Self-Employed

ABSTRACT The purpose of this paper is to describe the self-employed in the United States (as identified by the 2000 U. S Census) and show how they differ from employees who are not self-employed. The findings suggest that the self-employed are generally older, more likely to be male, and in more lasting marital relationships than employees in governments and private companies. The self-employed are predominately White and generally make more money than those workers who are not self-employed. INTRODUCTION During most of the 20th Century, the United States has utilized neoclassical economic theory to guide the economic development efforts of the nation. One of the central concepts of neoclassical economic theory is economies of scale, which assumes that as the size of the firm increases, the per-unit cost of the product decreases. America's adoption of neoclassical economic theory and the domination of large firms have led many Americans to believe that large firms are the key source of creation and distribution of wealth. Two influential books supported the importance that large businesses play in economic development. William Whyte's (1956) book, The Organization Man, suggested that the Great Depression and military training in World War II created a society willing to accept employment in, and obedience to, large bureaucracies. John Kenneth Galbraith (1967) in his book The New Industrial State, suggested that those large corporations, working in coordination with governments and labor unions, would run nations in the future. Neoclassical economic theory, which has been the mainstream economic theory in the United States for a century, supported the concept that big business is a very important part of economic development. Other economists have argued that the entrepreneur is an integral part of the economic development process. Schumpeter ( 1934) saw innovation as the key for creating new demand for goods and services and entrepreneurs, as owner-managers, were the driving forces who start businesses to exploit innovation. Schumpeter's supposition that entrepreneurship made a significant contribution to economic development has been supported by numerous studies. In a study of U. S. firms during the period from 1969 through 1976, Birch (1987) discovered that small firms (firms with 100 or fewer employees) created 81 percent of the net new jobs in the United States. Birch also reported that an analysis of the U. S. Small Business Administration data base from 1969 through 1990 indicates those firms with 100 or fewer employees are the primary job creators in the United States. Entrepreneurs in the United States start between 3.5 million and 4.5 million businesses each year. (NFIB, 2000, p. 15) And the small business economic sector in the United States is the world's largest economy, trailing only the overall economy of the United States and the economy of Japan. (NFIB, 2000, p. 33) It is becoming increasingly evident that small firms, in the current environment of rapid change and high technology, are a driving force in the U. S. economy. Scarborough and Zimmer (2003, pp. 2-3) suggest that whereas twenty-five years ago competitive advantages favored large companies, today the balance has tipped in favor of small, entrepreneurial companies. The entrepreneurial economy is growing. The U. S. Government reports that almost 10% of the people in the 2000 Census classified themselves as self-employed. We know a lot about why people go into business for themselves. Research has shown that the six most frequently given reasons for becoming self-employed are for the opportunity (1) to gain control over their own destiny, (2) to make a difference, (3) to reach their full potential, (4) to reap unlimited profits, (5) to contribute to society, and (6) to do what they enjoy doing. (Scarborough & Zimmer, 2003, pp. 9-11) Although we may know a lot about why people give up the security of regular employment for self-employment, we do not know much about whom these people are and how they differ from those who are not self-employed. …