The goods (and bads) of self‐employment

Abstract

Self-employment, which accounts for one in seven workers in OECD countries, has ceased to decline in recent decades and is now growing in these countries.1 It comprises shop owners, restaurateurs, consultants, lawyers, and an increasing number of unskilled workers in industries like construction and transportation, in which self-employment was unusual in the past.2 Yet these workers, the vast majority of whom do not employ others, have meagre access to social protection. In some countries, the self-employed are legally excluded from unemployment, sickness, and occupational injury benefits—the three areas of social protection that, retirement pensions aside, self-employed workers value most.3 And in other countries they become de facto excluded because, despite having statutory access to these benefits, the eligibility requirements to accrue them are tailored to waged work.4 Unprotected exposure to social risks makes self-employed workers, on average, three times more likely to become income-poor than their salaried peers.5 Over recent years, the working conditions and social protection of the self-employed have gained ground in public policy debates. A growing consensus exists among practitioners and policy-makers on the importance of strengthening the social protection of the self-employed in four ways. One is to offer them unemployment benefits in order to protect them from poverty in the event of bankruptcy. Another is to secure them access to insurance for occupational diseases and injuries. The third is to grant them adequate protection from day one in case of sickness. The fourth and final way is to give them access to benefits and measures that allow for a better work–life balance, including maternity, paternity, and caregiver leave. Moreover, as part of the implementation of the European Pillar of Social Rights, the European Commission has recently put forward a proposal that encourages EU member states to offer adequate social coverage to self-employed workers.6 The debate over these measures, however, has lacked normative input thus far. Even though self-employment was a central concern for pre-industrial thinkers like James Harrington, Adam Smith, and Thomas Paine, who conceived of it as an alternative to the ‘servile dependency’ that waged work involved, recent philosophers have largely overlooked it.7 The burgeoning philosophical analyses of work have paid scant attention to the nature and value of self-employment, nor to the normative significance that the distinction between self-employment and employee work may have for the legal and social protection that self-employed and waged workers are due. This neglect may be explained by the tendency in recent philosophy to embrace a corporatist paradigm of working relations—a paradigm that equates work with employment, usually in large firms, and neglects self-employment and other non-standard forms of work. This is clearly true of philosophers working in the Marxist tradition, who conceive of workers as a class of waged earners compelled to sell their labour force to capitalists.8 But it is also true of neo-republican philosophers, who typically focus on the domination to which workers may be subject under the managerial authority of their employers,9 and of liberal egalitarians, who have recently centred their attention on how subordination to an employer may be compatible with the basic liberties of employees.10 The corporatist paradigm has two serious limitations. First, it sits uneasily with the reality of existing labour markets, in which standard employment coexists with a growing myriad of non-standard forms of work, including self-employed, gig, and multi-party work. Second, it is blind to pressing moral questions that fall outside the scope of standard employment relationships, such as the moral obligations that firms might have towards independent contractors, the self-exploitation of mom-and-pop owners that may result from market competition, the risks that algorithmic management may impose on gig workers, and the protection that informal self-employed workers in poor economies may deserve. These problems affect a substantial portion of the global labour force, and they are not bound to fade away. It is time for the corporatist paradigm, then, to give way to a non-wage-centred view of work: one that appropriately accounts for self-employment and other forms of non-standard work. This article takes some first steps in this direction by focusing on the moral significance of self-employment. It seeks to explore the extent to which self-employed work may offer adequate opportunities to realize goods traditionally associated with waged work. Identifying such goods has become central to the debates over what makes (waged) work decent or meaningful, and worthy of protection as a result—with scholars and policy-makers offering a diversity of views of the pecuniary and non-pecuniary goods that work may deliver. For example, whereas economists tend to focus on earnings and benefits,11 sociologists and philosophers often centre on the non-economic dimensions of work, including autonomy, self-realization, and socialization.12 Such goods operate, in these analyses, as normative standards for assessing different work arrangements. Inspecting whether self-employed work may also realize them is critical, then, to assessing whether self-employment merits protection—without prejudice to the independent reasons we may have to protect it. If, for example, self-employment happens to deliver such goods, then we may have pro tanto reasons, whose stringency will depend on how successfully self-employment delivers them relative to employee work, to improve access to protection for the self-employed, making it easier for those with a preference for self-employment to go solo as a result. The article proceeds as follows. After offering a two-dimensional account of self-employment in Section II, the