The old adage that leading horses to water but being unable to force them to drink has an application in trying to understand American labor markets today, which is difficult at best. Many employers say they can’t get help (at least on the wages and working conditions they offer) and experts offer several explanations. People worried about getting sick, they care for children and older relatives, many find themselves out of work again because companies have closed or lost business.
One factor that usually escapes mention is the number of people going into business for themselves. The Census Bureau has data called new business formations based on IRS filings for an employer identification number (a business similar to a Social Security number). Here is a copy of the graph covering the figures till December 2021.
There are some caveats. The yellow area at the bottom of the graph is for so-called high-trend filings, which have aspects that make them more likely to turn into businesses with payrolls. Companies that will become employers of many. Some filings are from corporations. These can be special business vehicles for a home acquisition, purchase of property, a joint partnership, or something similar. In the latest January 2022 numbers, out of 430,411 filings, 140,174 were high-trend applications, including 49,295 with wage plans and 51,914 from corporations.
But that still leaves 290,237 low-trend, meaning someone starting their own business, whether full-time or looking for opportunities on the side. The figures are also seasonally adjusted, which means that economists are trying to take into account general variations. However, given how vastly the figures have changed, the accuracy of such adjustments may not be as helpful. Actual swings have been bigger. In the non-seasonally adjusted figures, total applications for January 2022 were 445,536 or 3.5% higher.
The change in circumstances has been astonishing. Not only in the third quarter of 2020, when millions were out of work and desperate to bring in money, but so forth. Things seem to be going well, but at a higher rate than ever before in history.
There is no explanation in the data for the significant increase, only statistics for applications. And this does not include new businesses in which people are not necessarily filing for an employer identification number, even if they start a new business.
Statistics show that since the third quarter of 2020, there have been 7,776,928 new business applications, a significant majority of which are low-trend, meaning people want to go into business for themselves. Many of these people are women and minorities who do not get a fair setback from the corporate world and have decided to strike on their own and take charge of their own destiny. They can structure their work around other aspects of their lives without getting permission from the supervisor.
Will everyone be successful? No, but many will and those who fail in one area may learn something else, as they go for a greater chance of success. Studies have also shown that self-employed people prefer to do so. Some people will be someone else’s employees—and given all the noise about how many employees are available to employers, they should be given a quick path to worker status if they so desire.
Many politicians, working with unions, are pushing for new federal standards, such as the ABC test, to be expanded to various areas of the law, as President Biden and prominent Democrats have said they want to do. If so, it will be impossible for many millions of people to continue. their businesses as independent contractors. Instead, they will potentially become part-time employees of different companies, not receiving benefits because they will not work full-time for any of them, and will lose business tax status, which means they will be unable to deduct standard business expenses. not being able
This is ultimately a foolish move. People pointing to rideshare drivers and gig platform delivery identify only a small portion of the overall group. If they are being abused, then, by all means, insist that the government apply resources to deal with the situation. But don’t assume that the small portion is the full representation of all, and that everyone needs to be saved from being forced to obey the other, possibly with even worse benefits to do with less than they can do on their own. Huh.