Category: Labor Economics

Pandemic Results in “Historic” Increase in Free-Agent Entrepreneurs

In my book Openness to Creative Destruction, I distinguish between free-agent entrepreneurs and innovative entrepreneurs. Free-agent entrepreneurs work for themselves mostly doing what has been done before. Innovative entrepreneurs work for themselves mostly doing something new. (The dividing line is not sharp.) During the pandemic we have seen a large increase in free-agent entrepreneurs. The number of innovative entrepreneurs is hard to measure, but I believe that the loss of health capital, the increase in transaction costs, and the growth of government regulations and lockdowns has reduced their number.

(p. A1) The pandemic has unleashed a historic burst in entrepreneurship and self-employment. Hundreds of thousands of Americans are striking out on their own as consultants, retailers and small-business owners.

The move helps explain the ongoing shake-up in the world of work, with more people looking for flexibility, anxious about covid exposure, upset about vaccine mandates or simply disenchanted with pre-pandemic office life. It is also aggravating labor shortages in some industries and adding pressure on companies to revamp their employment policies.

The number of unincorporated self-employed workers has risen by 500,000 since the start of the pandemic, Labor Department data show, to 9.44 million. That is the highest total since the financial-crisis year 2008, except for this summer. The total amounts to an increase of 6% in the self-employed, while the overall U.S. employment total remains nearly 3% lower than before the pandemic.

Entrepreneurs applied for federal tax-identification numbers to register 4.54 million new businesses from January through October this year, up 56% from the same period of 2019, Census Bureau data show. That was the largest number on records that date back to 2004. Two-thirds were for businesses that aren’t expected to hire employees.

(p. A14) This year, the share of U.S. workers who work for a company with at least 1,000 employees has fallen for the first time since 2004, Labor Department data show. Meanwhile, the percentage of U.S. workers who are self-employed has risen to the highest in 11 years. In October, they represented 5.9% of U.S. workers, versus 5.4% in February 2020.

The self-employment increase coincides with complaints by many U.S. companies of difficulties—in some cases extreme—in finding and retaining enough employees. In September, U.S. workers resigned from a record 4.4 million jobs, Labor Department data show.

Kimberly Friddle, 50 years old, quit her job as head of marketing for a regional mortgage company near Dallas in September 2020.

. . .

. . . when a friend contacted her the next month, she saw an opportunity.

The friend sold home décor items on Amazon.com from his home in Canada, and Covid-related border restrictions were making it difficult to process returns. When he explained what he needed—primarily, someone to examine returned items for damage and ship them back to Amazon—Ms. Friddle felt the work could be a good challenge and a chance for her older daughter, Samantha, to gain some work experience.

They began processing returns for him steadily. When other Amazon sellers he knew needed help with warehouse-related tasks that were also made harder by the pandemic, he referred them to Ms. Friddle.

. . .

Now she runs an Amazon logistics, warehousing and fulfillment business full time from the family’s home outside Houston and rented warehouse space nearby.

. . .

Though the decision to leave that job was an emotional one, she said, a change after 27 years has given her new energy and confidence in addition to the flexibility.

“I didn’t have a plan when I left,” she said. “I wasn’t giving enough attention to the needs of my family. I wasn’t giving enough attention to the job that needed to be done. I felt like I was failing everywhere.”

Now, “I feel so successful and I wake up every day like, ‘I wonder what’s going to happen today.’ ”

. . .

Through the late 19th century, a large share of Americans worked for themselves, as farmers or artisans. With new technology such as electric lighting, manufacturing expanded, and many people left the field for the factory floor. They landed in an environment of strictly defined work hours and hierarchies—workers overseen by managers overseen by executives.

By the time Covid-19 arrived in the U.S., the advent of apps, websites and companies catering to entrepreneurs and freelancers was already giving employees options.

. . .

Marcus Grimm, a 50-year-old in Lancaster, Pa., worked at advertising agencies from the time he finished college. For years, he toyed with freelancing. “I had always considered it, but literally just never had the guts to make the move,” he said. “I was scared I would lose sleep every night worrying about my next dollar.”