remainder of the article examines the link between self-employment and three of the core goods of work: autonomy, self-realization, and self-provision. Sections III and IV inspect the non-pecuniary goods of autonomy and self-realization, respectively. Work may no doubt provide a wider range of non-pecuniary goods—for example, it may often improve health, marriage prospects, and family stability compared to joblessness. Yet the reason for focusing on autonomy and self-realization is not just that these are among the core goods of work, as their salience in philosophical and sociological analyses suggests. It is also that they encompass other narrower goods—such as self-direction and self-sufficiency in the case of autonomy, and social contribution and recognition in the case of self-realization—which loom large, given their significance, in recent scholarly and political debates on the value of work. Section V turns to a pecuniary good: the economic capacity to fend for oneself and one's family—or self-provision, as I label it—in an attempt to capture what is normatively significant about earnings. The conclusions I draw, albeit tentative, favour improving the social protection of the self-employed. I first argue that self-employed workers are both less and more autonomous, as it were, than those who work for an employer, as self-employment may sometimes lessen the off-duty autonomy that people acquire through work. Yet it significantly increases workers’ autonomy within work. And I also argue that self-employment, although unnecessary for attaining self-realization and self-provision, is distinctively useful for securing each of these goods, under plausible, far from outlandish, conditions. Before proceeding, two caveats are in order. First, the arguments I develop here do not entail that self-employment should be promoted, in the sense that workers should be conditioned or induced to develop a preference for self-employed work.13 They rather seek to show that, under actual circumstances, yet also under an wide range of neighbouring ones, some individuals have reasons to engage in independent work, and that this decision deserves adequate social protection, so that those with a preference for self-employment have suitable opportunities to realize this preference without incurring unbearable risks. Second, although the arguments I develop apply both to the self-employed who work on their own and to those who employ others, it is worth teasing these two categories apart. For one thing, improving the social protection of solo self-employed workers (that is, those who have no employees) has greater urgency. This is not only because solo self-employed workers account for more than three quarters of the self-employed,14 it is also, and chiefly, because they are in a more precarious situation, in terms of earnings, financial security, and job stability, than self-employed employers. For another thing, social contributions, which are the counterpart of social benefits, tend to be higher in the case of self-employed employers, who are usually among the high-earning self-employed.15 Whom we should prioritize among the self-employed, and how we should fund their benefits, are questions to be addressed separately, once we have answered the question of whether the social protection of the self-employed merits improvement. The concept of self-employment is not neat. The definitions we find in our legal systems lack the consistency of those of waged or employee work. Take, for example, the 1993 International Classification of Status in Employment (ICSE-93), which the International Labour Organization has long endorsed. According to this classification, which is the standard that national statistical systems still most widely use, the self-employed are those workers who are not compensated with a salary. They instead work for profit, in the sense that their income directly depends on the revenue that their productive activity may generate, being more exposed to market risks than waged workers as a result. Compare, for example, the self-employed owner of a beer garden, who will lose her clientele and make no money on a rainy day, with her employed waiters, who will take home a day's wage despite having spent the day sitting on their hands. Yet an exclusive focus on the for-profit dimension of work, which the ICSE-93 exemplifies by limiting the self-employed to the residual group of workers who do not earn a wage, is insufficiently discriminating. It misclassifies a number of workers who, although working for profit, have much in common with wage labourers. One example of this misclassification is that of dependent contractors, who provide goods and services for a single client with whom they have a commercial agreement. Another example is that of contributing family members who work without a contract in family businesses run by the head of the family. Like employees, these workers are under the authority of someone else—the single client or the head of the family—who restricts their autonomy in many aspects of their work. A more nuanced definition of self-employment, which the International Labor Organization's (ILO) 2018 update of the International Classification of Status in Employment (ICSE-18) incorporates, considers a second dimension as well—namely, that of independence. According to the updated definition, a major difference between self-employed and employed workers is that the self-employed, unlike employees, are not subordinated to the authority of a boss. Self-employed workers are free to decide basic aspects of their work, such as when, how, and with whom to work, whereas employees are not. This is a definition that is increasingly used in various jurisdictions to reclassify bogus self-employed workers as employees, and to extend certain employee rights, like sick pay and paid holidays, to dependent contractors on the grounds that, despite their being legally classified as self-employed, they lack autonomy