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3 May, 2013 20:35

Death of small business: Number of self-employed Americans at all-time low

Death of small business: Number of self-employed Americans at all-time low

The unemployment rate in the United States is at a four-year low, but another labor stat is shrinking in not such a favorable way: a decline in the number of self-employed Americans suggests the personal business will soon be a thing of the past.

Since the Great Depression, the number of Americans who identify themselves in the work force as “self-employed as a share of non-farm employment” has been getting smaller. Some economists now say though that the major US recession that started in 2007 will soon send that stat straight down to zero.

The number of self-employed Americans at the end of World War II was roughly one-quarter of the country’s population, but during the length of just the 1960s that section shrank from nearly 20 percent to being barely in the double digits. From the 1970s through the first half of the ‘90s that rate stayed constant, but since just before the start of this century the stats have been smaller than ever. That figure is continuing to decrease, and the result is a major drop in the number of self-employed workers due to the recent recession is ravaging what was once a viable way of making a living.

Although the proportion of self-employed workers has been shrinking during the last few decades, the sheer number of workers who identify as such dropped drastically as a result of the recession — all the while, of course, the population of the country as a whole got larger.

More than 10 million Americans as of 2007 were self-employed unincorporated workers — “unincorporated” in the sense that their personal businesses might sign paychecks for other staffers, such as with a doctor’s office or private law firm. That number dropped by roughly one million at the start of the recession, though, and by today’s numbers it looks like a mere 9.2 million Americans are self-employed, according to US Bureau of Labor Statistics data cited in a recent essay by financial writer Charles Hugh Smith.

Things changed in the recession, as the self-employed ranks have lost 1.6 million from the peak in 2007,” Smith wrote last month.

The population of the US remains on the rise, and subsequently so does the number of working age Americans — at least until those born in the Baby Boomer era are all officially retired. But because the recession forced a lot of independent workers to abandon their personal businesses — at least 1.6 million — the small business is soon expected to be extinct.

As a percentage of domestic workers, self-employed Americans dropped from 25 percent to only 7 percent between 1950 and 2013.

We can attribute this trend to the rise of global Corporate America and government employment,” Smith wrote last month on his economy website. “The workforce expanded, and relatively more people became employees of corporations or the government than became self-employed.”

Michael Snyder of The Economic Collapse blog analyzed the data as well and had much harsher words on the state of affairs. While Smith said that the recession was the catalyst is cutting down self-employment stats, Snyder wrote that the result is one much worse than just that. According to Snyder, the drop of self-reliance in terms of employment is favored in a society where big businesses and even the government can get away with murder.

Once upon a time, the United States was a paradise for entrepreneurs and small businesses, but now the control freak bureaucrats that dominate our society have created a system that absolutely eviscerates them,” Snyder wrote.

Snyder wrote in his post that increased regulations and other rules forced on personal businessmen are the primary reasons Americans are less likely to stay self-employed. According to him, there’s a reason for that.

Sadly, this is what the bureaucrats that run things want,” he wrote. “They don't want us to be independent of the system. Instead, they are much more comfortable when as many of us as possible are heavily dependent on the system in one way or another. If all of us have to go running to the government or to one of the big corporations for a job, then we are much easier to control. But as the control freaks continue to construct their bureaucratic utopia, they are also killing off what once made the US economy so great.”

On his part, Smith suggested that the worse could be the start of a whole new recession. “Small business is the incubator of employment. As it declines, so too do opportunities for first jobs, second chances and economic independence,” he wrote.