Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Including the professional class, perhaps 3% of the workforce is truly independent.
Being self-employed (i.e. owning your own small business that does not require employees) is an integral part of the American Dream. Many start out dreaming of a corner office in Corporate America, but as they move up the ladder, many become disillusioned by the process and the goal: do I really want to spend my life making big-shots even wealthier?
Bureaucracies (government and corporate) are safe sources of employment, but at a cost: they're often soul-deadening.
Many dream of making a living doing something they actually care about, and that often means striking out on your own, i.e. self-employment.
This raises an interesting question: how many self-employed people in the U.S. actually earn a middle class income? Since all the government statistics have a line at $50,000, and $50,000 might support a minimal middle class lifestyle in areas with a low cost of living, let's use $50,000 in annual income as our minimum.
As you might expect, government agencies count jobs and self-employment in different ways, which makes sorting out the numbers difficult. The Bureau of Labor Statistics (BLS), for example, counts two types of self-employed, the unincorporated and the incorporated. The unincorporated may have employees, but typically do not, i.e. they are sole proprietors. The incorporated have employees, starting with the owner, as the BLS counts the incorporated self-employed as employees of their own corporation.
The analysts at Docstoc.com assembled a chart that counts only those sole proprietors, partnerships and corporations with no employees, i.e. the self-employed:The State of US Small Businesses.
They came up with a total number of all self-employed that earned at least $1,000 annually of 22.5 million, of which 3 million were partnerships or corporations. These are overwhelmingly professionals such as attorneys, accountants, physicians, consultants, entertainers, etc.
If we subtract the partnerships and corporations, there are 19.4 million sole proprietors.
For context: there are about 141 million people in the U.S. with some sort of employment according to the BLS: total nonfarm employment.
But how many of these jobs are marginal, i.e. earn less than $10,000 a year? For that, we turn to the IRS data from tax returns (The Social Security Administration also compiles income statistics.)
I prefer the statistics compiled by tax returns, as these numbers are verifiable and precise. There is no seasonal adjustment of tax returns; there is an exact known number of tax returns with taxable income, i.e. net income after credits and deductions.
I am referring here to Table 1.1, All Returns: Selected Income and Tax Items for tax year 2012, (the most recent data available) and Table 1.4, All Returns: Adjusted Gross Income, Exemptions, Deductions, and Tax Items for tax year 2012.
If we examine Table 1.1, we find there were about 145 million returns filed, and 93 million had taxable income after credits and deductions. Roughly 46 million earned less than $20,000: 22 million workers earned less than $10,000, 35 million earned less than $15,000, and 46.5 million earned less than $20,000.
While 19.4 million sole proprietors is a big number, it turns out most are side businesses that earn relatively little income. 5.5 million earn less than $5,000 annually, 3.8 million net between $5,000 and $10,000, 5.7 million earn between $10,000 and $25,000, and another 3 million net between $25,000 and $50,000.
Only 4.48 million self-employed earn $50,000 or more, and 3 million of those are partnerships or corporations, i.e. professionals such as CPAs, attorneys, etc. That leaves leaves about 1.5 million people who aren't in the professional class (those with advanced degrees and professional licenses and credentials) who earn a middle class living as sole proprietors.
This is roughly 1% of the workforce of 145 million. It turns out the non-professional self-employed that make enough to maintain a minimally middle class lifestyle are a razor-thin slice of the workforce.
Table 1.4, All Returns: Adjusted Gross Income, Exemptions, Deductions, and Tax Items is a treasure trove of telling statistics. Information junkies will be in hog-heaven as soon as they open the spreadsheet, because these numbers cut through the fog of employment and income.
As many of you know from previous entries on jobs, work, etc., I am self-employed and have no employees. I am one of the 1% who earns more than $50,000 annually via self-employment who is not a licensed professional or equivalent. Since I have to file Schedule C tax returns, I am keenly aware of the deductions that are only available to sole proprietors/self-employed taxpayers.
Only self-employed taxpayers get to deduct half of their healthcare insurance premiums. You have to earn a fair sum to actually afford the sky-high costs of health insurance. We pay $15,300 per year for stripped-down healthcare coverage, which is more than the annual earnings of the bottom 35 million workers in the nation.
