The self-employed present us with a dilemma. It is popular to think that, unlike mere employees, these people are independent “capitalists” and “entrepreneurs.” They are boldly and gladly building their small businesses. They are the “backbone of the economy,” highly productive as they seek to design, create, service or consult on a better mousetrap. Certainly governments wish us to think so. And so do associations of small business.
But the majority of the self-employed are not independent and most of them work in conditions of subordination and dependency, some of them are objectively worse off than employed workers.
In Canada about two and a half million people (around 15% of the labour force) are classified “self-employed.” In the US, it is 8.3%, in the UK 13.8% and in the EU 16.7% (p. 20). Trend lines show the proportion of such workers has risen steadily in the past three decades, with some spikes in bad economic times and some troughs in good. But there may be an upward ratchet effect as every economic downturn throws more employees out on their own devices.
Capturing dependency among the self-employed statistically is very difficult. Canada and other countries make a distinction between the self-employed who hire other people to work for them and “own-account self-employed” (OASE) meaning those who do not hire any others. In Canada, these latter constitute about 10% of the workforce. Using Canada as an example, while the general workforce increased by 27.8% from 1987 to 2003, OASE increased by 66.3%. But even this distinction does not capture the difference between dependence and independence. Some own-account self-employed workers are in positions of some power and independence in the labour market. They provide valuable services to a range of clients and therefore have considerable bargaining power, demanding and receiving good compensation and control of their conditions of work. But most OASEs work for only a handful of clients (often a single client), are dependent upon the economic vagaries of those clients (indeed, they are often economic buffers for their clients) and adhere to conditions dictated by those clients.
But it gets worse. Compared to paid employees, they work longer hours; they have little access to crucial social benefits, either state-mandated or employer-provided and can be left destitute if they fall ill, get injured, lose jobs or retire; they have no legal protection to join a union and obligate their opposite parties to negotiate collectively. While working for a client they often must refrain from working for competitors. Many of these workers are women.
Many of these workers are reluctantly self-employed – and crave a paid job.
In this book, Ulrike Muehlberger is one of the first to take on this question both factually and theoretically. She distinguishes among three types of work arrangement: There are employed and the independent self-employed. But in the “grey zone” between the two are the “dependent self-employed”, describing those workers who work primarily for a single contracting firm and whose working conditions and income to a large extent is therefore determined by that firm.
Muehlberger’s argument is rigorous. Her analysis that a large part of the labour market are dependent self-employed is compelling. But, as can be expected, she has difficulty in coming up with definitive numbers for the dependent self-employed. Governments in all developed countries simply do not make the distinction on the basis of dependency because it cannot easily be counted, as the number of employees can be counted. Dependency is a sociological concept, not an economic one. Simple questionnaires in labour market surveys cannot dig that deep.
That is not to say that she does not try. She attempts to get at the numbers by sifting through the material available in several countries – government reports on self-employment, data on franchising, evidence on independent contractors, studies of self-employment and outsourcing. However persuasive the cumulative effect of these, there is still no conclusive gauge of the extent of the dependent self-employed. What is necessary is a series of more-or-less intensive surveys of the self-employed in several countries, asking respondents questions like how many clients they regularly have and the degree to which those clients dictate conditions of work.
Muehlberger’s best contribution is her painstaking case studies of dependent self-employed workers in several industries, some of them internationally comparative: insurance sales agents in Britain and Austria, business service workers in Austria and freight forwarders in Austria. By interviewing workers in these industries and countries, the author is able to provide a rich and deep examination of how dependency works, both subjectively and objectively.
While the objective aspect is very useful, the subjective aspect is often surprising. Despite their dependency on a small number of client (or often a single client) and the difficulties inherent in such a tie, many of those interviewed express satisfaction with the arrangement and a sense, if not the reality, of independence. While many of them are forced to work long hours to satisfy a client’s needs and whims, they retain some semblance of control over their hours and appreciate not having to attend at a workplace every day.
Another salutary contribution of the book is the author’s careful building of theory. She surveys the legal complexity of the regulation of such work. She examines the determinants of self-employment and the motives of the suppliers. And she explores the “governance” of dependent forms of self-employment, contrasting the evolution from market-based (the free market) to hierarchy-based governance (the firm) and back to more market-based, but informal approaches that characterize contemporary sub-contracting.
All in all, this is a splendid contribution to a subject that, while of growing importance, has hitherto received scant attention among students of work.