Arum, Richard and Walter Mueller, eds. 2004. The Reemergence of Self-Employment: a Comparative Study of Self-Employment Dynamics and Social Inequality

American Journal of Economics and Sociology, The, Oct, 2004

Arum, Richard and Walter Mueller, eds. 2004. The Reemergence of Self-Employment: A Comparative Study of Self-Employment Dynamics and Social Inequalities. Princeton: Princeton University Press. ISBN 0-691-1175-8

This book consists of 11 essays documenting the phenomena of "self-employment" among various nations of the world. The list of nations covered includes Taiwan, Japan, Italy, (post-Soviet) Russia, Hungary, Australia, the United States, the United Kingdom, France and Germany. The editors of this book (both professors of sociology) have done an admirable job of commissioning, editing, and analyzing these diverse bodies of data (sometimes comparable and sometimes not). All the contributors are sociologists and this gives a certain bias to the work (pp. 455-458). The group of researchers has been meeting since August 1999 "to develop and implement a unique analytical perspective that highlights inequalities both related to self-employment and found within self-employment" (p, xv).

Early in the editors' introduction we are reminded of Karl Marx's claims that since the means of production become increasingly mechanized, it is virtually impossible for any single person to profitably compete against the factory owners and so self-employment (for example; cottage industry artisan labor) disappears as capitalism matures (p. 4). This, of course, has never been true and is not true today.

Self-employment as a percentage of the nonagricultural workforce now accounts for a robust 10% to 30% of the total. Most remarkable, the self-employed are not just your small business owners (like the mom and pop pizza shop down the street), they increasingly include professional and managerial talent as well as shop owners and unskilled workers. While the civilian workforce is still expanding among the OECD nations by a growth rate of less than 1.5% per annum, the serf-employed growth rotes store a whopping 2.3% average annual rate of growth at century's end. So Marx was wrong when he declared that as capitalism progresses, more and more workers must "sell their labor" to the large factory owners. The very opposite seems to be the case.

Most remarkably and disturbingly the editors, while they mention Marx at places, do not state the obvious conclusion that Marx's predictions were wrong, (I suspect that Marx is too revered a name in sociology, for anyone to dare make such a suggestion that he might have been dead wrong.)

In my view, the basic structural fact about contemporary developed economies is how much of measured final output (GDP) is located in "service sector" industries and how farming and manufacturing are becoming outsourced in some cases to the third-world poorer nations. This structural shift in the developed economies has been coupled with widespread urbanization and the stunning running up of housing prices in market-oriented cities and suburbs. There is mention of these trends since they are ubiquitous among the trading nations of the world but the trends and the implications of these trends are not analyzed at all. Do the self-employed enjoy an improved quality of life or do those in the ranks of the self employed suffer daily anxiety worrying about where their next meal will come from? The editors make no use of the recent quality-of-life literature in economics (the effort to measure "happiness" by skilful interviewing techniques) and the application of that literature here seems promising.

Another important fact about contemporary developed economies is that measurements of income and wealth distribution have come up tallying greater inequality. The authors touch on this development and its association with a smoothly growing cohort of self-employed workers but there are no causal connections stated. As an economist, I would suppose one event is causally connected to the other but I did not see this possibility discussed in the book.

On an interesting diagram, the authors divide the 11 national economies into types. There are the "corporativist" states with high labor market regulations and (therefore) a greater reliance on social capital and family businesses. There are the neo-liberal states of the United States, United Kingdom and Australia where "labor market regulations are less severe. Finally, there are the transition economies or "postsocialist" regimes of Hungary and Russia (pp. 19-20). Related but not entirely the same are the issues of "income class consciousness" and social status associated with job market activity. Some suppose that in nations where the government puts an end to or severe restrictions on the common law "employment at will" contract the self-employment phenomenon will be more pronounced.

The "employment at will" contract allows entrepreneurs the maximum flexibility in reshuffling the composition and magnitude of their labor force to respond to business conditions. In nations where it is impossible to fire a worker except with enormous compensation or notice, entrepreneurs might be expected to have a difficult time starting a business since the downside risks to them and their creditors would be enormous. These regulations function like a tax on entrepreneurship and like all taxes discourage the activity. What entrepreneurs do in those cases is outsource work and this creates a business opportunity for self-employed people to establish useful businesses (p. 21).