Only 3.9 million taxpayers took the self-employed health insurance deduction.That's a pretty good indicator of how many taxpayers are actually living solely on their income, that is, they don't have a spouse who has family healthcare coverage via being an employee for the government or a corporation.
The number of taxpayers who took the deductible part of self-employment tax was 18.6 million. This includes everyone with a net income from a business. According to the IRS tax data, 7.39 million taxpayers reported self-employment of $50,000 or more.
This is almost 3 million more people than counted in the infographic, which shows that it takes cross-checking various agency statistics to sort through all the data.
This means roughly 5% of the workforce is self-employed and earns $50,000 or more annually.
If we assume most of the incorporated self-employed are professionals, this leaves roughly 1.9 million non-professional self-employed who earn more than $50,000 annually (7.39 million - 5.5 million).
However you figure it, there are less than 2 million non-professionals making a middle class living via self-employment. That is roughly 1.5% of the 121 million full-time workers in the nation.
I confess to being astonished at the tiny number of truly independent self-employed people in the U.S. Only 3.9 million of us deduct our healthcare insurance, and only 7 million out of 145 million earn $50,000 or more--and on the left and right coasts, $50,000 is not a middle-class income--it is borderline poverty.
If we only counted the self-employed who earn enough to afford a minimally middle class lifestyle in high-cost urban zones such as greater New York City, Boston, Los Angeles, the San Francisco Bay Area, etc., the number declines to an even thinner slice of the workforce--no more than 4 or 5 million, depending on where you draw the line.
It isn't easy to earn enough to afford a middle class life via self-employment. Including the professional class, perhaps 3% of the workforce is truly independent.
I resemble that remark!
Stay under the radar, my friends.
LOL. Cloaking Shield On. Warp Drive in Standby -- in case Cloaking fails.
;-)
Wait -- about 2/3rds of small business generate cash flows of less than $2k per month?!
How in God's name do these people eat?
EBT, SNAP, Welfare.... take your pick.
The new middle class is a lower class part time job plus government bennies.
Oh hell, Charles.
Drug dealers, pimps, and 'Hoes, are way more than 3%.
Watchu smokin' Homie?
Being in business for yourself is great !
You get to pick whatever 12-14 hours out of the day you want to work and whatever 6 days out of the week.
Everybody will be an enemy before anybody is a hero. ~Gaius Frakkin' Baltar
"owning your own small business that does not require employees"
That's me! It ain't easy but at least I have zero debt!
We have large numbers of "self-employed" around here. They wear rags, are all dirty, and stand on street corners asking for handouts.
One of the bright spots about being a self-emnployed small business person is if you don't work, you don't eat.
I just can't get ahead being self employed 35+ years, those dang boating accidents cause me casualty loses every year.
Gold Bitchez....I pick up pennies
I am one and by the way there are 7 days in a week.
My business was going great until the Beanie Baby market went to shit. Paypal fees ate half my profit margin.
It helps to have a nest egg to supplement income while you're growing the business.
Best way to do it, if possible is to start part time on your off hours. I didn't have the nest egg and that's how I got started.
They don't shop in European grocery stores or eat in European restaurants. So $2K per month goes a lot farther than it does here.
Sorry brosef, lots of stuff is stupid expensive here. Food isn't one of them.
Its actually way cheaper here than in the US.
That, cell phone bills, health insurance (now fuck you Obama), little stuff like that. Savings are eaten alive via higher gas and electricity prices, but here you learn to be happy with less. It sounds like a weird concept, but I do not need (at the age of 28) to rent an apartment with granite counter tops and Viking appliances.
I feel like many people in the US consume (now that I have been outside of it for a while) for the sake of consumption. If people put that into cash flow generating assets, I think the US would be a lot less fucked.
Its why Germany I think will survive the next financial apocalypse pretty well, while the US will turn into a shitstorm.
Hmmmm... so less is more, then?
If I...
use it up
Wear it out.
Make it do.
Or do without.
... I'm there!
That was the family motto I grew up with.
Then your countrymen in the south are getting royally screwed over for some reason (gas for transit from Hamburg isn't that expensive). I occasionally invade your country to plunder an Aldi or Lidl in Waldshut where the prices are more reasonable than in my neighborhood, but it's still a lot more expensive for produce and meats than the local Kroger near my US place, and if I was willing to set foot in Wally Word... I could save even more (at the cost of my soul). I have no idea about the Whole Foods crowd, but I don't think the $2k/month-ers in America do either.
