Self-Employment

Self-employment has always been a fundamental feature of American life, not just in colonial times and during early U.S. history—during which, of course, the predominant form of work was agriculture—but also in the most recent period of modern times since World War II. Data on self-employment are collected by the U.S. Bureau of Labor Statistics (BLS) as part of the Current Population Survey. The most recent such data are for the year 2003. In the period 1948 through 2003, those self-employed in non-agricultural industries have represented around 7 percent of total employment. The highest levels came in the early decades of this period, with 1948 being the highest year: 12 percent of all those working outside agriculture were working for themselves. The lowest level was reached in 2002 (6.7 percent), and, generally the trend has been downward. In 2003, 9.3 million individuals were self-employed and represented 6.9 percent of non-agricultural employment. Self-employment rates fluctuate up and down. They tend to rise during reces-sions—but sometimes also rise with the rising economy. Self-employment is highest in the agricultural sector where, in 1948, 61.1 percent of all workers were self-employed. In 2003, 951,000 agricultural workers, 41.8 percent of all those engaged in agriculture, worked for themselves.

LEGAL DEFINITIONS

Individuals who choose self-employment must be aware of the rules governing the treatment of free-lance employees (also known as independent contractors). Classification of someone as an employee or a self-employee is somewhat ambiguous and depends on several factors, including the degree of independence, the freedom to hire others to do the work taken on, the freedom to work for others, and the assumption of risks. Independent contractors typically accept no fringe benefits and pay Social Security, Medicare, and income tax installments directly. Employees have more statutory rights, benefits, and protections than subcontractors, who must generally provide these for themselves. But independent contractors have advantages in terms of freedom, flexibility, and tax deductions.

The IRS applies a 20-part test in order to determine whether a certain worker should be classified as an employee or an independent contractor. The main issue underpinning the test is who sets the work rules: employees must follow rules set by their bosses, while independent contractors set their own rules. For example, an individual who sets his own hours, receives payment by the job, and divides his time between work for several different employers would probably be classified as an independent contractor. Other criteria involve who provides the tools and materials needed to complete the work. For example, an individual who works at an employer's facility and uses the employer's equipment would be considered an employee, while one who works at a separate location and provides her own equipment would be classified as an independent contractor. Finally, an independent contractor usually pays his own expenses of doing business and takes the risk of not receiving payment when work is not completed in accordance with a contract, while an employee is usually reimbursed for business-related expenses by the employer and receives a paycheck whether his work is completed or not.

An individual's status as a self-employed, independent contractor can be reinforced by having multiple clients, being paid by the amount of work done rather than by the hour, or obtaining an employer identification number from the IRS. Working under a business name also helps reinforce this status. Printing invoices, business cards, and stationery can also help identify someone as a self-employed person. In general, the person must demonstrate that he or she is in business for the purpose of making a profit.

CHARACTERISTICS

Of those self-employed in industry (versus agriculture), slightly over half (51.5 percent) were working as incorporated entities. The self-employed are predominantly older. Among those unincorporated, those aged 24-44 represented 42 percent and those aged 44 and older 54.5 percent of this segment of the self-employed. Among those incorporated, the older were even more numerous, representing 58.5 percent of those over 44 and 42 percent of those in the 24-44 bracket. In the wages and salary-earning population as a whole the 24-44 group was 48.1 percent and those over 44 were 36.5 percent. The self-employed are overwhelmingly white (88.2 percent of unincorporated, 90.1 percent of those incorporated) and U.S. born (87 percent in both categories). The educational attainment of the incorporated self-employed was high in 2003. Of these individuals, on average, 72 percent had some college on up to advanced degrees; among the unincorporated 58 percent had such attainment, slightly below the wages and salary-earning population, of which 60 percent had some college or higher attainment. Males are more present in both categories, representing 62 percent of the unincorporated and 73 percent of the incorporated self-employed.

