The younger members of today’s workforce think about business and careers in a very different way than previous generations. While there have always been job-hoppers and entrepreneurial-minded individuals, there seems to be exponentially more of these types of employees when we look at Millennials.
Up to 91% of Gen Y workers expect to stay in a position for less than three years before moving on to a new job. And some of those workers will transition out of company jobs entirely — by 2020 about half the workforce is expected to be working as freelancers, contractors, or temps.
What Caused This Trend for Gen Y?
Employment didn’t always look this way. A couple of generations ago, job security meant working your way up the ladder at one company (or at most, two or three). You often spent thirty or forty years furthering your career at that company. In exchange for your loyalty, you received a good retirement plan, maybe even a pension, and sound benefits throughout your career.
Now the pension plan could be a museum exhibit. Millennials don’t feel loyal to the companies they work for — because those companies showed their employees that they were the first assets to cut loose when entire departments were laid off during the Great Recession. Job security in the corporate world now means looking out for yourself and constantly seeking newer and better positions elsewhere.
Working for someone else means taking on a big risk with little chance for reward.
Why Employment in Someone Else’s Business Is a Huge Risk
That sounds silly, doesn’t it? Traditionally, going out on your own as an entrepreneur was seen as the big risk. And telling someone you were going to make a career change and work as a freelancer was sometimes interpreted as code for “I’m unemployed.”
But the recession and subsequent layoff of hundreds of thousands of people in “secure” jobs reminded us that as an employee, you’re always at the mercy of someone else’s business decisions. Your risk is unlimited; you could lose your paycheck for any reason, any time.
And for most employees, that paycheck is 100% of their income.
But what about the rewards? They’re limited, because again, someone else makes the business decisions around your earnings. Sure, you can earn a raise or bonuses. But you have to negotiate for higher pay, or hope that you meet someone else’s quota or standards to secure that extra money each quarter or each year.
Even if you do successfully negotiate for a raise each year, the average raise was estimated to be about 3% in 2014. That’s better than nothing, but remember: you’re dealing with the risk of losing 100% should anything go wrong.
Let’s look at it this way: Would you invest in a financial asset that at best provided you with a 3% to 5% return, but each year you risked losing 100% of your investment? Of course not!
But that’s exactly what employees do with their careers if they rely 100% on a paycheck from an employer. And that’s exactly why working for yourself, in some capacity, is the new job security.
Working for Yourself Provides Better Job Security
Don’t get me wrong: Working for yourself does still come with risk. You can’t simply take a leap into the unknown and expect for a parachute to magically form as you fall.
You must have a plan. You need to verify your ideas. You have to ensure there’s actually a market for what you want to do. And you must be willing to actually do the work; it’s not enough to have some good ideas and hope someone else will see your brilliance and either execute for you or fund you so you can pay someone else to do the work.
Even if you manage to do everything right, you can still fail. Everything comes with risk. But here’s the difference in working for someone else and working for yourself: You don’t need to risk 100% of your earnings.
Anyone who is self-employed can mitigate their risk in several ways:
- You can work on launching your own business or freelance career on the side of your full-time day job; if you can’t succeed as a self-employed worker, you can fall back on the job you wisely did not quit right away.
- As an entrepreneur or freelancer, your income is likely diverse and varied. If you lose one contract, or one client, you may still have nine others paying you. That means you’ve lost 10% of your earnings, not 100%.
- With the rise of the online economy, it’s no longer cost-prohibitive to start your own business or freelance career. You can bootstrap your business with zero funding. (I launched my own successful digital marketing business for about $300.) The traditional risk of losing hundreds of thousands of dollars can be a thing of the past.
Working for yourself provides more job security than working as an employee in someone else’s business because there is less risk, more control, and greater rewards.
You make the business decisions. You diversify your income so your earnings don’t originate from a single source. You can bootstrap your setup so that you can make a small investment with a potential for an unlimited return.
Yes, an unlimited return. This is where working for yourself really gets an advantage over working for someone else. Theoretically, your earning potential as a self-employed worker is unlimited. The harder (and smarter) you work, the more money you can make.
(Not to mention, there’s more job security in working for yourself because you must gain more marketable skills in order to succeed. You naturally diversify your skillset, and therefore gain the ability and experience needed to work in a wider range of positions than you would limiting yourself to your current job responsibilities as outlined by someone else.)
What Happens If You Don’t Want to Be an Entrepreneur?
It’s important to note that working for yourself doesn’t need to mean creating a million-dollar startup. This is another big reason why self-employment offers better job security today: It doesn’t necessarily mean entrepreneurship in the traditional sense.
You can be an entrepreneur who needs to seek investment capital for their huge new tech startup if that’s what you want. But that’s not the only way to work for yourself.
You can be a freelancer or a consultant who creates a simple website and uses social media to successfully market their services. You can be a “solopreneur,” or one-person business owner of a very small venture that doesn’t use employees but relies on other independent contractors instead.
You can even be an employee with a side hustle. For many, this offers a best-of-both-worlds solution. You get to keep your company benefits like retirement plans with employer matches, health insurance, a shared tax burden, and paid time off — but you also diversify your income, your skillset, and your work.
ARTICLE: Choose Your Side Hustle Carefully
You don’t have to be full-time self-employed to better your job security by working for yourself. There is no one right option for everyone.
The takeaway: The key is to understand that employment doesn’t look the same as it used to, and we need to react appropriately in order to safeguard our earnings and our careers. If you want to enjoy real job security, it won’t be enough to rely on a company to always take care of you through good economic times and bad.
Consider working for yourself, in some capacity, to ensure you’ll always have a way to earn money with a diversified skill set that clients or an employer would be happy to pay for.