in how to run their businesses, as well as the authority to hire and dismiss staff.16 Considering these two dimensions—profit and independence—we can define genuine self-employed workers as those who earn their income by engaging in independent productive activity at their own risk.17 This allows us to distinguish the self-employed both from standard wage workers, who engage in dependent work for a salary, and from intermediate categories that sit uneasily between self-employment and waged work. These categories do not only include the above-mentioned cases of dependent contractors and contributing family members. They also include employers who, despite earning a salary from their own business, are independent enough to have a work experience that is closer to that of their self-employed peers. And they also include members of worker cooperatives who, despite having collective ownership and control of their business, are subordinated to the authority of the management of the cooperative, and enjoy less individual control over their working conditions than self-employed workers do.18 As an initial exploration of the nature and value of self-employment, this article sets aside the complexities that borderline cases, such as those of dependent and bogus self-employment, may pose. It rather focuses on whether, and on what grounds, the decision to engage in genuine self-employment deserves better protection than it currently has. In order to address this issue, the next three sections examine the value of self-employment as a vehicle for attaining three core goods of work: those of autonomy, self-realization, and self-provision. As noted above, these goods may not cover the full gamut of goods that can make work valuable. Yet it is hardly controversial that their absence entails serious work deficiencies, such that if, for example, self-employment happens to poorly secure them, it then becomes inimical to good work—and the reasons to protect it accordingly diminish in stringency. Analyses of autonomy at work tend to focus on the extent to which workers exercise self-direction or control over their working conditions, including their schedule, tasks, and workload. Karl Marx famously diagnosed the alienation of the proletariat on the grounds that the capitalist division of labour dispossesses workers of control over production.19 And Max Weber warned of the impact that the bureaucratization of economic activities and organizations could have on workers’ control over their jobs.20 These analyses home in on workers’ degree of autonomy while at work. But the significance of autonomy at work is also prior and subsequent to work performance. It is prior because the decision to take one particular job instead of another can be more or less autonomous. And it is subsequent because one of the rewards of work is the off-hours autonomy that we may acquire through it. This section inspects the extent to which self-employment may foster or stifle these three dimensions: (a) autonomy within work, (b) autonomy in one's choice of work, and (c) autonomy through work.21 As we will see, the self-employed are more autonomous than their salaried peers in some, yet not all, of these dimensions. Autonomy within work is the main motivation for engaging in independent work, which most self-employed workers cite.22 Self-employment grants self-direction: it allows workers to decide which work to perform, when to perform it, and under which conditions. This discretion sharply contrasts with the diminution of autonomy that waged work, by its very nature, entails.23 In entering an employment relationship, workers agree to subordinate themselves, while on duty, to their employer's authority. The specific impact of such an agreement on employees’ autonomy no doubt depends on their bargaining power, the peculiarities of the employment contract, and the way in which managers exert their authority. An engineer with abundant job alternatives, no need to clock in, and a hands-off boss surely enjoys more autonomy on the job than an unskilled courier with few outside options, tight delivery times, and an intrusive manager. Yet it is also useful to distinguish between ideal and non-ideal scenarios in this respect. In non-ideal circumstances, in which labour law is defective or defectively enforced, bosses’ authority can significantly undermine individual autonomy. Workers aplenty undergo capricious rescheduling, verbal abuse, sexual harassment, and other forms of abusive management.24 These practices harm them in various ways, one of which is the curtailment of their autonomy within work. And these practices do so not just to the extent that workers actually suffer them. The mere possibility of being abused for what managers may see as a failure can also undermine employees’ self-direction as to basic decisions about, for example, when to undertake pending tasks or how to address customers. Self-employment is valuable and worth being better protected and promoted, then, because it shields workers from abusive management by removing its cause: subordination to managerial authority.25 It is hardly surprising, then, that self-employment increases in jurisdictions where labour regulation is loose and employers can more easily abuse their staff.26 But one could argue that the superiority of self-employment disappears, in this respect, when legal protections effectively protect workers from abusive authority.27 So it is important to see how in ideal scenarios, in which such protections are in place and are complied with by employers, self-employment may still foster autonomy within work, in the following two ways. First, under existing employment law, employers retain the prerogative to direct workers in all the aspects that remain unspecified in the employment contract and by labour legislation—whose content is inevitably incomplete, and desirably so for efficiency reasons.28 Such residual authority permits them to make final decisions on