On the appliance side I can certainly do without Viking and granite counter tops, but for CHF 4000 the Miele dryers that you all export to us do a really crappy job of drying clothes. Too bad they never break, or I would be sorely tempted to import a real Chicom dryer for 1/5th the price of "German engineering".
But yeah, the consumption (or transition to more realistic consumption) will kill America. Germany is also well situated for trade and trans-shipment to other countries, which America isn't.
If they're not carrying debt (e.g. own their home or rent in a very low rent area, have roommates, etc) it's not too bad. Both my brother and I are self-employed, and he's definitely below the 2K per month level at this point as his business slowly dies. When your only expenses are utilities and health insurance, it can be done. It's ain't pretty, but it's doable.
While not self-employed, my daughter is living (pretty comfortably, in one of the more wealthy zip codes in my state) on about $1K/mo. Apartment with rent and utilities split 3 ways costs her about $400/mo, cell phone about $40 (switched to Walmart's straight talk, literally saved her $1K a year), car/health insurance and gas money and the balnce food.
Neither of them take any benefits (though daughter does get Pell grants for school.) If you don't have an insane lifestyle (and aren't getting hosed on health insurance) you can live pretty nicely on under 2K a month.
It's called intelligence
"Wait -- about 2/3rds of small business generate cash flows of less than $2k per month?!"
Simple:
1. The keep most of their earns off the books (don't report all of there income)
2. Side-business. People have another job and run a small part time business. In may cases, people keep their dayjob and start a small business. If they are successful they quit there dayjob and go self-employeed full time.
3. Spouse provides income. Lots of "Trophy spouses" have side business, that are financed by the breadwinner. Former co-worker had a wife that openned a nail-salon. Never made any money and the salon losses about $15K a year, but the wife is happy.
4. Some businesses may be LLC that are set up for asset protection. They have no income, but they are used to seperate the assets from potential liability. This might be real estate, that is rented to out for $1 a year.
Wize advice
What are you implying? That one should refuse to report on oneself and pay taxes on income which is otherwise unreported and unknown with zero actual consequence? That would just be silly now.
That's me bitches. Cut the corporate cord and couldn't be happier.
Don't forget that tax deductions are huge part of "income" that gets discoutned for the small time guys. I won't say how much mine are, but deductions make me happy. So, the "income" shown on IRS tax returns can be 25-50% low.
Yes and if you work from your home, you can deduct the % of your home that's for business and write off utilties, etc.
No doubt - Shop and lab in the basement, large home office makes a man happy at tax time.
And puts a large red flag on your tax returns. The secret to saving on taxes is knowing the parameters of your deductions in accordance with your reported occupation. If your claimed expense for any item falls as much as 5% above the average for your occupation! you may as well write 'fuck you IRS dumbasses' on your return and get prepared to grab your ankles.
dbl post
Long black markets and sharecropping then. All those "uncounted" people didn't dissappear, they are still eating and doing something. The war on everything by the central planers will be about as successful as a war on gravity, same as it ever was...
I'm self employed. I'm a ZH commenter.
Ha, belated April fools joke. I really work for DHS.
Ha, fooled you again. No, actually I work for FBI.
Ha!~ Got ya.
I'm self employed and my boss is an asshole
When you are your own business, you still exploit your employees.
Berspankme: I'm self employed and my boss is an asshole.
There are advantages to being S.E. One of the jokes I like to play on people who drive 3-2 States away to have me complete work for them....Is to crack open a beer (gotta have beer breath to pull this off) and when they drive up and drop off parts... throw a complete shit fit , Moherfucking "my boss". it helps to get all theatrical and throw some shit around....get red in the face etc...
The looks are priceless. Since they never met me, don't know what my voice sounds like.... the possibilities are absolutely endless for screwing with them,........just when they're ready to leave I crack a smile and let them in on the joke......and no I've never lost a job because of this yet.
I'm just hoping they pass a $15.00 min wage so I can give myself a raise
I'm Chopper level, what are you guys?
No really I like you guys.