Beyond such demographic measurements, the motivation for self-employment is more difficult to determine. Motivations routinely mentioned by commentators no doubt rest on experience and observation—namely that some women choose self-employment to be more available to care for a member of the household. Some of the elderly continue working on their own as they reach retirement age—and beyond. A certain segment of the self-employed population is motivated by enterprise. Many, however, do not choose this type of work but do it as a way of coping with inability to find good jobs, especially in middle age. And of these some succeed well enough to found organizations and thus, after a period, migrate back into employment—but in companies that they now own. Fluctuations in self-employment data may in part be explained as an indirect effect of new business formation: these begin as single-person businesses but then become providers of wages and salaries—for the owners as for others.

SELF-EMPLOYMENT AND THE VERY SMALL BUSINESS

Elsewhere in this volume (see Small Business ) are presented data on the so-called nonemployer businesses, labeled "the micros." In 2003, there were some 18.6 million such businesses grossing $830 billion in revenues, equivalent to $44,623 per entity. This number was twice as high as the 9.3 million self-employed persons in 2003—but also includes them. The self-employed, thus, are roughly half of the population of "micro" of business, the seedlings from which larger entities often emerge. But obviously many nonemployer businesses are also operated "on the side" by people employed in ordinary jobs but doing some trading, producing, and service providing in their spare time: moonlighting, in other words. In 2001, 7.8 million people reported working at multiple jobs. Of these, 4.6 percent (359,000) told the BLS that they were doing this in order to build a business or to get experience—preparing, perhaps, to launch their own operations. Nonemployer businesses grew by 20.8 percent between 1997 and 2003; during the same period, total employment increased 7.3 percent and self-employment by 3.1 percent, losing share, in other words. Thus it is plain that the growth of seedling businesses is far less attributable to self-employment than to entrepreneurial activity.

CONSIDERATIONS IN SELF-EMPLOYMENT

Self-employed individuals as a whole tend to work longer (an additional 17.5 hours per week, according to one study) and harder than their colleagues who are organizationally employed. Moreover, self-employed people often operate under uncertain payment schedules and must make outlays from personal earnings for insurance and retirement. In addition, their salaries and assets are dependent on their work contributions in a more intimate way than are those of their colleagues. The entrepreneurial role is also often more physically and psychologically stressful due to the investments in energy the jobs demand.

Isolation and Networking

Isolation often proves to be an important source of psychological strain for self-employed individuals. The environment of the typical self-employed individual is quite different from the corporate environment where many professionals gain their experience. This is one reason contact with supportive colleagues becomes crucial. Mentors can provide advice regarding business aspects of a new business owner's operation. Trade and professional organizations can be an excellent way to establish contacts with peers. Tenacity in networking has been cited as a key to survival for business owners, some of whom maintain databases of thousands of contacts. These contacts are also vital in referring clients and providing market information. The role of the contact is made more important as the self-employed individual typically has no staff for marketing support.

It is difficult to exaggerate the importance of referrals to the typical independent professional. Since relationships are so vital, one must exercise the utmost delicacy in terminating employment with one's former employer or turning down a job. One's former employer can even become a good client, besides providing valuable referrals. When turning down clients, the self-employed person can protect those relationships by making referrals or even subcontracting to other colleagues in their network. Provided the work done is of quality, this can strengthen one's reputation as a purveyor of talent—whether one's own or an associate's. When the client calls back with a more appropriate assignment, the contractor has the choice of the business.

As they begin their enterprises, many self-employed individuals feel compelled to accept a variety of assignments due to sheer scarcity of work. However, specialization can help ensure their long-term survival. For one thing, corporate clients can often find a generalist's abilities in-house. Also, specialization may allow professionals to broaden their client base geographically, thus freeing their fortunes from fluctuations in the local economy. These factors can enable the specialist to earn higher fees and work more consistently. Paradoxically, one's work as a specialist can garner referrals outside one's specialty, so specialization might not be as limiting as a strict definition would imply. The self-employed should be cautioned against changing their specialties too often, as this can confuse clients and make their own operations inefficient.

Tax Implications

Self-employment entails both tax advantages and disadvantages. In terms of advantages, individuals who are classified as independent contractors can deduct work-related expenses for tax purposes. In addition, independent contractors often qualify for tax deductions for using part of their home as an office and for salaries paid to other people, while employees usually do not. Independent contractors also can claim significant deductions for medical insurance, transportation, office supplies, and a host of other operating costs.