Early in the pandemic, Mr. Grimm, a married father of two grown children, was laid off. He logged onto Upwork, a website that connects freelance workers from a wide range of industries with potential clients. He fielded several assignments doing ad campaigns for big companies, charging a low hourly rate.

Business flowed in. He has steadily raised his rate, to $150 an hour. Mr. Grimm said he now earns more than in his old job, which paid $130,000 a year.

His favorite part is not having to deal with corporate politics or any bureaucracy. He can go kayaking in the middle of the day.

“I’m the one who finds the client, I’m the one who does the work, and I’m the one who deals with any of the problems that come up,” he said.

. . .

Part of the current shift to self-employment might prove temporary. The boom in self-employed day traders during the dot-com hoopla of the late 1990s deflated along with the stock bubble.

A sharp rise in savings—boosted by a federal supplement to unemployment benefits, most recently $300 a week, that was paid for as long as 18 months of the pandemic—provides some individuals a financial cushion to pursue self-employment. As they run down those savings, some might again want a regular paycheck, economists say.

In addition, if labor shortages ease, freelancers could face stiffer competition from companies in landing clients. Finally, if the pandemic recedes, so might one piece of the impetus to leave regular work in favor of self-employment. Five percent of unvaccinated adults say they left a job because of a vaccine requirement they opposed, according to a Kaiser Family Foundation survey in October [2021].

For the full story, see:

Josh Mitchell and Kathryn Dill. “Workers Quit Jobs in Droves to Become Their Own Bosses.” The Wall Street Journal (Tuesday, Nov. 30, 2021): A1 & A14.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the story has the date November 29, 2021, and has the same title as the print version.)

My book, mentioned at the top, is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

California Labor and Environment Policies Reduce Nimble Response to Supply Chain Backups

(p. A17) The backup of container ships at the Long Beach and Los Angeles ports has grown in recent weeks despite President Biden’s intervention to get terminal operators to move goods 24/7.

. . .

The two Southern California ports handle only about 40% of containers entering the U.S., mostly from Asia. Yet ports in other states seem to be handling the surge better. Gov. Ron DeSantis said last month that Florida’s seaports had open capacity. So what’s the matter with California? State labor and environmental policies.

Some 20 business groups recently asked Gov. Gavin Newsom to declare a state of emergency and suspend labor and environmental laws that are interfering with the movement of goods. Opening the Port of Los Angeles 24 hours a day “alone will do little without immediate action from the state to address other barriers that have created bottlenecks at the ports, warehouses, trucking, rail, and the entire supply chain,” they wrote.

One barrier is a law known as AB5. Before its enactment in 2019, tens of thousands of truck drivers worked as independent contractors, which gave them more autonomy and flexibility than if they were employees. As contractors, truck drivers can work for multiple companies, which allows them to nimbly respond to surges in demand.

. . .

Another problem: a shortage of storage space. “There is absolutely no available capacity in the warehousing sector due to the difficulty in developing any new capacity,” the businesses noted in their letter. The vacancy rate for warehouses near the Los Angeles and Long Beach ports was a mere 1%, compared with 3.6% nationwide.

If warehouses don’t have space in their facilities or parking lots to unload goods, drivers can’t make deliveries. Some truck drivers are leaving container boxes along with the chassis outside storage facilities and are picking them up later, but that results in a shortage of chassis at the ports. (About half of chassis are leased to truckers from a common pool supplied by private companies.)

. . .

. . . in California warehouse growth ignited opposition from environmental groups, which complain of pollution and noise. Many cities have limited new logistics facilities.

For the full commentary, see:

Allysia Finley. “California Is the Supply Chain’s Weakest Link.” The Wall Street Journal (Friday, Nov. 5, 2021): A17.

(Note: ellipses added.)

(Note: the online version of the commentary has the date November 4, 2021, and has the same title as the print version.)