Mr. Force “stole and converted to his own personal use a sizable amount of Bitcoins,” the digital currency that was used by buyers and sellers on the website and which he obtained in his undercover capacity, the complaint said.
“Rather than turning those Bitcoin over to the government, Force deposited them into his own personal accounts,” it added.
Mr. Bridges, meanwhile, who was described as a computer forensics expert, diverted to a personal account more than $800,000 in digital currency that he gained control of during the Silk Road investigation, the authorities said.
Reason based on government statistics. YeeeeeeeHaaaaaaaa.
Here is the latest Craig Hulet link. It is pretty good. A lot of the same stuff.
http://www.eliasound.biz/hulet/mp3s/2015/04.30.15.mp3
I bet there are a lot more hookers and dealers out there than these statistics show.
And they are way above 50k if they are good
The freedom this affords is worth giving up a lot of income, in my opinion.
I have never been freer, and would never go back to corporate america for any amount of money.
Being self-employed all I can add is that you'd have to be nuts to live like this.
More nuts is being self employed in Cali.
Miffed
Is it true they make you wear a target on your back or is that just a metaphorical target?
No actually it is quite distinctive. Our government calls it the Cone of Shame.
Miffed;-)
we feudalized some folks
Count me in. The left has always hated the self employed for obvious reasons. No withholding... no unionization... we compete with their cronies. I suspect it will get worse before it gets better.
If you can work for yourself, move to a low-income-tax jurisdiction like Hong Kong, Singapore, Dubai, or Swissyland. Assuming $130k income, your after-tax income is higher in HK by 19%, Singapore 26.5%, Dubai 39%, and Swissyland 23% compared to that income earned in NY or LA. (this is based on calculations from each jurisdiction's tax website)
Am I "self employed"? Do you want the "official" answer or the truth? It's all a bullshit fucking game with several clubs folks, now that there are blatantly no rules things get interesting...
I thought that is what the American electorate wanted to do...destroy the self-employed. Wasn't that B. Hussein Obama's singular focus?
you didn't build that!
I got booted from a corporate job 5 years ago due to my employer being acquired. I was targeted for elimination. That was not exactly a great time to be begging for a job nor is today.
I'm self-employed now, and it's an uphill struggle to say the least. I still make more than some stinking useless $10 an hour job would pay me working 40 hours a week that is if such a unicorn exists anymore due to the ACA.
The funniest part is that I had a side business 10 years ago doing the exact same thing I do now. I gave it up to devote more time to the shithead that tossed me overboard. I often think about my decision to end my side business out of loyalty to that soulless corporatist pig who is now dead and hopefully rotting in hell. The bastard actually made a lot of money on the sale w/o me being on the books.
The global corporations can go to hell as far as I'm concerned. Luckily, I stayed debt free and now do whatever it takes to minimize the money I give to mega-corps.
"Luckily, I stayed debt free and now do whatever it takes to minimize the money I give to mega-corps."
Those are two important keys.
Another is being in control of how you spend your time.
Loyalty!
HaHaHaHaHaHa. What a primitive concept.
Seriously, I do feel your pain - more than yuou can imagine. I have been a Sub-S corp since 1981 as an independent agent for various factories and importers. As I used to explain to my employees, back in the day when I had employees (we once had over 2K accounts), there is no such thing as loyalty in business anymore. It is all numbers.
It's like a complex algebra equation. You either find a way to keep contributing to the equation, or you will be equalled out. What have you done for me lately? It's all that matters.
Only fools are loyal to anything in today's climate.
They still do expect total loyalty from the slaves. I'm a mercenary now. I look only after my interests. It really would not have been nearly as bad if we had a functioning job market like we used to have.
Basically, my fat salary was not on the books when they finalized the deal. I found out later that the owner ordered my firing directly. I was redundant for the acquiring company. That's just the way it goes down sometimes.
A job is a job. Money for service. End deal.
When people start bringing relationships, morals into something that's essentially a prostitution arrangement, I cringe. Quit pretending your job or your company is something special. If you work for somebody else, to them you're a number - that number is profit. To you they're income. End deal.
Leave ideas of friendship, love, loyalty devotion for things that don't require a wallet and a social security number.
I am close to ending my stint in the corporate world and moving abroad if all falls in place. The corp setting will suck the life right out of someone that isnt a lemming. I've come across some like minded people in multiple compaies but most love their 1.5% raise and do nothing day.