The main tax disadvantage for self-employed persons is that they must pay the full amount of Social Security and Medicare taxes themselves and make quarterly estimated tax payments to the federal government. For those who are organizationally employed, the employer withholds income taxes and pays half of their Social Security and Medicare taxes. Although the payment of Social Security and Medicare increases the tax burden of self-employed individuals, these amounts are based on net, rather than gross, earnings. For this reason, it is essential for small business owners to keep an accurate record of expenses. Self-employed individuals also file quarterly taxes.

INCREASING THE CHANCE OF SUCCESS IN SELF-EMPLOYMENT

Self-employment, whether by choice or necessity, does not guarantee success. In fact, nearly two out of every three new businesses fail within five years. But the chances of success can be improved with careful planning, prior savings, and a sound marketing strategy. It may also be helpful to make the transition to full-time self-employment gradually. As already mentioned, one option is to "moonlight" on the new job first. Those planning home-based businesses should also take time to prepare family members for the changes that will take place.

Some prospective new business owners also try to establish one stable client relationship that will provide steady income during the search for additional clients. A particularly attractive option may be an individual's former employer, who will already be familiar with the would-be entrepreneur's reputation and abilities. For this relationship to succeed, however, it is important that the individual use an honest and professional approach when severing ties with their employer. Of course, your employer may not react warmly to such an arrangement if your new business is a potential threat to its own financial fortunes.

Although one stable client relationship can help establish a new business, it is also important that the self-employed person develop a marketing strategy to find new clients and grow. Many new business owners become so busy serving their existing clients that they do not devote sufficient time to marketing. Sending out brochures, networking, and joining professional organizations are a few possible marketing strategies.

Finally, self-employed individuals should take an organized approach to all business activities in order to increase their chances of success. A business plan, however rudimentary, is often helpful to set the path ahead with some consciousness and formality. A plan can help a self-employed person evaluate strategies, plan expenditures, and motivate him or herself. It is also important to keep careful records of income and expenses, set aside money for taxes, and insist upon contracts for all work performed.

see also Self-Employment Contributions Act (SECA); Small Business

BIBLIOGRAPHY

Hipple, Steve. "Self-Employment in the United States: An update."Monthly Labor Review. U.S. Department of Labor. 23 July 2004.

Karoly, Lynn A., and Julie Zissimompoulos. "Self-Employment Among Older U.S. Workers." Monthly Labor Review Online. U.S. Department of Labor. Available from http://www.bls.gov/opub/mlr/2004/07/art3exc.htm. July 2004.

"Moonlighting in 2001." Monthly Labor Review. U.S. Department of Labor. 16 October 2002.

U.S. Bureau of Labor Statistics. "Work at Home in 2004." Press Release. 22 September 2005.

U.S. Census Bureau News. "Small Business Week 2006." Press Release. 27 March 2006.

                                 Hillstrom, Northern Lights

                                   updated by Magee, ECDI

Birdseed

Background

Birdseed is a mixture of seeds, nuts, fruits, and vegetables provided to birds for sustenance. It is produced in a two-stage process that involves preparing the component ingredients then combining them in a mixing kettle.

Statistics show that the United States is a nation of bird lovers. In fact, feeding and watching birds has become one of America's favorite pastimes. According to the United States Fish and Wildlife Service (USFWS) one third of the United States population feeds wild birds. In a survey done by the American Pet Products Manufacturers Association (APPMA) it is reported that 6.9 million households in the United States have birds as pets. This fascination with birds has led to a birdseed industry that dispenses over 500,000 tons of birdseed per year.

History

Humans have a long history of interaction with the avian world. As far back as the Egyptian pharaohs and the ancient Romans, people captured and kept birds for both aesthetic and practical reasons. Certainly, modern society continues to depend on birds for food, entertainment, and companionship. In light of this, then, it is not surprising that the United States Congress enacted the Wild Bird Conservation Act of 1992 in an effort to preserve exotic and endangered birds around the world.