Young People With “More Dignity Than Fear” Continue to Protest Cuba’s “Lack of Freedom”

(p. A9) Four months after a wave of spontaneous demonstrations against Cuba’s 62-year-old Communist regime, civic groups and dissidents are defying authorities with protests inside high-security prisons and plans for peaceful rallies across the nation to demand democracy.

Despite facing a crackdown that includes forced exile, summary trials and prison sentences of as much as 25 years, government critics ranging from artists to doctors have openly expressed discontent on social media.

. . .

The arrests have done seemingly little to discourage an increasingly organized and determined opposition movement, fueled by a wave of anger in the island nation over its lack of freedom and the government’s handling of the coronavirus pandemic, as well as the country’s sharpest economic contraction since the early 1990s.

. . .

“They have sicced prosecutors on us, and threatened us with expulsion from work and universities, but I think many young people have more dignity than fear,” said Yunior García, a playwright and founder of Archipiélago, a rights group with more than 31,000 members on Facebook that requested permission for the demonstration.

. . .

In an unusual show of public criticism, doctors—long considered the pride of Cuba’s revolution—posted videos on social media complaining about dismal work conditions.

For the full story, see:

José de Córdoba and Santiago Pérez. “In Cuba, Protest Amid Threat Of Prison, Exile.” The Wall Street Journal (Tuesday, Nov. 9, 2021): A9.

(Note: the online version of the story has the date November 8, 2021, and has the title “Cuba’s Dissidents Dig In Despite Government Crackdown.” When there was a slight difference in wording in the versions, the passages quoted above follow the print version.)

Auntie Sewing Squad Made, and Distributed, 350,000 Free Masks

(p. C7) Kristina Wong is an in-your-face performer who, until this month, hadn’t performed for an in-person audience since March 2020.

. . .

While Wong was stuck at home in Los Angeles, she stayed busy leading the Auntie Sewing Squad, a volunteer group of mostly Asian American women she founded in March 2020 to make face masks for health care workers, farm workers, incarcerated people and others. She recruited 6-year-old children, her 73-year-old mother and others for the operation, which ballooned to more than 800 “Aunties,” a cross-cultural term of respect and affection for women, as well as “Uncles” and nonbinary volunteers in 33 states. Together, they distributed more than 350,000 masks.

“I feel like I got more done for the world by running a mutual aid group than as an elected official,” said Wong, a third-generation Chinese American from San Francisco.

. . .

In March 2020 your tour for “Kristina Wong for Public Office” was postponed. What made you want to start a mask-making group?

I was home without income feeling sorry for myself, and I stumbled across some articles that said there was a need for homemade masks. It started with me taking my Hello Kitty sewing machine and fabric and making a naïve offer to the internet: “If you need masks and don’t have access to them, I will help you!” But my ego wrote a check my body couldn’t cash, and within four days I was inundated with requests, so I started a Facebook group of people whom I knew could sew. We had Aunties cutting the elastic off their fitted sheets, the straps off their bras. It was a Robinson Crusoe situation.

Why did you call yourself a “sweatshop overlord”?

My first volunteers were all Asian women, and I was like, “Oh, my God, this is the sickest moment, we are a modern-day sweatshop.” Our mothers and grandmothers did garment work — my grandmother and grandfather did laundry work as part of their rite of passage to America — and now we find ourselves doing this work again, for free, because the government hasn’t prepared us for this moment. So it was this gallows humor joke that I was the sweatshop overlord — also humor about child labor because I was ordering children around.

For the full interview, see:

Sarah Bahr, interviewer. “Kristina Wong’s Story: Sewing With Her Aunties.” The New York Times (Saturday, October 30, 2021): C7.

(Note: ellipses added; bold in original. The questions in bold are from the interviewer. The words under each question are quotes from Kristina Wong.)

(Note: the online version of the interview has the date October 19, 2021, and has the title “Kristina Wong’s Pandemic Story: Sewing With Her Aunties.”)