If you're over 50, white, male, and hetero, you have a target on your back unless you are at the top of the corporate ladder.
AMEN
OT Another police shooting in Baltimore...
Reminds me of this excellent video:
Why Can't Chuck Get His Business Off The Ground?
Reminds me of this excellent video:
Why Can't Chuck Get His Business Off The Ground?
This comment reminds me of your previous comment.
27 years for me. Never had a boss. Free time man; you just can't beat it. Only run the machines enough to support the family. Life is grand. Can't wait for the crash; watch all the corporate roaches scurry. Long live ZH.
Employee suk. Subcontractors from India are the way to go.
When the recession hit in 81-82 I was forced into self employment and never looked back.
Yeah, there were some tough time, like making only $200 in a month with a family of four to feed and shelter but there were times I made out real well.
In the end I wouldn't change it. My bosses are my customers. If you have more than one customer and they pay on time, the ones you find difficult to deal with can always be replaced.
The system discourages self employment. Credit is difficult to get, you are treated like scum by bankers and such, but that is all right too as you learn to live without the bullshit, direct deposit and so on.
I work hard and long hours but I feel a lot more free than some poor folol sitting in a cubicle all day waiting for a weekend.
Cherrypicker, everything you wrote applies to me. The first ten years were tough, but no problems now. Oh, except for some sideline dalliances that failed....one in real estate, two marriages. I'm marrying for money next time!
What most folks don't appreciate is when you're self-employed, pleasing your customers is much more demanding than pleasing your boss. Taking a sick day is a rarity, and unpaid. Not complaining, just facts.
Very interesting exercise: count the health-care deductions to count the really solvent self-employed.
There are a lot of "self-employed" like me, who work mostly W-2 through recruiters, we do NOT get to use that deduction ... hmm, maybe I should go back to 1099. Hmm.
"Self-employed" has always been a grey category, and it's greyer than ever today, and I don't mean that stupid soft-core S&M stuff neither.
Try starting a business and see how many "pocket partners" you'll have.
Liberty is a demand. Tyranny is submission.
That is what a friend of mine calls them. Says that when he went to start a business it cost him over $850 in fees, fines, and fixes ("The three F's.")
Been self-employed for 30 years, it really sucks having free time and no boss. The hours are killer sometimes and the companies I've worked with are clueless how business works most of the time, but, it beats being a rat in the maze. The money isn't as good as it used to be, but we have almost no debt other than the monthlies.
Self- employed Pizza Man
No employees
Cash Only
Keep my guitars in store; friends drop by at nite-we be pickin' n' grinnin'
I DON'T TAP DANCE FOR THE MAN.
Way I read this there are only 15 Million or so Self Employed who can exercise their Free Speech Rights, Say what they want to anyone, put anything on the Internet, and have the Job Security where they aren't afraid of it Hurting their Careers or Income.
I've been saying this for a quite a while now.
- Liberty, Freedom, Equality, Brotherhood... really only come if you are retired, live on fixed income, or are Self Employed.
- Maybe Music is Spiritually Liberating though, so I guess they can't take everything away.
And I honestly don't thing there are many of us 'self-employed' who don't have a corporate shield...can you say Nevada corporation?
We are now seriously trying to resist this, having supported corporatism for way too long for the usual various factors; price, selection, convenience. Hardware stores, pharmacies, grocery stores, ect. It does require commitment. We could have gone with a big box for a shower door, but we're taking our chances with a local business. It takes longer, and doesn't have the backing of a big box, although that isn't necessarily depositive of customer satisfaction either. We also tip better, although I usually tipped at the 15% level anyway, but now easily 20% as long as the service is decent. I often engage servers and many claim that often people, no matter how large the tab, leave only token tips. I suppose that could be just self serving, but I do tend to believe them based on observations when going to lunch with coworkers.
Truly independent small business and self- employment is dying by design of corporate oligarchic rule. And that's the fact. There is another 0.01% ,these are truly independent of corporate world small businesses and small farmers still alive. US is a mockery of Jeffersonian republic.
Very unique and honest take on faith of small business and diversity in US over last 75 years, under on-slot of corporatism I found at:
https://sostratusworks.wordpress.com/2015/01/31/diversity-of-one/