Even with such a rich history of interaction between humans and birds, birdseed manufacturing did not get its start until the middle part of the nineteenth century. Many of today's American birdseed manufacturers have similar roots; they were small town agricultural grain companies with retail stores. In the 1940s, Simon Wagner of Wagner Brothers Feed Company and Bill Engler Sr. of Knauf & Tesch (the company is now known as Kaytee, one of the largest pet food manufacturers in the country) collaborated on creating a market for wild birdseed. Up to that point such a market had never existed. Creating birdseed was a natural extension for these feed companies considering they were already making products that contained the same ingredients. Wagner and Engler were able to establish a market for their birdseed relatively quickly. Wagner attributes the early success to the growth of suburbia after World War II, which led to new homeowners' interest in their yards and the animals that visited them.

Raw Materials

The most commonly used birdseed ingredients are sunflowers, corn, millet, fruits (such as raisins and cherries), and peanuts. Many of these crops come from Nebraska, Kansas, North Dakota, and South Dakota.

One of the primary ingredients in birdseed is sunflower seeds. These are four sided, flat seeds that are about 0.25 in (0.64 cm) and 0.13 in (0.32 cm) wide. The seed coat is black with gray stripes. The outer coat protects the inner kernel which is composed of about 20% protein and 30% lipids. It also contains a significant level of iron and fiber. Other seeds that may be used include cottonseed, pumpkin, safflower, hemp, or palm kernel seeds.

Cereal grains are another type of ingredient used in birdseed compositions. Of these corn is one of the most important. About 800 kernels are produced for each ear of corn harvested. An average center kernel measures about 0.15 × 0.31 in (4 × 8 mm) thick and 0.5 in (12 mm) long. Corn kernels are made up of about 60% starch and 4%oil. Millet is another grain used. It is smaller than corn with a length of about 0.15 in (4 mm) and a width of 0.11 in (3 mm). It contains about 11% protein, 3% fat, and 8%fiber. Its small size makes it an ideal birdseed ingredient, especially for smaller birds.

Peanuts are a groundnut grown on an upright plant. Its flowers are fertilized above ground and then are pushed into the ground to develop the seeding pods. A pod will contain anywhere from one to three nuts. Peanuts are good components for birdseed because they contain over 25% protein. Additionally, they have about 50% oil which increases their taste appeal for birds. Manufacturers must be particularly careful of any birdseed mixes that contain peanuts because peanuts can harbor the pergillus mold. This mold can do serious liver damage to birds.

Fruits are another component material added to birdseed mixtures. They have a high sugar content that makes them appealing to certain bird species. The most commonly used fruits are cherries and raisins. Cherries are pitted before they are used and then dehydrated. Raisins are produced from grapes using a drying process. They can be either sun-dried or physically dried by forced-air dryers.

In general, pet bird food is a more complex mixture including exotic nuts and fruits. This is because pet birds get all their nutrition from the bird feed that is given to them by their owners; unlike wild birds that have access to and utilize other food sources. Another interesting additive to some wild birdseed is ground hot peppers. It turns out that birds do not mind the hot pepper taste but squirrels have a distinct aversion to it. This prevents squirrels from eating birdseed laid out for wild birds. Other ingredients such as algae extract can be added to improve the tone and color of a bird's feathers.

The Manufacturing
Process

Making birdseed is a relatively simple manufacturing process. The first phase of production involves the procurement of seeds, grains, and fruit that make up the various mixes from processors. The second phase involves blending and packaging these materials then shipping them to consumers.

Seed procurement

• 1 The process of producing birdseed begins with the procurement of raw materials. This is an important phase of production because pure and fresh ingredients are crucial to the quality of the end product. Birdseed manufacturers purchase their raw materials from processors who obtain their grain from the actual growers or grain brokers.
• 2 The processors clean the component seeds to get them to 98% purity. Once the raw materials are in the plant, they must be cleaned further. The cleaning process consists of sorting unwanted debris and waste products from the birdseed ingredients. Typically the raw materials are put through a three-step air cleaning system that sorts the quality foodstuff from the waste (also known as Chilton). The air sorter separates the lighter debris such as sunflower hulls and stems from the raw materials used in the birdseed mixes. Many manufacturers use the Chilton to make other animal feed such as pellets for companion birds. Additional waste products may be sold to local farmers for use in their animal feed. Dirt and rocks can also be removed with a similar process. Processors may also provide drying services and some seed treatments to prevent fungal growth.
• 3 Once the seed is cleaned and treated, it is filled into bags, drums, or even trucks and delivered to the birdseed manufacturer within one week. Larger manufacturers are often geographically located near processing companies that clean and store the crops used to make birdseed.
• 4 Next, the cleaned seeds are blended. Recipes vary depending on the mix, but all ingredients are automatically measured and blended in large, stainless steel containers. In an effort to keep the mixes blended and consistent from package to package, the ingredients are continually mixed until they are deposited into their appropriate packaging. Occasionally, scents, oils (such as anise or orange oil), or colors are added to the blends to enhance consumer appeal.

