COLUMN

A call for a new King Solomon

DIANE FRANCIS January 11 1993
COLUMN

A call for a new King Solomon

DIANE FRANCIS January 11 1993

A call for a new King Solomon

COLUMN

DIANE FRANCIS

As unemployment remains a problem during this latest economic downturn around the world, politicians in Canada, the United States and elsewhere call for more retraining programs to shift workers from nongrowth sectors to those with bright prospects. The problem is, where is the King Solomon out there in the education or political realm who can tell our society which skills in which sector and in what numbers will be needed? Politicians and educators are probably the least capable of distinguishing “winning” from “losing” industries, mostly because, as servants in the public sector, they are totally removed from the commercial world. Even entrepreneurs and company presidents cannot be counted on to find niches that will guarantee success in the future. Witness how the corporate landscape is littered with the corpses of those who guessed wrong.

That is why politicians and so-called industrial strategies are not the way to help Canada make the transition to whatever the future holds. The best way is to give Canadians, who are basically entrepreneurial, the tools to help forge their own opportunities.

After all, not everyone can, or wants to, become an electronics engineer or software designer. Although those professions will be in demand for years to come, economies will need far more people who can start new dry-cleaning establishments, restaurants, doughnut shops and boutiques, or who import doodads from the Third World, specialize in packaging products from abroad or who can sell anything from advice to autos. And the rewards for such undertakings, not to mention the sense of satisfaction, can be great for those who work hard, and work smart. That is why, out of necessity and choice, increasing numbers of people throughout the industrialized world are going into business on their own.

Between 1979 and 1990, self-employment jumped to 37 million workers or 10 per cent of the total employment in all 24 nations that belong to the Organization for Economic Co-

Amid the search for opportunities, see how the corporate landscape is now littered with the corpses of those who guessed wrong

operation and Development (OECD). Of the new entrants, more than half have opted to be selfemployed by leaving an existing job, according to the OECD’s 1992 Employment Outlook. Only about 20 per cent came from the ranks of the unemployed.

Self-employment varies greatly from country to country surveyed. In Canada, the selfemployed represent 7.4 per cent of our entire workforce, compared to 6.7 per cent in 1979. Italy has 22.3 per cent self-employed, Spain 17.1, Australia 12.4, Britain 11.6, Japan 11.5, France 10.3, Germany 7.7, the United States 7.6 and Sweden seven. In most OECD countries, the rate of self-employment growth outpaced total employment growth.

That is why the most enlightened retraining policy a government can deliver is to give the unemployed, or anyone else, the generic skills to enable them to be self-employed. It’s not a complicated curriculum: how to keep a set of books, deal with regulations, tax collectors, employees, suppliers, bankers, landlords and lawyers. Would-be proprietors should also take a basic training course on how to sell; how to read financial statements, the business press and macroeconomic indicators; how to prepare loan requests, budgets and mini-strategic

plans; how to find investors or lenders, manage cash flow and analyse a business’s or product’s prospects. I would also throw in an afternoon on the 10 most common reasons for business failure plus another on famous swindles, or how to smell a business rat.

In short, more people should be taught the basics of entrepreneurship. Critics would say those skills aren’t worth a damn because the ability to spot opportunities or live with risk are not traits that can be taught in a classroom. That is true, but many a risk-taker has failed merely because he had never mastered, nor been told that he should, the basic skills that are required to run one’s own affairs successfully.

Besides the trend toward self-employment, the report points out some other interesting facts. The self-employed tend to work longer hours and get paid less than those who work for someone else. That may be because many employed people are overpaid for the amount of work they perform. After all, employers are increasingly saddled with obligations to pay workers for statutory holidays, vacation pay, sick pay and maternity or other leaves even though they perform no work. Meanwhile, the self-employed stop making money on holidays and while on vacation or otherwise indisposed.

That is why it is not surprising that the OECD found that countries with high self-employment percentages also have high social-security charges imposed on employers, including health, pension or other schemes. If such charges exceed productivity gains, people are thrown out of work or forced to become selfemployed. In other words, we are killing off workers with our imposed kindness. On the other hand, lower pay among the self-employed can be misleading because they enjoy such tax breaks as writing off entertainment, transportation or depreciation costs against income. While legitimate, such writeoffs artificially reduce reported incomes.

Perhaps most significantly, the OECD found that governments who trained and partially bankrolled the unemployed, so that they could become self-employed, fared the best. In Britain, for instance, more than 500,000 unemployed people started new businesses between 1983 and 1990, representing nearly a quarter of all workers turning to self-employment.

I would suspect that a disproportionate percentage of self-employed persons in rich countries are immigrants from poor countries. Selfemployment is more necessary for immigrants because new arrivals have greater difficulties finding employment. All other things being equal, such as credentials, they lack a network, or relatives to help them. Besides, many lack the social or linguistic skills, not to mention comparable licences or diplomas. Immigrants drive cabs, manage convenience stores, run restaurants and hotdog stands, and the like.

Supporting the unemployed forever or embarking on costly retraining programs that may be outdated or inappropriate is financially impossible, as is the task of choosing winners and losers. That is why the best curriculum around to train Canadians how to cope with the future is to teach them how to be their own boss.

MACLEAN'S/ JANUARY 11,1993 1 1