Monday, December 12, 2011

The Silent Exploited Americans

There is a minority group in America that is underpaid, overworked, and provided with no fringe benefits whatsoever.  Moreover, they are always one false step from losing their jobs and everything they own.  Who are these people and why is no one helping them out or protesting for their better treatment?

Suppose I was to tell you that there was a minority group of people in America - less than 10% of the population - who was being overworked and underpaid.  These folks are often working 10, 12, or even 16 hours a day, oftentimes seven days a week, with little or no vacations, and for wages that are often far below the minimum wage dictated by law.  Sounds pretty fantastic, right?  I mean, where is the bureau of labor in preventing this abuse?

Worse yet, they have no fringe benefits whatsoever.  If they have health insurance at all, it is only because they pay for it themselves - and because the premiums are so staggeringly high, they usually have to opt for very high deductibles.  And a retirement plan?  Well, if they can fund their own IRA, maybe they can retire some day.  But fringe benefits for this group are basically non-existent.

And the government is very aware of the plight of this group of people.   But instead of trying to help them, they heap extra taxes on them - up to 9% more than you pay, for Social Security and Medicare taxes.  Sounds like a raw deal, don't it?

And they get no paid vacations, no sick days, whatsoever!

But it gets worse.  You might have certain rights at your job - the right not to be discharged without cause.  You can sue your employer if you are sexually harassed, discriminated against, or whatever.  These folks have no rights and cannot sue their employer for anything.  And while you may have some modicum of job security, these folks have none - and can be put out on the street any time the market dictates.  And if they lose their job, they get no unemployment benefits whatsoever!   If they are injured on the job, they get no workman's comp whatsoever!  And if they are injured on the job, they can't even sue their employer for damages!

But wait, it gets even worse than that!  If you lose your job, you collect up to a year of unemployment  or sometimes more.  But for these folks, if they lose their job, they probably also lose everything they own.  If they make one false move in the workplace, not only will they be out on the street, but could be sued for every last penny they've managed to make.

Who are these people?  Illegal Immigrants?  Minorities?  Women?  What?  Why are they being treated so badly?  And why aren't they protesting on Wall Street or in front of the White House?  Why are they given such a raw deal, when the rest of us get nice jobs with benefits?

Well, before I answer that question, let me tell you one more thing about this group.  They are also the creators of most new jobs in America.  Yea, they create jobs and get treated like dirt.  Real fair, eh?

So who is this exploited minority group?  The self-employed.   That's right.  You may think of self-employed people as rich bastards raking in all the dough and not paying any taxes, but usually the reverse is true.  The person running his own business, whether it is a small cafe and coffee shop, or cutting and selling firewood, or running a landscaping business, often has to work such long hours to make a living that his effective wages are far below minimum wage.

A friend of mine runs a small cafe in town, catering mostly to the Law Enforcement Training Center crowd.  She works long hours, seven days a week, keeping the place running.  In addition to cooking, cleaning and waiting tables, she has to keep the books, order supplies, and even do minor repairs on the joint.

And she is one lawsuit away from financial oblivion, too.    Some idiot catches the flu and claims "food poisoning" and it is all over, thanks to our crazy legal system and clever lawyers.  Low pay, long hours, no benefits, self-employment tax, and huge risks - that is what they are serving up on the menu at the self-employment cafe.  And if her shop doesn't do well and she has to close, well, she loses her investment, is on the hook for the rent for the remainder of the lease, and guess what?  No unemployment for her - just poverty.  If she cuts off a finger on the meat-slicer, there is no workman's comp, just a trip to the hospital, which probably will not be covered by the deductible on her insurance.  And if the business closes for a few days as a result, that means lost income.  Sick days?  Vacation days?  They don't exist.

So why do they do it?  Why bother running your own business?  That is a question many folks are asking themselves lately.  And when a small business like that closes - to be replaced by a major chain industry like McDonald's, we lose something in this world. Individuality and the spirit of entrepreneurship is replaced by lackadaisical slacker jobs that provide no innovation whatsoever - and pay low wages and offer few, if any, benefits.

And yet many folks claim they want to be self-employed.  But if they knew the real deal, they probably would have second thoughts.  And that's one reason why, only 1 in 10 Americans are self-employed.

Who are these people?  What do they do?  They can be anyone, from a restaurant owner, to a farmer, to your local physician, lawyer, dentist, shop owner, construction worker, cement truck driver, landscaper, or whatever.  Self-employment comes in a myriad of forms.  Most of them suck.

Can you get rich being self-employed?  Perhaps, but for every one person who strikes it rich, there are perhaps 10 or more who struggle.  And in many fields, you can never expect to get rich.  Running a retail business is a very hard way to make money.  Any field of personal services - contracting, landscaping, massage therapy, whatever, is never going to make you wealthy.  And even the professions - Doctors, Lawyers, Dentists - become wealthy only after years of practice, and are often only one step away from abject poverty if someone claims they committed malpractice.