shifts, promotions, overtime, and so on.29 In ideal circumstances, employers would not use such authority to purposely trespass on employees’ interests by, for example, reallocating them against their will or assigning them overtime on their birthday. Yet workers’ autonomy may suffer from the mere fact that, whenever they disagree about what to do, the employer's judgement will always prevail over their own. Think of a mechanic whose boss tells her to fix a customer's car in a particular way. If she disagrees with her boss about what the best solution for the car is, she will be compelled to act against her judgement. And if, in contrast, she happens to agree, then she will not be able to revise her judgement without great cost, including the risk of being dismissed. Second, although some wage workers may enjoy substantial autonomy within their work—for example, they may be able to decide when they work and whether to do so remotely or on site—there are certain economic liberties which the self-employed have which they do not have (or have only to a lesser degree). Such liberties include rights to negotiate prices with customers, to self-brand, to secure autonomous capital investment, as well as other liberties required for operating in the market as a freelancer or independent producer.30 Employers can no doubt decide to bestow such liberties upon their employees. For example, the owner of a tailor shop can let her employed tailors design suits and negotiate their price with customers. When this occurs, employees enjoy greater option freedom, in the sense that they gain access to a wider range of options than otherwise.31 But such freedom is subject to the will of the employer, who can always restrict, with no reason offered, some such options or rescind them altogether. The employer, by contrast, enjoys agency freedom, in the sense that her economic liberties are legally protected from others’ interference.32 In sum, only self-employment ensures that economic freedoms are enjoyed in a modally robust way. An important objection is that self-employed workers, despite not being subject to managerial authority, may see their autonomy limited by their dependence on suppliers, creditors, and customers, whose wills they have to satisfy to keep their businesses going. The economic liberties of a self-employed tailor are meagre, so the objection goes, if market competition compels her to take orders she dislikes or put in more hours than she would rather work.33 There is a kernel of truth to this objection. Yet it also misses two relevant considerations. The first is that we should distinguish personal dependence, as it exists between employees and their employers, from dependence on the aggregate, as it exists in the market. The self-employed rely on many, sometimes hundreds or thousands of anonymous customers, yet not on any particular customer.34 Although this dependency may restrict their autonomy in various ways, as the objection rightly points out, it does not subject them to the kind of domination that the employment relationship often involves. The critic could insist, however, that the self-employed are sometimes subject to personal dependencies, such as when they rely on a single supplier or purchaser with market power.35 Here is where the second consideration comes in—namely, that the kind of personal dependencies to which self-employed workers may be subject emerge from horizontal market relationships, which are qualitatively different from vertical employment relationships.36 To illustrate, suppose that the self-employed tailor has no choice but to rely on a single supplier who sets abusive prices. The crucial point is that, although she may end up having to work longer hours to pay the supplier, the supplier cannot direct her as to how to tailor ballgowns, or when to clock on and off. Horizontal dependence is surely not innocuous. Yet it does not entail submission to the command and supervision of an alien authority.37 After a long working day, the self-employed tailor goes home having to report to no one but herself. Let us now turn to autonomy in one's choice of work, which importantly differs from autonomy within work. Workers may, as a result of an autonomous choice, take jobs that involve little autonomy within their work. And workers may also take jobs that involve more autonomy within their work than they would rather have, as when a journalist who wishes to be hired by a newspaper is bound, because there are no openings in media outlets, to freelance. In sum, autonomy within work and in one's choice of work, albeit often related, are distinct. How autonomous one's choice of work is depends on two conditions. The first is objective, and requires that occupational freedom be secured. Occupational freedom entails the capacity to choose aspects of work that are central, such as with whom, by which means, and to what ends one works. Sabine Tsuruda has recently argued that managerial authority, when bestowed solely on employers, is incompatible with occupational freedom.38 It undermines its epistemic conditions, she argues, because employees cannot make fully informed choices about jobs whose conditions the employer can alter in unpredictable ways. If correct, this reasoning provides a rather straightforward argument that self-employment opportunities should be available without having to incur unbearable risks. But it also seems to exclude the right to submit oneself to the managerial authority of an employer as an instance of occupational freedom.39 Tsuruda's argument proves too much, given that, by the same token, our freedom to marry would be undermined by the decision to marry someone with greater power to change the terms of the marital relationship as the marriage unfolds—because, for example, she is better educated and more affluent. But this is implausible, for such a decision can perfectly well result from an autonomous assessment. And the same is true of the decision to work for a