Explaining Southern California's economy

Self-employment won't save California from jobs crisis

Job Fair At Marlin Stadium Draws Many Seeking Employment

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First, the good news: unemployment continues to fall in California, to 11.1 percent in December from 11.3 in November. Basically, California is beginning to add jobs at a decent clip — the pace is faster than the nation as a whole. However, the state was clobbered far worse the rest of the country during the downturn, so our unemployment rate remains above the national level of 8.5 percent.

Now the bad news: for a lot of people to get a job these days, they have to create it — themselves! This is from the LA Times:

Self-employment is often the only option for workers with limited education and skills, suggested Christopher Thornberg, principal at Beacon Economics, a Los Angeles consultancy.

"They're struggling, trying to get ahead," he said. "For every guy we see selling fruit on the corner somewhere, there's another guy working as a DJ doing sweet 16 parties and probably making a good dime."

That entrepreneurial spirit is very Californian. "It's healthy," said economist Jerry Nickelsburg with the UCLA Forecast. "People stop looking for others to provide jobs and start using their own creativity."

But this surge of self-employment also underscores fraying job security and declining wages and benefits in many industries. Some hard-pressed employers are shedding full-time workers and hiring independent contractors to do the same jobs for lower pay.

Call it what you like: self-employment, "consulting," entrepreneurship, the gig economy — working for yourself when no one else will hire you isn't exactly a formula for prosperity. On the plus side, it does mean that you're doing something. On the minus side, it means you're a rough-rider in a bad economy, probably patching together a living from a variety of sources, none particularly stable.

You're buying your own health insurance. You're struggling with cash flow. And you may not even have more freedom. For the self-employment, weekends can disappear, as can a normal 9-5 schedule. Forget about Me Time. The only Me is Them: your clients and customers, every one as precious as oxygen.

So I'm going to disagree somewhat with Nickelsburg on this one. Entrepreneurship is healthy when it's freely chosen — not when it's foisted up a worker. One of the great unspoken bargains of American life is that the government won't tax corporations excessively to fund an extensive social safety net, on the understanding that corporations will help the nation achieve full employment most of the time (economist define "full employment" as an unemployment rate in the 4-5 percent range). That means layoffs as a last resort, not the first option of managers when the stock price comes under threat.

I've been self-employed at various periods in my life, and I can neatly divide the experience into two categories: the times when I chose to work for myself; and the times when I had no choice but to work myself.

The former is entrepreneurial. The latter is an invitation to anxiety. Additionally, your price always falls when you're unable to choose between getting a job and making your own luck. Full employment means that there's a demand for workers in the marketplace. Unemployment in the double-digits means that there isn't. 

It also means that there aren't enough customers out there to create adequate demand. What this means is that you actually need to go beyond creating a job for yourself. You also need to create a product or service that's going to capture the limited dollars of what few consumers there are who will spend money when demand is weak. That's called "innovation" and it's rare and difficult to achieve.

We should adore and reward entrepreneurship in California as much as we can. All glory to the risk takers! But let's not use it as an excuse to say that we're doing better than we really are.

Follow Matthew DeBord and the DeBord Report on Twitter.

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