Musk Wants to Use His Billions “to Get Humanity to Mars”

(p. B1) In the negotiations over President Biden’s infrastructure bill, Senator Ron Wyden, Democrat of Oregon and chairman of the Finance Committee, proposed the idea of a tax on billionaires specifically. Thursday morning, Mr. Biden announced his framework for paying for the bill, which promised additional taxes on the income of “the wealthiest 0.02 percent of Americans.”

Mr. Wyden’s proposed tax will likely never make it into law.

. . .

(p. B5) Elon Musk, in a tweet, seemed to come out against the proposal. “Eventually, they run out of other people’s money and then they come for you,” he wrote. It is fairly safe to say that Mr. Musk will never run out of money. A back-of-the-envelope calculation from Forbes’s real-time net worth tracker suggests that he could spend $1 million a year for 100,000 years and still have more money than Bill Gates, with an estimated $136.2 billion.

. . .

Abigail Disney, granddaughter of Roy Disney and a longtime critic of income inequality, said in an interview that she believes the immense displays of wealth by the country’s richest during the pandemic — particularly the ostentatiousness of last summer’s space race — helped foster a serious discussion about the tax burdens on billionaires.

. . .

In comments denouncing the proposed billionaire tax, Mr. Manchin described the ultrawealthy as people who “create a lot of jobs and invest a lot of money and give a lot to philanthropic pursuits.”

That was an implicit endorsement of the idea, often repeated in discussions around high-net worth giving, that regular people pay taxes while rich people pursue philanthropy, giving not to the Treasury but to their preferred causes. “My plan is to use the money to get humanity to Mars and preserve the light of consciousness,” Mr. Musk said in a subsequent tweet in response to the tax proposal.

“That idea that ‘it’s my money and I should decide what to do with it’ is very dominant, and it goes along with the culture of individualism that allows people to feel that they’ve done this on their own and haven’t benefited from social goods like roads and education and laws,” Professor Sherman said.

Ms. Disney, who is an active member of the Patriotic Millionaires, said she sees that thinking as a primary obstacle to raising taxes on the richest Americans. “Billionaires may be brilliant — and I don’t doubt Elon Musk’s I.Q. — but they don’t do anything on their own,” she said. She also questioned the prevailing wisdom among the country’s wealthiest that they know best and the government shouldn’t be trusted with their money.

“The last time I was in the Bay Area, I went walking in the marina and saw seven consecutive boats named after characters from Ayn Rand,” Ms. Disney said. “They need to come to their senses.”

For the full story, see:

Nicholas Kulish, Ephrat Livni and Emma Goldberg. “Billionaires Of America Are Thriving.” The New York Times (Friday, October 29, 2021): B1 & B5.

(Note: ellipses added.)

(Note: the online version of the story was updated Nov. 2, 2021, and has the title “Who Are America’s Billionaires, Anyway?”)

M.I.T. Tries to Silence Abbot for Defending Hiring and Promotion Based on Merit

(p. A1) CHICAGO — The Massachusetts Institute of Technology invited the geophysicist Dorian Abbot to give a prestigious public lecture this autumn. He seemed a natural choice, a scientific star who studies climate change and whether planets in distant solar systems might harbor atmospheres conducive to life.

Then a swell of angry resistance arose. Some faculty members and graduate students argued that Dr. Abbot, a professor at the University of Chicago, had created harm by speaking out against aspects of affirmative action and diversity programs. In videos and opinion pieces, Dr. Abbot, who is white, has asserted that such programs treat “people as members of a group rather than as individuals, repeating the mistake that made possible the atrocities of the 20th century.” He said that he favored a diverse pool of applicants selected on merit.

He said that his planned lecture at M.I.T. would have made no mention of his views on affirmative action. But his opponents in the sciences argued he represented an “infuriating,” “inappropriate” and oppressive choice.

. . .

(p. A14) This fight did not surprise Dr. Abbot, who described his own politics as centrist. A Maine native, he went to Harvard and came to the University of Chicago for a fellowship and became a tenured professor. He said he found in Chicago a university that remained a leader in upholding the values of free speech, even as he noticed that colleagues and students often fell silent when certain issues arose.

