For some, it’s a means of escaping the feeling of having someone standing over them, telling them what to do and how to do it, which can come with traditional employment. For others, it’s a means of adapting in the face of the changing economic conditions that threaten their finances.
With the most recent falls in commodity prices bringing a loss of export income, the challenging market conditions have contributed to higher levels of informal employment and lower salaries across many parts of the Caribbean and Latin America. These unpredictable times call for a more flexible, responsive attitude to work and an entrepreneurial spirit in the face of adversity.
Unemployment or a fear of redundancy has been the catalysts for many people becoming self-employed. According to The World Bank, the Caribbean is a region of entrepreneurs, with nearly 70% of the workforce self-employed. Similarly, 60 per cent of working Latin Americans own their own business or work for a small company, and this trend is expected to grow in the labour market in 2016.
The World Bank also reports that within the past four years, 19 per cent of new businesses in Latin America and the Caribbean were founded by someone under the age of 35. With the current market offering fewer opportunities to secure traditional forms of employment, an increasing number of young people are clearly following the trend towards self-employment.
The Caribbean does have a serious unemployment issue, especially with its levels youth unemployment. Not only is youth unemployment high relative to global levels, it is also significantly higher than adult unemployment. Data from the Caribbean Development Bank indicates that the average youth unemployment rate for countries in the region with available data was nearly 25% in 2013, compared with the adult rate of only 8%. Gender differences were also significant, with unemployment among female youth exceeding 30% as opposed to 20% for males.
Job creation can be problematic for many governments when economic conditions are less favourable. But there has been a rising trend in many countries to promote entrepreneurship and small business development to combat the lack of quality jobs available in the region’s larger or multinational businesses.
The rise in ‘going solo’ isn’t just being seen in this part of the world. The self-employed economy is also one of the great UK success stories of recent years. According to The Association of Independent Professionals and the Self-Employed (IPSE) it has grown by 25% since 2009 and provides an estimated ?30 billion a year in “added” value to UK GDP. The latest UK labour force figures from the Office for National Statistics show a record 4.63 million people are self-employed, which is equivalent to 1 in 7 in the total workforce.
Self-employment itself can be a double edged sword for those who embark on earning a living through this form of work. A steady income keeps a family well supported and many money problems at bay, whilst self-employment income can fluctuate and bring money worries to the forefront.
Income variations make it more difficult to budget effectively and set aside appropriate amounts of money for savings. This means having the ability to see through the rough times and plan for the future is key.
This knowledge is called financial literacy, which allows an individual to make informed and effective decisions about their financial resources. Anyone in control of a small business will benefit from recruiting the services of a professional accountant who can best support them on how to get hold of sustainable finance, navigate through the government procurement process, and how to comply with regulations. Regrettably, regulations and taxes are generally designed with the larger businesses in mind and then retro-fitted to the smaller ones. Every tax or regulation break and nuance later created to help small businesses only adds to the weight of regulation that small business owners have to understand and apply.
A good financial foundation is a must. Any good accountant can be as flexible as a business needs them to be, and able to explain anything that is unclear to ensure the best decisions are made.
There are many attractions and great benefits from becoming self-employed, however the reality is uncertainty is the new norm. Anyone who makes the brave decision to go it alone will have to factor in turbulence as a very real possibility, and should develop strategies for a range of different economic, market and of course, personal, scenarios.