All Work & No Pay

[don]

A new survey by Citibank finds that 23 percent of small business owners have gone without pay for at least a year as they work to keep their businesses afloat in a tough economy. “Business owners are wearing more hats, working more hours and taking less profit” to keep their businesses going, said Maria Veltre, Citi's managing director of small business. “They don’t sit idle, they’re asking, ‘What do I need to do to make my business grow?’ There is a level of sacrifice small business owners take for their businesses.”

The nationwide survey of 750 small business owners found that despite financial challenges, one-third of respondents say their business is better than it was a year ago, up from 26 percent in January. Another 33 percent expect their business will grow by more than 10 percent in 2012.

Keeping businesses afloat has required sacrifices on the part of both employer and employees, the survey found. Over the past few years, business owners report that they have, at one time or another, taken less profit (78 percent), worked more hours than usual (70 percent), and used their own money to help the business survive (69 percent).

But what is most revealing is that the majority of respondents — 54 percent — say they have gone without a paycheck in order to keep the business running. And nearly one-quarter (23 percent) have gone without pay for one year or more.

Employees, too, sacrificed finances for their employers. More than one-third of owners (38 percent) said their employees worked overtime without pay; 18 percent said employees either missed paychecks or had paychecks delayed.

Previous reports of tight credit for small business owners could be one reason that owners are going without paychecks. But a reluctance to borrow is another. As fears loom about what Obamacare and expired tax cuts could mean for their bottom lines, many are avoiding the idea of taking on more debt.

Indeed, said Veltre, “access to financing doesn’t come up in the top five most important issues among small businesses on our survey. We don’t see that they are saying, ‘We need cash.’ Instead, they are saying, ‘We need sales, and we need consumer confidence to be addressed.’”

Veltre said she would characterize small business owners as cautious, even as they become more optimistic. “They’re holding tight on hiring, because sales is still a question.”

The survey, conducted between May 1-May 18, had an overall margin of error of plus or minus 3.58 percentage points.

http://www.cnbc.com/id/47723383

[wayiwalk]

Re: All Work & No Pay

My biz partner and I stopped taking any salary mid February this year.....and have delayed raises to employees. Glad I also have a full time job elsewhere.

[don]

Re: All Work & No Pay

One in Four - appalling.

[c1ue]

Re: All Work & No Pay

How can you have 2/3rds of business owners seeing improved business (1/3 improved over 1 year ago and 33 percent seeing business up 10 percent year on year), but half not taking a paycheck?

Losing money on every order, but making up for it in volume?

More likely the improvement is vs. a very low comparison point - and present levels of business are still too poor to actually make a living.

Or in other words, times are still bad.

Pity the real question that should have been asked was not included:

At present levels of business, how long can your business remain viable?

[peakishmael]

Re: All Work & No Pay

One in Four - appalling.

At first read, yeah. But they don't cite historical averages. Surely there have always been small business owners, especially startups, that are taking no salary and plowing their savings into the business. That said, I don't doubt it is worse now, but who knows by how much.

[ProdigyofZen]

Re: All Work & No Pay

I would think that geographics would matter as well. Here in Dallas is quite different than Cleveland Ohio for small business.

[thriftyandboringinohio]

Re: All Work & No Pay

At first read, yeah. But they don't cite historical averages. Surely there have always been small business owners, especially startups, that are taking no salary and plowing their savings into the business. That said, I don't doubt it is worse now, but who knows by how much.

Good point. I think many small business owner skip pay checks to make a go of it ( me and my partners certainly did back in the 90's).

Plus, I'd like to see more detail, because "small business" is a pretty broad category. The SBA defines a business as "small" differently in different industries, but some categories allow up to 1500 employees or $21.5 million annual income. It doesn't seem right to lump together those firms with the local independent solo tax accountant.

[BadJuju]

Re: All Work & No Pay

Good point. I think many small business owner skip pay checks to make a go of it ( me and my partners certainly did back in the 90's).

Exactly what I was thinking of.

[peakishmael]

Re: All Work & No Pay

At first read, yeah. But they don't cite historical averages. Surely there have always been small business owners, especially startups, that are taking no salary and plowing their savings into the business. That said, I don't doubt it is worse now, but who knows by how much.

