The Other 1%
(A Razor-Thin Slice)

Dateline: 5 May 2015

We hear a lot about the 1% these days, with the 1% being the super rich. This 1% happens to be getting richer while everyone else is getting poorer. It's a bad sign.

But I have just learned that there is another 1%, and to my surprise, it turns out I am in this rare group. I discovered this by way of an article at Zero Hedge by a guy named Charles Hugh Smith. The article is titled, Endangered Species: The Self-Employed Middle Class

Self employment has long been a part of the American dream but how many independent, sole-proprietor, self-employed people in the US actually make a middle class income (defined as $50,000 a year)?  Mr. Smith has taken a close look at "the numbers"and come to the conclusion that only 1% of Americans fall into this category. Here is a pertinent section from the article...

"While 19.4 million sole proprietors is a big number, it turns out most are side businesses that earn relatively little income. 5.5 million earn less than $5,000 annually, 3.8 million net between $5,000 and $10,000, 5.7 million earn between $10,000 and $25,000, and another 3 million net between $25,000 and $50,000.

Only 4.48 million self-employed earn $50,000 or more, and 3 million of those are partnerships or corporations, i.e. professionals such as CPAs, attorneys, etc. That leaves about 1.5 million people who aren't in the professional class (those with advanced degrees and professional licenses and credentials) who earn a middle class living as sole proprietors.

This is roughly 1% of the workforce of 145 million. It turns out the non-professional self-employed that make enough to maintain a minimally middle class lifestyle are a razor-thin slice of the workforce."

When the professional class of sole proprietorships is added in, Mr. Smith says the number of truly independent self-employed in America increases to only about 3% of the workforce.

This is a powerfully discouraging statistic, especially for anyone who dreams of owning their own business and achieving the  measure of independence (a.k.a., freedom) that such a business can bring.

But from my perspective, I believe that being self employed to any degree is better than not being self employed at all. I've believed that since I was a teenager, and I've long acted on that belief. 

Besides that, I can say with certainty that every little venture (of which I've had many) into self employment was a learning experience that contributed to me finally finding the freedom from employment that I now enjoy.

My point being, if you want to be free from wage slavery, you can do it. But it will take a lot of focus, imagination, determination, hard work, and persistence. Oh, and if my example is any indication, it might take a very long time (35+ years).

One last thought... If you stay out of debt and live a simplified, self-reliant lifestyle, you can be among the independent sole proprietor class for less (in some cases, a lot less) than the defined middle class income.


SharonR said...

That's really a good thing to be included in that razor thin slice. The tricky part, as you said in the last paragraph is to stay out of debt. Is it possible? I suppose so, but like all the other attributes you gave, "focus, imagination, determination, hard work and persistence", it's not for the half-hearted. One would need to really be dedicated. Your patience has paid out and I'm glad to have a small part of that (in buying your book and other things, that is)

W. said...

We operate a family owned business. We've had struggles, as all small businesses have had. One of the common issues for us and for others is the wide variation in income from month to month and year to year. We have learned to deal with that by being frugal with our money and always putting money into savings, so that a lack of a paycheck for a period of time doesn't throw us into a crisis.
We have no debt, house is paid for, saved up for (used) cars so we could pay with cash, kids put through college without debt by saving since they were babies (and it helps to have smart kids that qualify for academic scholarships).
The person who helps us with college and retirement accounts said something one time about our "spartan" existence, which I thought was funny. We don't have a big house or fancy cars, but there isn't anything we need that we don't have. As you said, Herrick, living a simple, debt-free lifestyle makes a big difference in how much income you actually need. And simple (or spartan, according to some people) doesn't mean poor.

-Matt the Farmer said...

I am also a member of this "razor thin slice" as well as an even smaller slice as a farmer. I have found the things you mention (focus, imagination, determination, hard work, and persistence) to be of the utmost importance.

Thanks for your articles - I enjoy reading them!

-Matt the Farmer

Herrick Kimball said...

Hi Sharon—
Thanks for the comment. It's not always possible to stay out of debt. But I do think it is possible to keep debt to an absolute minimum, with the intention of eventually being debt free, and staying debt free. That's how it has worked for me.

Re: purchasing my book and other products... As Fred Bartles used to say, "Thank you for your support."

Herrick Kimball said...

Putting your kids through college without debt is quite an accomplishment. I could never have done that.

Very good!

Tucanae Services said...

My wife of ten years used to work the retail trade as a wage earner. She decided to strike out on her own with a franchise opportunity. She by no means is even close to $50k a year. But she sets her own hours, goals, and is a heck of a lot happier for the choice.