Is Self-Employment Advocated in the Current Economy?

During my recent visit to the United States with my mother to visit relatives and friends, I was surprised to hear that many have been participating in trends such as work-from-home or Self-Employment. Realistically, this shouldn’t be out of anyone’s expectations, especially from a country where people on social media constantly promote businesses like dropshipping or online businesses that involve self-employment. Because of the visit, I was intrigued to investigate this topic: whether self-employment is advocated in the current economy or not.

According to Dollarhide, M. (2019), self-employment is generally defined as the “state of earning a living from any independent pursuit of economic activity instead of earning a living working for a company or entity.” This basic definition gives insights into the logistics of self-employment, where one’s earning is directly controlled by the effort they put into that job. 

With a growing population demographic of single moms and disadvantaged individuals in Western society, another benefit of Self-employment, as noted by Ferenstein, G, (2019) becomes apparent. Self-employment is oftentimes a great way for disadvantaged workers who couldn’t afford to train for high-income professions to gain upward mobility and get to know these careers. This option aligns with their need for work flexibility and intermittency, making it a coherent choice for many. 

Self-employment is a crystal-clear yet nuanced business model that requires deep analysis to indicate its effectiveness in the current economy and its other effects. This essay will delve into the relationships between Self-Employment and the domestic economy and equity and break down its effects and implications for the economy.

Self-Employment and Economic Performance

To be entirely fair, society's widespread notion about Self-Employment has never been too optimistic. Due to the popular belief that Self-Employment garners little return and requires little skill, few studies have been conducted and published regarding its general economic impacts, subsequently reinforcing the notion and causing a viscous cycle. Fortunately, research on this topic has been gaining traction, just as self-employment does.  

According to Goetz and Rupasingha’s 2011 research, one of the most eminent on the topic, “self-employment has tangible positive economic impacts not only on wage and salary employment but also on per capita income growth and poverty reduction.” In the US, various government levels have bolstered self-employment and small businesses through subsidies, tax breaks, and other incentives. A relative study recognized by the researchers is a special issue of Small Business Economics in 2008, where US–data showed new firm formation and employment growth. This correlation also paralleled data from other regions like Europe, indicating Self-Employment’s benefits to the broader economy. Overall, Goetz and Rupasingha’s study yielded three conclusions: 1. Self-employment significantly benefits GDP per capita in the US. 2. Self-employment significantly increases total employment growth. 3. Self-employment effectively reduces poverty rates.  These justify why US governing forces advocate for Self-employment. 

Their research also goes to prove the protective benefits of self-employment in the broader economy. Regions often have an easier time dealing with recessions and economic downturns when self-employment is present, with the quote, “A higher share of self-employed workers in a country was unambiguously associated with greater resilience.” (Ferenstein, G, 2019) With such positive aspects of self-employment, it is easy to say that governments would like to see a substantial portion of the population take the self-employment route. 

Self-Employment: Equity at stake

There are nuanced yet essential pros and cons of self-employment that impact the general economy. One advantage of self-employment is that the worker can focus on a specific subject they are interested in. This could diversify the economy because less common jobs could be explored with little stake at play. The self-employment model could also drive the economy by tapping a more significant portion of the population because there would be less corporation pressure, and more people would be working. However, the disadvantages of self-employment are rooted in Equity. 

If a person takes the route of self-employment in the US, their finances would be significantly impacted by taxes. Self-employed workers are required to pay annual taxes and additional self-employment tax (around 15.3%), which is distributed to Social Security and Medicare. This means that federal laws are systemically unequal to self-employed workers, which can be commonly considered as a trade-off for a more free and ungoverned career choice (Dollarhide, M, 2019).

Additionally, ALIS (2017) addressed that many self-employed workers seeking consistent revenue streams are prompted to work longer hours to meet deadlines and fix problems. They routinely face challenges that come with juggling work and management, which can ultimately make it hard for them to reach financial independence or even just live on a consistent income. 

Conclusion

Overall, the choice of becoming self-employed comes with its fair share of benefits and limitations. While it is pretty advocated in this day and age in the US, for example, as seen in the government’s subsidies for such workers and self-employment’s backward benefits to the broader economy, some may still refrain from working for themselves due to the financial equity issues at stake. The best option going forward, considering the wider economy, is for individuals to strive for their own opportunities – more advantageous individuals should reach for corporate jobs that require high skill levels, which they are equipped with from their access to education. In contrast, others can choose self-employment, which has numerous benefits that target the communities that need self-employment the most. This way, society would find cohesive ways to work together, drive the economy, and remain balanced in domestic economics. 

Reference List

‌Anil Rupasingha and Goetz, S.J. (2011). Self‐employment and local economic performance: Evidence from US counties. Papers of the Regional Science Association, [online] 92(1), pp.141–162. doi:https://doi.org/10.1111/j.1435-5957.2011.00396.x.

ALIS. (2017). Self-Employment: Rewards and Challenges - alis. [online] Available at: https://alis.alberta.ca/look-for-work/self-employment/self-employment-rewards-and-challenges/ [Accessed 4 Feb. 2025].

‌Dollarhide, M. (2025). Self-Employment: Definition, Types, and Benefits. [online] Investopedia. Available at: https://www.investopedia.com/terms/s/self-employed.asp [Accessed 4 Feb. 2025].

Ferenstein, G. (2019). Why Self-Employment Is Good For Workers And The Economy. [online] Forbes. Available at: https://www.forbes.com/sites/gregoryferenstein/2019/10/30/why-self-employment-is-good-for-workers-and-the-economy/ [Accessed 4 Feb. 2025].