To Be, or Not To Be

I was surprised to learn that the number of Freelancers in the US has dropped to the lowest level in eight years,  down 13%  from a record high of 9.98 million in 2006.  The Department of Labor recently reported that as of August 2010,  there are now 8.68 million of us.

Because full time employment is not materializing for many citizens,  I assumed that the survival instinct would kick in and induce laid off salary men/women to assess their skill sets and figure out a way to package and promote their acts.  That’s what brought me to Freelance Nation.  But the stats have proved me wrong.

It is true that self-employment typically increases in the aftermath of a recession,  when laid off workers are unable to get rehired and thus venture out on their own.  But in this recession,  a variety of factors have weakened the demand for Freelance services,  causing many to choose alternate paths.

Some are maxing out their unemployment benefits as they sign up for temp work or settle for low end hourly wage jobs,  seeing those roads as their best,  albeit unsatisfactory,  survival options.  They don’t see much financial potential in either Freelancing or setting up a small business.

Diminished credit and poor sales are stifling the growth of small businesses.  A recent report issued by the National Federation of Independent Business Owners shows that 31%  of small business owners say that poor sales is their company’s single most important problem.

This news is interpreted by economists and labor experts as a sign that economic recovery is not just around the bend.  There is evidently not enough money being spent by consumers to sustain the survival of many small businesses.

However,  easier lending terms could encourage small business owners to make capital improvements and staff additions that will help to improve competitive positioning and perhaps attract more customers.  The Federal Reserve recently confirmed that about 20%  of banks are making commercial and industrial loans more available to small businesses for the first time since 2006.

Unfortunately,  large and mid-size companies prefer to play the wait and see game.  They are waiting for the outcome of the mid-term elections,  wonder what the newly reconfigured Congress will do about economic  initiatives (will the Stimulus Bill be extended?),  they wonder about taxes and wonder what the new health insurance regulations will mean to their bottom line. 

The big boys do have money to spend.  They slashed payrolls by laying off workers whether or not that strategy was necessary for the organization’s survival.  They limited hours worked per week,  limited or eliminated raises and off-shored as many functions as possible.  Paradoxically,  productivity remains high and continues to increase,  as businesses get more work out of their leaner and meaner staff.

There is precious little incentive to hire under these conditions.  Why bother? Those at the top of the pyramid are free to put still more money into their bulging wallets.  That explains why the only healthy segment of the real estate market consists of 7 figure properties.

These practices have left many current and aspiring Freelancers in the lurch.  Although the Fed states that lending to mid-sized and larger firms has over the past six months begun to ease,  there remains a marked resistance to green lighting the projects that Freelancers depend on.  A hard freeze is in full effect and it shows no sign of abating.

According to Scott Shane,  professor of economics at Case Western Reserve University in Cleveland,  the failure rate of self-employment is significant during this recession and economic  indicators do not point toward a quick recovery.  Only when larger companies,  those considered bell weathers and thought leaders,  begin to hire again will demand for Freelancers increase.

That said,  not all Freelancers are suffering.  A fortunate few are having their best year ever.  Recently,  I was chatting with a friend who makes and restores fine string instruments.  He does not lack for work.  I am also aquainted with a market researcher, with  someone who arranges and supervises the relocation of scientific laboratories and with someone who helps manufacturing facilities comply with environmental regualtions.  All of them are enjoying very healthy billable hours.

It just goes to show you,  in every kind of economy, there are always those who make money.  I just wonder when it will be my turn?

Thanks for reading,

Kim

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