The Self Employed Start Trading In Their Shingles

When Gary L. Daugherty lost his job in 1989, he decided to cope in the same way as many other professionals: He became a consultant. Daugherty, 45, had spent most of his career at Nashville-based Aladdin Industries Inc., rising to vice-president for human relations. He soon landed several assignments, including a major one to recruit for a small company in the Northeast. By hustling, Daugherty was able to maintain the pay he had enjoyed at Aladdin. But in July, when a job as vice-president for human resources came up at Gibson Greetings Inc., he grabbed it. Says Daugherty: "The hardest part about being self-employed is finding new work."

Daugherty is not alone. With many white-collar industries hiring again, some self-employed are going back to work for companies, bringing to an end the extraordinary surge in self-employment that began in the 1980s. That, in turn, may force a revision of some popular notions about white-collar workers. Since the recession began, many observers have argued that with big corporations restructuring and thinning the ranks of managers and professionals, the only way for many professionals to survive in the '90s would be to hang out a shingle and go into business for themselves.

NEW WAVE. Today, this theory seems to have parted company with reality. After rising steadily through the 1980s and then shooting up early in the downturn, self-employment among professionals in the past year has dipped. While very large corporations have cut their ranks of professionals and are still shedding workers, small and midsize ones, especially in business services, have been creating white-collar jobs. That's enough to give some of the world's Daughertys a chance to get back into the corporate fold. "If self-employment by managers and professionals was the wave of the future, it's not happening now," notes Andrew M. Sum, a labor economist at Northeastern University.

It's easy to see why analysts believed that the self-employment boom of the 1980s would be fueled by the recession. The economy shed 1.3 million jobs from the third quarter of 1990 to the first quarter of 1991, according to the Bureau of Labor Statistics. And large companies--even many of those in the manufacturing sector--cut white-collar jobs mercilessly. That sent plenty of managers going into business for themselves. It all fit neatly into a longer-term trend toward white-collar self-employment, which grew by 30% from 1982 to 1991, vs. an overall employment gain of just 18% over that period.

RECLASSIFIED. Yet since then, the trend has gone into reverse. From the second quarter of 1991 to the third quarter of this year, white-collar self-employment fell by more than 6%, to 2.9 million (chart).

Where did all those consultants go? BLS surveys don't track the self-employed closely enough to know for sure, so some could have retired or withdrawn from the labor market. And some may simply be reclassifying themselves as employees after the Internal Revenue Service in 1987 began a crackdown on companies that carried contract employees on their books as self-employed. But some are getting jobs again. Headhunters say they're now placing more self-employed professionals in corporate jobs. Says Dan Parker, a vice-president at A.T. Kearney Inc. in Atlanta: "Many of these people are going back to smaller companies, which is where the hiring is."

The sluggish economy still is causing plenty of turmoil for white-collar workers. But hiring by many corporations is increasing, not shrinking. And if there's a company job to be had, many of the self-employed are only too happy to jump at it.

Before it's here, it's on the Bloomberg Terminal.