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The following is a post by MPFJ staff writer, Kevin Mercadante, who is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.
It may seem counter intuitive that self-employment is more secure than a job, but with the deterioration in the job market in recent years, that may in fact be the case. It’s not so much that self-employment has become more secure, but rather that traditional jobs have become less so.
Why jobs are less secure than they used to be
As the economy has slowly climbed out of the recession, employment has been lagging. It’s becoming increasingly apparent that the loss of jobs during the recession had at least as much to do with structural changes in employment as it did with the bad economy.
Technology is one factor. Computers are increasingly eliminating jobs. Cheap overseas labor is another drag. Employers are learning that it’s less expensive to hire foreign-based workers at $5 an hour than to pay a domestic employee $25.
In addition, employers are increasingly making use of contract, part-time and virtual workers during heavy work cycles. As a result, many employers are maintaining minimal permanent staff and relying on a flexible workforce to make up the difference.
All of these changes make traditional jobs far less secure than they were just a few years ago.
Holding a job can cost money
In addition to the lack of job security, jobs are becoming steadily more expensive to maintain. Consider the following:
- Commuting. Now that gasoline is close to $4 a gallon, commuting is much more expensive than it was when the price was hovering around $1 dollar a gallon. And if you live in an area with tolls, they’ve gone way up too.
- Relocation. Companies still hire people for out of town assignments, but they’re becoming much more reluctant to foot the bill. If you relocate, there’s a greater chance you’ll do so out of your own pocket.
- Employee benefit contributions. Many employers have been cutting back on the company contribution for the cost of benefits. This is especially true with health insurance. A few years ago employers routinely covered 80% of the cost, but many are now paying 50% or less. The employee contribution is growing larger.
- Extended working hours. Some employers expect their workers put in extra hours without additional compensation. This has always been true at the management level, but it’s now increasingly common among the rank-and-file.
It could be said that employees today are bearing expenses that are not at all unlike those of the self-employed.
Self-employment can give you more control over your occupation
When you work for someone else, you’re typically hired to do a specific job. If that job is suddenly subject to elimination, you lose your job unless you can relocate to another job somewhere within the company. When you’re self-employed, you’re largely free to gravitate toward successful income sources. If one source is beginning to decline, you can begin shifting to another. In addition, as a self-employed person you can generally adjust to change much more quickly than an entire organization. That means you have more control over your occupation.
If you’re self-employed you can take on additional income earning ventures
Even if you’re self-employed, you will have certain commitments of time and effort that you’ll have to honor. However, you will also have a great amount of control as to when those tasks need to be completed; That means you have the kind of time flexibility that can allow you to take on additional income sources. This can be an additional revenue stream within the same business, or a venture – such as a part-time job – that is completely unrelated. When you hold a full-time job your time is much more limited, and so are your additional income earning options. Most jobs today have shifted away from “9 – 5” to something more like a nine hour workday. It could be 8 – 5, or 9 – 6, as employers are now insisting on a full eight hour workday plus an hour for lunch. If you add commuting time, 8 – 5 can easily turn into 7 – 6. That’s 11 hours a day! That doesn’t leave much room for much else, and will be even more complicated if your employer requires additional hours.
For people over 50, self-employment can be the only option
If you’re over 50, replacing a lost job is more difficult than ever. Middle-age workers face all of the obstacles that every other worker faces, but adds age to the mix. For many middle-age workers, self-employment will be the only option the event of a job loss.
Self-employment can flow more neatly into retirement
Millions of people are not adequately prepared to retire by age 65. For most of them, they’ll have to continue working into the traditional retirement years. As jobs become even more difficult to find as you get older, self-employment can be the safest bet for a continuing income. If you hold a job up until retirement, there’s a better-than-even chance that you will lose your job as a result of some sort of mandatory retirement provision.
But, if you are self-employed, you can continue working for as long as you like. In addition, if you’re self-employed, you’ll have a better chance of earning a living wage. Many of the jobs open to people in their 60s and 70s are low-wage positions that often require standing for long periods of time or performing functions that can be physically challenging to an older person. Self-employment can also provide greater control over your work schedule than a job will allow. This can be very important to person in the traditional retirement years. If you’re worried about the security of your job, you may want to take a long, hard look at self-employment options.
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