Self-employment has all sorts of perks: control over your time, freedom to choose work you enjoy and unlimited earning potential.
But working for yourself also has some major financial drawbacks compared to working for someone else. And those disincentives are big enough to discourage some would-be entrepreneurs from creating their own jobs.
Which is a HUGE problem. Particularly in this struggling economy, don't we want people to create jobs?
When I left my day job nine months ago to create my own career (I write e-books and help small businesses with blogging and social media), my move freed up that full-time position for someone else. I created a job -- and one that paid more than my 9-to-5. Then I hired a handful of part-timers to help me with my business, creating more jobs.
One full-time job plus several part-time positions might not seem like a lot in the grand scheme of things, but every bit helps. And with more people going the solopreneur route, it all adds up.
What if our government created financial INCENTIVES for the self-employed, rather than DISINCENTIVES?
Here are three big challenges to address:
You have to earn MORE money when you work for yourself (as a sole proprietor) than when you work for a company to have the same amount of spendable income.
Why? Because sole proprietors pay a self-employment tax -- more Social Security and Medicare than employees (not to mention covering your own health insurance, business expenses and more). It's complicated, but this blog post lays it out in more detail.
The high cost of working for yourself often comes as a surprise to people who go off on their own for the first time. In fact, one would-be solopreneur told me how she left her full-time job, only to return to her previous employer once she realized just how difficult it would be to earn the same income on her own.
Just figuring out your taxes as a self-employed go-getter, even before paying them, is a huge hassle -- red tape that takes up valuable time we could be using to build our business.
Speaking of taxes, freelancers should be able to deduct expenses for space we use for both our business AND our life. As the rule stands now, you're only allowed to deduct for space that's used purely for business. But as more people transition toward working from home, it's just plain SMART to use a room in your house both as a relaxing space AND as an office. You should be rewarded, not punished, for being efficient.
2. Health insurance
A lot of self-employed folks go without -- unless you're married, of course, and can depend on your spouse's company insurance to cover you. Never mind that ambitious and career-minded young people (you know, the kind that create their own jobs) often wait longer to get married.
Some of us choose a high-deductible plan, which usually means foregoing preventative care because you have to pay out of pocket and waiting until something terrible happens to seek medical care. It seems risky, but it can also be the more practical option, given the high price of monthly health insurance premiums.
Then there are those of us who actually pay a monthly bill for our own insurance. Mine is more expensive than the basic plan because I'm a woman of childbearing age... and I'm actually not that unusual. A whole lot of women who start their own companies are at the age where they'd consider having kids.
Which brings up another financial obstacle for self-employed women: maternity leave. Since you won't get a month (or three or six) of paid leave, you usually have to rely on savings if you want to step away from your business to care for your new baby even for a short time. Unfortunately, that in itself is reason enough for some women in the prime of their job-creating years to work for someone else's company instead.
3. Retirement savings
Anyone who's smart starts putting away money for retirement as early as possible, at least enough to max out your company match. This is important, essential, VITAL -- the best thing you can do for yourself as a young professional. That's what we're told again and again, right?
Except when you work for yourself, no one matches your 401k contribution.
What if the government stepped in and paid the match for anyone who created a job?
What if they encouraged us to step up to the plate and make things happen, rather than waiting for a company to hire us?
If lawmakers are truly worried about jobs, they'll start looking for ways to support those of us who are actually creating them.
Alexis Grant is managing editor of Brazen Life and author of Turn Your Side Hustle Into a Full-Time Business. She also offers a free newsletter on creating freedom in your career. Brazen Life is a lifestyle and career blog for ambitious young professionals. Hosted by Brazen Careerist, we offer edgy and fun ideas for navigating the changing world of work -- this isn't your parents' career-advice blog. Be Brazen.