Dr. Abbot said his department had spoken of restricting a faculty search to female applicants and “underrepresented minorities” — except for Asians. He opposed it.

“Asians are a group that is not privileged,” he said. “It reminded me of the quotas used to restrict Jewish students decades ago.”

He spoke, too, of a lack of ideological diversity, noting that a conservative Christian student was hectored and made to feel out of place in an unyielding ideological climate. Last year he laid out his thoughts in videos and posted them on YouTube.

Loud complaints followed: About 150 graduate students, most of whom were from the University of Chicago, and a few professors from elsewhere signed a letter to the geophysical faculty at the University of Chicago. They wrote that Dr. Abbot’s “videos threaten the safety and the belonging of all underrepresented groups within the department.” The letter said the university should make clear that his videos were “inappropriate and harmful to the department members and climate.”

Dr. Abbot has since taken the videos down.

Robert Zimmer, then the president of the University of Chicago, issued a statement strongly reaffirming the university’s commitment to freedom of expression. Dr. Abbot’s popular climate change class remains fully subscribed. The tempest subsided.

. . .

WDr. Abbot, for his part, said he had tenure at a grand university that valued free speech and, with luck, 30 years of teaching and research ahead of him. And yet the canceled speech carries a sting.

“There is no question that these controversies will have a negative impact on my scientific career,” he said. “But I don’t want to live in a country where instead of discussing something difficult we go and silence debate.”

For the full story, see:

Michael Powell. “Science, Ideology and Politics Jostle in the Halls of Academia.” The New York Times (Thursday, October 21, 2021): A1 & A14.

(Note: ellipses added.)

(Note: the online version of the story has the date October 20, 2021, and has the title “M.I.T.’s Choice of Lecturer Ignited Criticism. So Did Its Decision to Cancel.”)

Higher Stock Market and Unemployment Benefits Allow Many Workers to “Be More Picky About the Jobs They Take”

(p. A1) Fall was meant to mark the beginning of the end of the labor shortage that has held back the nation’s economic recovery. Expanded unemployment benefits were ending. Schools were reopening, freeing up many caregivers. Surely, economists and business owners reasoned, a flood of workers would follow.

Instead, the labor force shrank in September. There are five million fewer people working than before the pandemic began, and three million fewer even looking for work.

The slow return of workers is causing headaches for the Biden administration, which was counting on a strong economic rebound to give momentum to its political agenda. Forecasters were largely blindsided by the problem and don’t know how long it will last.

. . .

(p. A13) Ms. Eager, who is vaccinated, said that she had always been careful with money and that she built savings this year by staying home and socking away unemployment benefits and other aid. “My financial situation is OK, and I think that is 99 percent of the reason that I can be choosy about my job prospects,” she said.

Americans have saved trillions of dollars since the pandemic began. Much of that wealth is concentrated among high earners, who mostly kept their jobs, reduced spending on dining and vacations, and benefited from a soaring stock market. But many lower-income Americans, too, were able to set aside money thanks to the government’s multitrillion-dollar response to the pandemic, which included not only direct cash assistance but also increased food aid, forbearance on mortgages and student loans and an eviction moratorium.

Economists said the extra savings alone aren’t necessarily keeping people out of the labor force. But the cushion is letting people be more picky about the jobs they take, when many have good reasons to be picky.

In addition to health concerns, child care issues remain a factor. Most schools have resumed in-person classes, but parents in many districts have had to grapple with quarantines or temporary returns to remote learning. And many parents of younger children are struggling to find day care, in part because that industry is dealing with its own staffing crisis.

. . .

When Danielle Miess, 30, lost her job at a Philadelphia-area travel agency at the start of the pandemic, it was in some ways a blessing. Some time away helped her realize how bad the job had been for her mental health, and for her finances — her bank balance was negative on the day she was laid off. With federally supplemented unemployment benefits providing more than she made on the job, she said, she gained a measure of financial stability.

