The
Troubling Decline of Financial Independence In America
If you
can't work for yourself and afford health insurance, something is seriously
messed up.
By financial
independence, I don't mean an inherited trust fund--I mean earning an
independent living as a self-employed person. Sure, it's nice if you chose the
right parents and inherited a fortune. But even without the inherited fortune,
financial independence via self-employment has always been an integral part of
the American Dream.
Indeed,
it could be argued that financial independence is the American Dream because it
gives us the freedom to say Take This Job And Shove It (Johnny Paycheck).
This
chart shows the self-employed as a percentage of those with jobs (all nonfarm
employees). According to the FRED data base, there are 142 million employed and
9.4 million self-employed. (This does not include the incorporated
self-employed, typically physicians, attorneys, engineers, architects etc. who
are employees of their own corporations.)
This
chart depicts self-employment from 1929 to 2015. Self-employment plummeted
after World War II as Big Government and Big Business (Corporate America)
expanded and the small family farmer sold to agri-business or went to the city
for an easier living as an employee of the government or Big Business.
Self-employment
picked up as the bulk of 65 million Baby Boomers entered the work force in the
1970s. Not entirely coincidentally, a 30-year boom began in the 1980s, driven
by financialization, technology and the explosion of new households as Baby
Boomers got jobs, bought homes, etc. These conditions gave a leg up to
self-employment.
Self-employment
topped at around 10.5 million in the 1990s, and declined sharply from about
2007 to the present. But the expansion of self-employment from 1970 to 1999 is
somewhat deceptive; while self-employment rose 45%, full-time employment almost
doubled, from 67 million in 1970 to 121 million in 1999.
Financial
independence means making enough income to not just scrape by but carve out a
modestly middle-class life. If we set $50,000 as a reasonable minimum for that
standard (keeping in mind that households with children recently estimated they
needed $200,000 in annual income to get by in San Francisco), we find that
according to IRS data, about 7.4 million self-employed people earn $50,000 or
more annually.
This
works out to a mere 6% of the full-time work force of 121 million, and only 5%
of the employed work force of 142 million.
There are
a number of reasons for the decline of financial independence/self-employment.
I cover the fundamental changes in the economy in my book Get a Job, Build a
Real Career and Defy a Bewildering Economy.
But there
are other less structural reasons, such as nonsensically complex and costly
regulations--a topic explained here recently by entrepreneur Ray Z. in Our Government,
Destroyer of Jobs
(August 12, 2015).
As many
readers pointed out, these complexity barriers limit competition to Corporate
America chains and provide make-work for government employees and politically
protected guilds.
What's
the difference between a Socialist Paradise where 95% of the people work for
the state or a quasi-state institution, and a supposedly "free market
economy" in which 95% of the people work for the state or a cartel-state
institution? Given that the vast majority of employees are trapped in their
jobs by the threat of losing their healthcare insurance, how much freedom of
movement and non-inherited financial independence is available?
This
reality is described in Health Care Slavery
and Overwork
(via Arshad A.) True financial independence is probably even scarcer than these
bleak numbers suggest. As a self-employed person myself, I have to pay my own
healthcare insurance costs --a staggering $15,300 per year for bare-bones
coverage for the two of us (no meds, eyewear, dental, $50 co-pay for
everything, etc.).
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 a government or corporate job.
That's a
mere 2.7% of all 142 million employees. If you can't work for yourself and
afford health insurance, something is seriously messed up.
See
charts at:
http://www.zerohedge.com/news/2015-08-28/troubling-decline-financial-independence-america
Comments
Self-employment
was at 32% in 1940. The US was coming
out of the Great Depression and planning for War production. There were over 10 million self-employed. By
the 1970s, self-employment had declined to under 7.2 million. Then, in the late
1970s self-employment started to climb back over 10 million in the 1980s and
remained over 10 million until 2008.
This 30 year period of full and dual employment was helped by the Reagan
tax cuts in 1986. In 2008 it declined again to 7.4 million.
Excessive
immigration since 1989 soaked up 40 million jobs and household incomes are down
over $6,000 per year, so demand is down.
Large monopolies charging high prices have soaked up most income. This includes taxes, healthcare, education
and utilities like electric, gas, phone, internet and cable. The costs of Draconian local ordinances and
government regulations are killing start-ups.
Healthcare
is not considered a necessity. Consumers are trying to avoid these costs. Health Insurance is considered a scam and
more consumers are avoiding it as well.
If
Obamacare is repealed, more consumers will buy catastrophic health insurance if
the price is right.
Norb
Leahy, Dunwoody GA Tea Party Leader
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