Originally published 3/30/2004. Links were valid at the time of publication.
Let’s begin with a link to Herbert Meyer’s absolutely brilliant article, Creating Work, an absolute masterpiece of common sense in a world where common sense isn’t common at all. The debate over jobs and job creation nowadays has a much simpler solution, Meyer says, and he’s right.
If you haven’t clicked on the link above to read his article, go ahead. I’ll wait. No, really; it’s a short but good read.
Meyer’s point about the Entrepreneur being the key to job creation is without a doubt the truest words spoken regarding this debate over jobs. It is not, after all, the government’s responsibility to create jobs, but rather the responsibility of business to create jobs.
When I was starting up Communiweb Communications, Inc., I read as much as I possibly could about how to succeed. I had heard (or read, I can’t remember which) that most business never make it to their second anniversary, and almost all of them fail completely within five years. I had a dream, though, of one day having my logo on the side of a building, hundreds of people working for me to pursue my vision of an intelligent way of doing business, of combining research with practical application to help companies do what they do better. It was a fantastic vision.
And then I got the shock of my life: don’t hire employees. That’s the advice I got from everyone I spoke with. My accountant, other entrepreneurs, various web sites, self-help getting started books on entrepreneurship: all of them said the same thing. Your world gets much, much more difficult when you add even one employee. Use subcontractors, so sayeth the sage advisors. The IRS has strict rules as to what constitutes a subcontractor versus an employee, but it’s infinitely easier to manage the paperwork.
I didn’t believe it at first. I mean, how bad could it be? Then I found out. My then-wife was hired on by a library cooperative in Central Florida (a place that acts as an interlibrary clearinghouse, among other things). They, too, had apparently learned the lesson about hiring employees, and brought her on as a contractor. We did the calculations and determined that if she was an employee of Communiweb, she would not be taxed at the maximum rate as an individual. So, Communiweb hired her, and then billed the cooperative.
What a nightmare. Being an entrepreneur is not easy by any means. There are many ways in which entrepreneurs are discouraged from hiring employees. Here are just a few of them.
Government Forms . I am still reeling from the repercussions of that decision now, even though she stopped working for Communiweb in 2000. The amount of paperwork that has to be handled ? Form 940, Form 941, Social Security, Withholding, Monthly or Quarterly tax reports, Unemployment, W2s, W4s, I9s, year-end accounting – goes beyond reason. And this is just the accounting aspect!
Taxes. Entrepreneurs have to pay matching taxes (often called ‘contributions,’ though that sounds misleadingly voluntary) for employees.
Liability. As Meyer points out, the entrepreneur now has to be ultra careful about what he says, how it might possibly be construed. Providing someone a compliment can be grounds for off-the-charts sexual harassment suits. Then there’s the very real threats of lawsuits by people who you’ve never even met who feel that you’re somehow oppressing them.
Demonization. Perhaps the single most inhibiting factor, though, is the simple fact that entrepreneurs are demonized as money-grubbing, filthy-rich greedy bastards. Why this is the case is unclear, though perhaps since there is no Entrepreneurial Lobby for Hollywood (how many labor versus management plot lines show labor to be unreasonable?) we could easily blame ‘the media.’
What people don’t seem to understand is that the entrepreneur isn’t ‘lucky.’ A successful entrepreneur becomes that way through taking risks (often with painful, disastrous results – I speak from experience here), very hard work, extremely long hours, and often blood, sweat and gallons of tears.
When I tell people that I own my own consulting business, the first assumption that I get is that I’m rich. Of course, nothing could be further from the truth. For one thing, I’ve got 5 years of ‘sweat equity’ and personal investment (debt) to be compensated for. That’s a long time of running a company on little more than blind faith and a dream.
The next thing that people assume is that I can give them a job. What’s interesting here is not only does it reinforce Meyer’s position that entrepreneurs are the saving grace of any sluggish job environment, but also how many of these people who ask me for work can’t actually do anything.
I mean this sincerely! When someone asks me if I have any positions open, I usually counter with, ‘Well, what is it that you do?’ More than half of the people who ask me for work have no idea what they want to do, but certainly know how much they want to be paid for it. On a couple of occasions (rare, but still it happens), I was stunned to find the job solicitor was angry with me because I simply didn’t have an open-ended, non-defined, well-paying position for them.
Too bad. I’m sure they would have made an excellent long-term employee.