Ms. Miess’s unemployment benefits ran out in September, but she isn’t looking for another office job. Instead, she is cobbling together a living from a variety of gigs. She is trying to build a business as an independent travel agent, while also doing house sitting, dog sitting and selling clothes online. She estimates she is earning somewhat more than the roughly $36,000 a year she made before the pandemic, and although she is working as many hours as ever, she enjoys the flexibility.

“The thought of going to an office job 40 hours a week and clocking in at the exact time, it sounds incredibly difficult,” she said. “The rigidity of doing that job, feeling like I’m being watched like a hawk, it just doesn’t sound fun. I really don’t want to go back to that.”

For the full story, see:

Ben Casselman. “Economic Gains Hobbled As Labor Market Shrinks.” The New York Times (Wednesday, October 20, 2021): A1 & A13.

(Note: ellipses added.)

(Note: the online version of the story has the date October 19, 2021, and has the title “The Economic Rebound Is Still Waiting for Workers.”)

Amazon Hiring 55,000 Workers

(p. B3) Amazon.com Inc. said it is seeking to hire about 55,000 people globally among its corporate and technology ranks during a recruiting event set for Sept. 15, [2021] as the e-commerce giant continues a hiring spree begun at start of the Covid-19 pandemic.

The Seattle-based company is aiming to fill roles in cloud-computing unit Amazon Web Services, as well as in divisions such as Amazon Studios, advertising and its broadband satellite Project Kuiper. The open positions include more than 40,000 roles in the U.S. across 220 locations, including in New York City; Bellevue, Wash.; and Arlington, Va., where the company is opening a large corporate office.

. . .

The company employs about 950,000 people in the U.S. and has said it has made more than 450,000 hires throughout the country since the public-health crisis began.

For the full story, see:

Dave Sebastian. “Amazon Seeks to Hire 55,000 for Office, Tech Roles.” The Wall Street Journal (Thursday, Sept. 2, 2021): B3.

(Note: ellipsis, and bracketed year, added.)

(Note: the online version of the story was updated Sept. 1, 2021, and has the title “Amazon Seeks to Hire 55,000 for Corporate, Tech Roles.”)

“The Best Recipe for Economic Growth Is” Freedom and Opportunity

(p. C3) Migration has been central to the American story since the beginning. In the early 19th century, New Englanders left the rocky soil of Massachusetts for the more fertile Ohio River valley. During the Dust Bowl of the 1930s, farmers fled Oklahoma for California. In the early 20th century, millions of African-Americans left the Jim Crow South to find work in the factories of northern cities. Through the 20th century, mobility was an American tradition: In every year between 1950 and 1992, according to the Current Population Survey, more than 6% of Americans moved across county lines.

In recent years, however, the engine of American migration has been grinding to a halt. People often move to get ahead, which makes mobility a reasonable measure of economic dynamism. So it’s a troubling sign that since 2007, geographic mobility has dropped by one-third, with fewer than 4% of Americans changing counties annually. The reason is clear: In the most prosperous cities and regions, insiders have figured out how to use regulations, laws and institutions to make life easier for themselves and harder for everyone else. In the process, they have made the U.S. a far less dynamic society.

. . .

Most important, we need to stop thinking of growth as a zero-sum game. Today, insiders worry about getting their share of the pie instead of growing the economy for everyone. The best recipe for economic growth is the traditional American one: freedom, combined with robust investment in opportunity for the least advantaged.

For the full commentary, see:

Edward Glaeser and David Cutler. “The American Housing Market Is Stifling Mobility.” The Wall Street Journal (Saturday, July 17, 2021): C3.

(Note: ellipses added.)

(Note: the online version of the commentary has the date September 2, 2021, and has the same title as the print version.)

The commentary quoted above is based on the authors’ book:

Glaeser, Edward L., and David Cutler. Survival of the City: Living and Thriving in an Age of Isolation. New York: Penguin Press, 2011.