But what about "be your own boss"?  Isn't it great to set your own hours and run the show?  Well, that really is a fiction.  If you are a farmer, you have to get up at four in the morning to milk the cows.  You can't just decide to sleep-in today and milk them at 9:30, it doesn't work like that.  Similarly, if you own a retail business or a restaurant, you have to get there at least an hour before it opens and stay late well past closing time.  And if you want that business to be a success, you almost have to live there.

So why do people do it?  Some have no choice.  In some fields, being someone else's employee is a dead-end.  And after a while, they probably will let you go, anyway, once your health insurance costs are too high and your wages creep up.  And some folks, too, hope to strike it rich by running a business.  Maybe you open a restaurant, and it becomes it a hit.  You make a lot of money, and an International Corporation offers to buy you out, so they can franchise it.  If you are smart, you sell.  It happens - sometimes.

But striking it rich in the self-employment field is rare.  Granted, there are a lot of self-employed people who become millionaires.  But this is often by necessity, not by design.  In order to retire in this country, with any semblance of an income, you need at least a million dollars in the bank, to assure yourself of even $40,000 a year, using the 4% rule.  If you work for a company that pays you $40,000 a year in a defined pension, that is the equivalent to being a millionaire - but few wage slaves would see it that way.  And yet, many have pensions far more generous that this!

And many self-employed people end up owning assets that are essential to being self-employed.  The farmer owns his land, which may be worth millions of dollars, but may yield a very poor income, depending on the weather and market conditions.   Many self-employed people can be asset-rich, but income-poor, as the Millionaire Next Door reveals.

Should we care about the self-employed?  After all, wouldn't they be better off with "jobs" where they have all sorts of rights, few responsibilities, a steady paycheck, and cushy benefits?  Wouldn't the world be a better place if everyone worked for some faceless Corporation?

I think that question answers itself.

But more important than that, the self-employed create more new jobs than large corporations and create whole new industries - and advance our society and technology.  If you look at many of the major high-tech companies today, such as Apple, Microsoft, HP, and others, they started as small garage start-ups, with only a few people, often working for weeks or months with little or no pay.  And for every one of those companies, who became successful and is a major conglomerate today, there are perhaps 10 or 100 that went belly-up, leaving everyone broke and destitute.

So why do we beat up on the self-employed?  Well, they are a minority group, to be sure.  They don't have the money and resources - or organization - to lobby Congress effectively.  And the great unwashed masses sees them as "bosses" who are obviously "making lots of money" and need to be regulated and taxed.

Congress sees them as a portal for collecting taxes through withholding, providing healthcare through employer mandates, and correcting injustices in our society by holding them accountable for society's ills, in terms of discrimination, harassment, and the like.  They have to pay for workman's comp insurance, but can never collect from it.  They have to pay unemployment insurance premiums, but can never get a nickel of it.  They can be sued at the drop of a hat for any number of alleged grievances, but themselves cannot sue anyone.  You can't sue your customers, can you?

Local governments see them as an additional source of income - and assess "gross receipts" taxes of 4% or more on their overall gross income.  Bear in mind that if you had a profit of 10% (which would be fantastic, for most self-employed folks in retail) that a tax of 4% of gross receipts works out to a 40% tax on your net profits!

And of course, all of these things mean paperwork - and tons of it.  Paperwork for the Federal Government, for taxes, and then separate paperwork for the State. Then you have your unemployment and workman's comp paperwork, your gross receipts, taxes, and a host of laws and regulations you have to comply with, if you have employees at all.

We complain we are falling behind in the world - that other countries, such as China, are racing ahead of us.  And one reason for this, is that in China, you can open a business, without such onerous regulations.  Yes, imagine that, Capitalism is being realized in a quasi-Communist country, while it wilts in a Democratic one.

And yet, in this country, we are told that the solutions to our problems are more regulations to protect us from our own instincts.  We are told that credit card companies have to be nicer to us - by law.  But no one stops to think that if people stopped using credit cards that perhaps they would have to be nice to us to get our business.  We are told that banks need to stop doing funny loans that cause people to lose their homes.  But we never think that perhaps if we didn't sign such loans, maybe we wouldn't lose our homes in the first place.

Regulations, of course, are not bad in and of themselves.  But there reaches a point where they can stifle opportunity and growth.  The decline in the number of self-employed Americans is a bit troubling to me - and should be troubling to you as well.  When everyone works for some corporate entity, we lose a big part of what America is all about.

Maybe it is time we protested for the rights of the self-employed!