Packaging

• 5 Proper packaging is crucial to the quality of the birdseed because rodents, mites, or other pests can contaminate seeds which in turn can be spread to birds. Packaging equipment weighs and fills pre-made packages composed of a variety of materials from paper to polyester films. The packaging provides a physical barrier between the feed and potential pests. As a general rule, companion birdseed typically gets more barrier packaging than wild birdseed.
• 6 To minimize infestations by any pests that may have inadvertently gotten inside the bags after packaging, each bag is flushed with nitrogen. The moisture and oil content of the grain also has an impact on the potential for infestations. Seeds with high oil and moisture content, like sunflowers, require more treatment to prevent infestations or rancidity. Another tactic for cutting down on infestation is to use airtight bins to house the birdseed ingredients prior to it being processed.

Quality Control

To ensure that a high quality product is made, birdseed manufacturers visually inspect the raw materials and finished products during each phase of production. Quality control begins with the raw material growers. For example, the plants are frequently examined while they are growing to make sure they are free from disease and growing properly. If diseased plants are found, they may be isolated and removed before harvest. When the birdseed manufacturers receive component raw materials inspections begin immediately. These ingredients are subjected to a variety of laboratory tests to ensure that specifications related to seed size, nutritional value, and microorganism contamination are met. After batches of birdseed are mixed, the finished product is checked to see that the correct proportions of ingredients were put in each batch.

The Future

Perhaps the biggest issue facing birdseed manufacturers in regards to pet birds is the trend in avian nutrition to move away from birdseed as the main source of nutrition toward pelleted food. Pelleted food is touted as being "complete nutrition" and, according to manufacturers, no additional supplementation is necessary. Manufacturers recommend using birdseed as a treat or behavior modification tool instead of the bird's mainstay. The advantage of pelleted food over birdseed is that it provides a bird with all the necessary vitamins and nutrients required for optimum health. Of course, the drawback to pelleted food is that some birds refuse to eat it. Birdseed is inherently deficient in some important nutrients like protein and some minerals and high in fat (up to 50% fat in some seed). In the future, birdseed manufacturers will try to formulate more mixtures with a more complete nutritional profile.

Another trend in the industry is to make the industry as a whole more proactive and homogeneous. Overall, the bird feed industry is relatively fragmented with cottage-based industries to massive corporations all producing birdseed. As a result, different states have different regulations and expectations for quality control. Industry trade associations have been attempting to deal with the quality control issue on many levels including an attempt to standardize regulations and expectations from state-to-state. Additionally, efforts are underway to educate the entire industry on issues affecting it, such as noxious weed control in crops.

Where to Learn More

Books

Alderton, David. The Cage Bird Question and Answer Manual. Barron's Publishing, 2000.

Armstrong, Holly, et al. Gourmet Bird Food Recipes. San Leandro, CA: Bristol Publishing, 2001.

Gallerstein, Gary A. The Complete Bird Owner's Handbook. Macmillan Publishing, 1994.

Periodicals

Allen, Carolyn. "We Have Roots: Early History of the Wild Bird Seed Marketplace." Birding Business (Summer 2001).

Rouhi, A. M. "Chili Pepper Studies Paying Off With Hot Birdseed and Better Analgesics. Chemical and Engineering News (4 March 1996).

Other

American Pet Products Manufacturers Association Web Page. December 2001. <http://www.appma.org>.

Kaytee Products Web Page. December 2001. <http://www.kaytee.com>.

SandyDe Lisle&

PerryRomanowski

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