Good point. I think many small business owner skip pay checks to make a go of it ( me and my partners certainly did back in the 90's).

Plus, I'd like to see more detail, because "small business" is a pretty broad category. The SBA defines a business as "small" differently in different industries, but some categories allow up to 1500 employees or $21.5 million annual income. It doesn't seem right to lump together those firms with the local independent solo tax accountant.

I did a little searching... all the articles I could find refer to the Citibank survey, and say that it was released in a press release. But I could not find it on the Citi web site, even under "Press Releases". Which makes me a wee bit suspicious about Citi's motives, to issue a press release, but post neither the release nor the actual survey results. It's possible I missed it though.

[lektrode]

Re: All Work & No Pay

Previous reports of tight credit for small business owners could be one reason that owners are going without paychecks. But a reluctance to borrow is another. As fears loom about what Obamacare and expired tax cuts could mean for their bottom lines, many are avoiding the idea of taking on more debt.

Indeed, said Veltre, “access to financing doesn’t come up in the top five most important issues among small businesses on our survey. We don’t see that they are saying, ‘We need cash.’ Instead, they are saying, ‘We need sales, and we need consumer confidence to be addressed.’”
http://www.cnbc.com/id/47723383

adding: once upon a time in a place called america, small business was built on sound cash management strategy - one example of this was SAVINGS TO TIDE, OR FLOAT ONE OVER TIL HARVEST OR DEMAND PICKED UP

and one either had savings to make it thru challenging times or the biz would fail (in the NE, one either was ready for winter, or one perished... starved n frozen style, typically sometime in january...)

so... doesnt seem to be 'lack of available credit' for (most) consumer stuff (?) - now... lack of DEMAND for fin-svc products (most of the lot of them developed during the easy credit/lowrates era of the immed past) sounds right...uhhh...
i mean correct.

it isnt for lack of access to credit, is what i mean - when i say that IMHO most small biz types dont feel confident in reaching for 'growth' right now, since it doesnt FEEL like a good bet to make - if for no other reason than the boomers are getting ready to scale back and why bet the farm at this point?

[don]

Re: All Work & No Pay

we only hire independent contractors . . .


100% of U.S. Jobs Added Since 2010 Have Been Self-Employment, Contractor, or Other Jobs Without Unemployment Insurance Benefits


Here are some charts from Reader Tim Wallace that help explain my report a few days ago that 23% of Small Business Owners (Approximately 6.21 million) Report "No Pay for a Year"; New Zealand, Singapore, US, Best Places to Start and Run a Business

The first chart below shows actual employment of covered workers compared to the civilian population and labor force. Covered employees are those eligible for unemployment benefits (working or not). Some are currently collecting those benefits.

In the following charts, "covered employment" or "net employment" refers to those with benefits and currently working.

Population, Labor Force, Covered Employment





Self-employed workers and contractors are not eligible for unemployment benefits even though they have to contribute to state unemployment insurance schemes. It believe it is government-sponsored fraud to have to pay unemployment insurance when there is no chance of ever collecting it.

The next chart shows state level employment data. Net covered employees (those currently with a job covered with unemployment benefits) was calculated by subtracting continuing unemployment claims from the pool of all covered workers.

Covered Employees, Net Covered Employees, Continuing Claims





The next chart compares BLS employment numbers to net covered employees (those actually working).

BLS Employment , Covered Employment, Non-Covered Employment





Notice the widening gap between covered employment and employment as reported by the BLS. In 2008 and again in 2010 the difference between BLS employment and Covered Employment as noted by the green line (right axis) was about 15 million.

This month the difference is nearly 19 million. The table below shows the precise numbers.

2003	123,193,833	137,687,000	14,493,167
2004	123,717,669	138,867,000	15,149,331
2005	124,663,546	141,591,000	16,927,454
2006	127,217,409	144,041,000	16,823,591
2007	129,399,094	145,864,000	16,464,906
2008	130,553,967	145,927,000	15,373,033
2009	127,539,427	140,363,000	12,823,573
2010	124,096,266	139,497,000	15,400,734
2011	122,146,266	140,028,000	17,881,734
2012	123,996,700	142,727,000	18,730,300

Since 2010, the economy has added 3.23 million jobs according to the BLS. Of those 3.23 million jobs, 3.33 million (slightly greater than 100%) have been self-employment, contractor, family-business jobs, or other jobs with insufficient wages and therefore ineligible to collect unemployment insurance.