hierarchical firm. Indeed, some workers may rather avoid the responsibilities that working for a more horizontal firm—or running their own business, for that matter—may involve. What matters in order to preserve people's freedom, in choosing their spouse as much as their occupation, is that ample opportunities to decide the kind of relationship they want to get into are on offer. The opportunity to avoid putting oneself under an employer's thumb is special in this respect—not only because of the effects that, as discussed above, employers’ residual authority can have on workers’ lives, but also because, as Kolodny observes, in modern societies hierarchical relations of authority, barring those between the state and its subjects, are exceptional.40 Given that work is one of the few places in which people are subject to other people's will, we should be particularly wary of the conditions under which such subjection occurs. Self-employment is valuable and worth protecting and promoting, then, because it contributes to ensuring that the choice of work of those who wish to avoid managerial authority is autonomous, and that those who submit to such authority do not do so because they have no alternative. The second condition that autonomy in one's choice of work requires is subjective—namely, that work be chosen because, or partly because, its end product is in line with workers’ personal goals. A job that is simply chosen in order to escape poverty, or to fulfil others’ expectations, is heteronomous.41 As a matter of fact, it must be noted, the decision to become self-employed often fails to meet this condition, as many become so out of mere necessity. This is true of developed economies, in which a decent portion of the self-employed—one in five in the EU—would rather work for an employer.42 Yet it is particularly true of developing economies, where self-employment, which accounts for nearly half of the workforce, mostly results from job scarcity.43 None of this entails, however, that in such cases self-employment undermines the subjective condition of autonomy in one's choice of work. First, what these empirical observations show is merely that, absent good job opportunities, distinguishing when self-employment is autonomously chosen and when it is not—when workers are pulled or pushed into self-employment, as organizational psychologists and labour economists often put it—becomes harder. Second, even when good jobs are available, self-employment expands one's opportunities to tailor one's work to fit one's goals. It allows a baker to produce patisserie, and a freelance journalist to write articles, free from the constraining direction of a boss. We will come back to this point in the next section. For now, it suffices to note that, when opportunities for self-employment are scarce—for example, because the social protection of the self-employed is meagre—it is harder for some workers to align their work with their personal goals. Finally, consider how working solo, rather than for someone else, may impinge on workers’ autonomy outside work. The greater flexibility that self-employment offers no doubt improves such autonomy in one sense, as it enables workers to adjust their working schedules to other activities and responsibilities, such as taking care of their children, walking their dog, or taking yoga classes. Many women, for example, cite the possibility of combining work with their care duties, thus avoiding the parent-unfriendly schedules that wage jobs often involve, as an important reason for becoming self-employed.44 But self-employment also poses various challenges to the autonomy that workers enjoy after they clock off—starting with the burdens that running a business, unlike working for one, involves. When it comes to bookkeeping or meeting administrative requirements, such burdens can be significant. And although the self-employed can mitigate some of them with professional assistance, those who cannot afford such services are likely to spend numerous evenings agonizing about their taxes and books, with significant costs not just of time, but also of mental energy. Second, there is the individualized responsibility that the self-employed—who risk not just their income, but also their capital investment in running a business—bear for the success of their economic activity. In order to keep their business afloat, the self-employed end up taking on more undesired work, and thus enjoying less leisure time, than wage workers do.45 And the pressure they endure, even when off-duty, to find new ways of branding their business, to offer new products, and to attract new clients often makes them constantly think about work, rendering their leisure of poorer quality. Finally, there is the financial insecurity that results from low earnings combined with higher exposure to market risks. More than 70 per cent of the self-employed, for example, earn less than the median employee.46 Under such conditions, sudden illnesses, quiet spells of work, and bad market luck can lead to serious income dips, even to bankruptcy. Further, when self-employed workers lose their shirt, they not only lose the means to realize their aims, they also tend to rely on family, friends, and other informal safety nets, which may create dependencies that may further harm their autonomy. One reason why people enjoy working, when they do so, is that it brings self-realization, which I shall now analyse. Before inspecting the ways in which self-employment may be conducive to self-realization, however, let me briefly consider why work, unlike other neighbouring activities, offers a privileged context for accessing it. An activity is a potential source of self-realization if it has two central features.47 First, it involves the exercise and development of valuable skills and capacities that people choose to develop. Second, its execution lends itself to positive appraisal by others. Thus, private activities that involve the development