Self-Employment on the Decline
By DAVID LEONHARDT
The idea that the United States is increasingly a nation of entrepreneurs and self-starters has become accepted wisdom.
"Welcome to the free-agent nation," declares Tom Peters, one of the world's best-known management gurus.
Thirty million Americans - and counting - are now some form of freelancer, recent articles in business magazines have proclaimed. This is the era of "the e-lance economy," experts say, with the Internet allowing millions of people to bid goodbye to corporate life and become their own bosses.
There is a problem, however, with this futuristic vision: it does not appear to jibe with reality. Rather than booming in recent years, self-employment has declined both in numbers and as a share of the work force. In the strong economy, it seems, large companies desperate for additional workers have managed to lure employees from all over, in part by offering some of the benefits of self-employment. At the same time, the difficulties of entrepreneurship have become less tolerable.
Since 1994, the number of self-employed Americans outside agriculture has fallen by 146,000, to 12.9 million, according to the Bureau of Labor Statistics. The period between 1994 and 1999, hailed as a golden age for entrepreneurs, is the first five-year span since the 1960's in which the number of self-employed fell.
By contrast, for most of the last three decades, self-employment grew slightly faster than the overall labor force.
But in recent years, as the economy has added millions of jobs, the portion of Americans who say that they work for themselves - whether on their own or with dozens of employees they have hired - has dropped by almost one-tenth, according to the bureau's survey of 50,000 households.
In 1994, 10.9 percent of the nonagricultural work force was self-employed; in 1999, it fell to 9.9 percent.
"It's a surprise," said David G. Blanchflower, an economics professor at Dartmouth, who writes about entrepreneurship. "We don't really understand it."
What is clear, economists say, is that much of the widely believed hyperbole surrounding the Internet and the new economy has exaggerated the ease with which people can hang out their own shingle.
"We have this idea that everyone's out there working for themselves," said Robert W. Fairlie, an assistant professor at the University of California at Santa Cruz, who studies the history of self-employment. Instead, he said, millions of Americans have joined the working economy during the 90's boom and almost all were employed by existing businesses.
And contrary to earlier trends, most have taken jobs with big companies. Businesses with at least 1,000 employees have grown the fastest since 1994, while the percentage of people working for businesses with fewer than 25 workers has slipped to 29 percent from 30.1 percent.
In fact in many ways, running a small business or acting as an independent consultant has become harder than it once was, analysts say. Health care costs have grown faster for self-employed people than for big companies, and the increase in families with two working parents has made the demands of running a business all the more difficult.
To listen to formerly self-employed workers, there also seem to be reasons to move to an established company that have nothing to do with economics. At a time when people have less time to spend with their neighbors or in civic and recreational groups, these workers say that a traditional office - despite all of its problems - has become one of the few places to find a community....
[The rest of the article is at <http://www.nytimes.com/2000/12/01/business/01SELF.html?pagewanted=2> & <http://www.nytimes.com/2000/12/01/business/01SELF.html?pagewanted=3>.]