Mon | Sep 26, 2022

Kristen Gyles | Self-employment and the ‘sink or swim’ decision

Published:Friday | August 12, 2022 | 12:06 AM
We can all agree that the motivation for starting a business should not be birthed out of frustration from not getting a job. However, this is the case for many persons now classified as self-employed.
We can all agree that the motivation for starting a business should not be birthed out of frustration from not getting a job. However, this is the case for many persons now classified as self-employed.

There are many layers to the declining unemployment rate. Recently, I wrote about what appeared to be the rapid growth of low-income employment sectors and the relation this had to the decreasing unemployment rate. This week, entrepreneurship, self...

There are many layers to the declining unemployment rate. Recently, I wrote about what appeared to be the rapid growth of low-income employment sectors and the relation this had to the decreasing unemployment rate. This week, entrepreneurship, self-employment and the growing ‘Be your own boss’ movement is the layer of focus.

Jamaicans certainly have an entrepreneurial spirit. But why? What is it that has driven so many entrepreneurial pursuits and specifically, small business ventures? Many genuinely have business ideas they want to explore. However, the truth is, many entrepreneurial pursuits are born from a kind of radicalisation caused by the frustrations associated with a poorly regulated job market.

Many Jamaicans start adulthood with the same positive outlook and high hopes for the future. They expect to pursue tertiary studies, then get a job, get married and start a family – the good ol’ Jamaican dream. This dream sometimes suffers a plot twist usually around year number two following graduation day, when the dreamer realises they have finished their studies but are either still without a job or have only been able to secure marginal employment. Then sets in sheer frustration and disappointment which sees the dreamer binging on Warren Buffet speeches and reading as many Mark Zuckerberg biographies as the internet can provide. Eventually, a renewed sense of motivation hits them and they say “I’ll start my own business!”

We can all agree that the motivation for starting a business should not be birthed out of frustration from not getting a job. However, this is the case for many persons now classified as self-employed.

Here is the evidence of that: In 2020, business name registrations at the Companies Office of Jamaica increased by 12 per cent. If you manage to recall, this was the year the dreaded ‘C’ hit Jamaica. That year was characterised by a number of lay-offs and company closures. The following year, in 2021, business name registrations increased by 33 per cent.

SINK OR SWIM

This was not simply a matter of business owners wanting to formalise their businesses. During the pandemic, when many persons lost their jobs, they were faced with the choice to either sink or swim. Swimming meant engaging in some moneymaking activity, since it made no sense sitting and waiting for a job at a time when organisations weren’t hiring but were instead looking to downsize their operations.

Unsurprisingly, while business registrations have gone up, the unemployment rate has simultaneously gone down. But what exactly is the connection?

While the unemployment rate is currently at its lowest ever, the number of persons employed is not at its highest. Just before the pandemic, in January 2020, when the unemployment rate was 7.3 per cent, the number of employed persons was 1,269,100. However, in January of this year, when the unemployment rate was six per cent, the number of employed persons was 1,257,100 – a shade less than that recorded two years prior. So clearly, it isn’t only increased employment that has been contributing to the decreasing unemployment rates.

Since January 2020, the overall labour force has fallen from 1,369,500 to 1,340,600 in January of this year. This could explain the reduction in the unemployment rate over the two-year period. A decreasing labour force will result in a decreasing unemployment rate since the unemployment rate is a ratio of the number of unemployed persons within the labour force over the size of the labour force itself. But why would the labour force decrease? If persons give up on job hunting and are no longer actively seeking employment, they will not be counted as part of the labour force. And this behaviour is nothing strange for an individual who has spent extended periods of time searching for opportunities which, when found, simply don’t make any economic sense.

So what does such an individual do? They swim. That might mean a day-to-day hustle or a registered business that is hoped to mushroom into the next Facebook. Whichever it is, the sad reality is that in many cases there is little success and the entrepreneurial effort is short-lived, leaving the entrepreneur with not only no real income but also no motivation to re-enter the job market that failed them.

DIFFICULTY FINDING WORKERS

All this should explain why so many business owners have been expressing difficulty in finding workers. At face value, the appearance is that there are so many jobs available that people can pick, choose and refuse – hence a declining unemployment rate. But as outlined earlier, increased employment is not the only factor at play. People are certainly refusing. They are refusing to take up employment that does not further their Jamaican dream. They are choosing to dodge the so-called opportunities that see them making just enough to keep working and living hand to mouth.

One thing is for sure: it is not corporate Jamaica that complains of a labour shortage. Somehow, there is no labour shortage of lawyers or any mass exodus of doctors who are refusing work. These complaints are coming from organisations which are known to offer marginal employment to droves of (usually young) people.

I read with interest the lament of one local business owner who, like many others, was bemoaning their inability to attract enough workers. They asserted that it’s really hard to find people who really want to work and buttressed this argument with an assertion that their compensation package is reasonable and that the benefits are good.

I had to wonder, is that really what business owners are thinking? That people don’t want to work? What do they want to do? Dead fi hungry?

People want to work, but slavery days are over. For that reason, many have walked away from jobs that overwork and underpay and have sought careers as entrepreneurs, reasoning that they must in some way be able to do better for themselves, than is being done for them in the job market. Are they right? For their sake, I hope so.

Kristen Gyles is a free-thinking public affairs opinionator. Send feedback to kristengyles@gmail.com.