With so many working for themselves, the dynamics of business, and starting your own business, have changed. As businesses closed or decreased their hours during the pandemic, it left fewer chances for employees to work their way up the ladder. There simply weren’t that many promotions to attain. Entrepreneurs decided to give themselves a promotion by making themselves the boss.
But getting started has been different, with banks and venture capitalists taking fewer risks during the pandemic. That’s left startups turning more toward crowdfunding and small-business loans for capital.
The technological acceleration of the pandemic, though, has created demand for products and services many businesses didn’t use before. Digitalization is a necessity now in just about every industry, and those whose operations weren’t digitized have had to get up to speed very quickly. They’ve needed everything from software to installation to cybersecurity partners to do so. That’s a big reason the professional, scientific, and technical services industry has 13.5% self-employment in its ranks, second only to construction.
With the prospect of a recession looming, should all those entrepreneurs think about picking up a day job? It seems not.
“A higher share of self-employed workers in a county was unambiguously associated with greater resilience,” Penn State economics professor Stephan Goetz wrote after studying how regions recover after recessions.
“(P)olicies such as providing general entrepreneurship training programs or ensuring that local economic conditions favor entrepreneurs or the self-employed could be effective in raising the resilience of regions at a cost much lower than the damages caused by a larger financial shock or crisis,” he concluded.
So more self-employment is actual better for rebounding from a recession than less.
Making Self-Employment Work
If you’ve made the leap or are considering it, you’re probably wondering how to make self-employment work for you. Well, it’s going to take patience and capital. As you build from the ground up, it could take three to five years to be in the position to pay yourself a nice salary. You may have to put much of the earnings back into the business for inventory, marketing, or whatever you need to gain more market share.
While you might not have to show up at a 9-5, you still have to put in work. In most cases, a lot more work than you did when you were someone else’s employee. Those flexible hours might mean you’re working a few hours after the kids go to bed in addition to what you can get done during the day. If you’re just self-employed as a means to make a little cash on the side, that’s one thing. But if you’re trying to build a lasting business, you’ll need to work harder than you ever have before.
Not only will you have to build a clientele, you’ll need to sort out taxes, insurance, a retirement plan and do all that for employees as you grow. Dare to do it, though, and you might make that dream come true. Since you took all the risks, you can reap all the rewards of success. After all, you’re the boss.