Since 2009 the numbers look much worse. In that timeframe the economy added 2.36 million jobs according to the BLS. Of those 2.36 million jobs, 5.91 million (250%) were self-employment or jobs otherwise not covered by unemployment insurance benefits.

Unemployment insurance benefits vary state to state. Bouncing around between temporary jobs may also make one ineligible, especially if there are lengthy lapses between jobs.

Inquiring minds may be interested in Unemployment Insurance Eligibility FAQs for Connecticut. You need to consult rules for your state.

Non-Covered Employment Percentage Hits All-Time High

2003	10.5%
2004	10.9%
2005	12.0%
2006	11.7%
2007	11.3%
2008	10.5%
2009	9.1%
2010	11.0%
2011	12.8%
2012	13.1%

Non-Covered Employment in the above table means any job that does not provide unemployment insurance benefits.

Notes About Unemployment (From the Link at Top)

Bear in mind, that making money or receiving a paycheck is irrelevant to the BLS when they compute the unemployment rate. If you work as little as 1 hour, whether you collect a paycheck or not, you are considered employed.

In addition to the 6.21 million business owners with no paycheck, factor in those selling trinkets on EBay out of desperation and collecting a few dimes in the process.

Also factor in all those starting multi-level marketing schemes and calling it a business. How many get sucked into that losing proposition every year? Yet, to the BLS, it's a job if you worked any hours.

The ease of starting a business in the US is a great thing. Unfortunately, making money in a small business startup is not so easy.

Historic trends suggest half of small businesses will fail within 5 years, and I highly suspect future trends will be much worse.

See article for additional stats on working with no pay as well as a county-by-country comparison as to the best places to start and run a business.

Also note that Doing Business offers economic rankings of 183 countries on numerous categories including starting a business, ease of doing a business, getting construction permits, etc.

Conclusion

6.21 million working without pay in conjunction with the reported boom in self-employment looks rather believable in light of excellent charts from reader Tim Wallace.

Factor in disability fraud (see 2.2 Million Go On Disability Since Mid-2010; Fraud Explains Falling Unemployment Rate; Will Higher Disability Taxes Fix the Problem?) and the realistic conclusion is the unemployment rate is much higher than reported while the alleged recovery is much weaker than reported.

http://globaleconomicanalysis.blogsp...have-been.html

[lektrode]

Re: All Work & No Pay

we only hire independent contractors . . .


100% of U.S. Jobs Added Since 2010 Have Been Self-Employment, Contractor, or Other Jobs Without Unemployment Insurance Benefits

The ease of starting a business in the US is a great thing. Unfortunately, making money in a small business startup is not so easy.

Historic trends suggest half of small businesses will fail within 5 years, and I highly suspect future trends will be much worse.

Conclusion

6.21 million working without pay in conjunction with the reported boom in self-employment looks rather believable in light of excellent charts from reader Tim Wallace.

Factor in disability fraud (see 2.2 Million Go On Disability Since Mid-2010; Fraud Explains Falling Unemployment Rate; Will Higher Disability Taxes Fix the Problem?) and the realistic conclusion is the unemployment rate is much higher than reported while the alleged recovery is much weaker than reported.

http://globaleconomicanalysis.blogsp...have-been.html

and THEN.... SHHHHHHH!!!! there's the games the subchapter-s crowd plays, but hey...

this one is interesting in that it both SHOOTS THE CRAP OUT OF THE ARGUMENT FOR "lower taxes on job creators"
(since most of the newest ones _arent_ coming from the recipients of most of the big money taxcuts/subsidies/bailouts) and suggests that longer duration unemployment benefits isnt any kind of 'solution' (altho its better than starving for those in such straights and costs less than riot cleanup, so....)

but then, nobody ever said self-employment was easy (and theres a reason why some of us are still, as difficult as the .gov continues to make it remaining so - tho its getting past pathetic when ones med ins premiums are (now) higher than ones tax payments)

a sole proprietor,
still sweatin it out, working for myself, all by myself - 22+ years later

[don]

Re: All Work & No Pay

I'm longtime (30 years) self-employed - wouldn't have it any other way - but what's being missed above is the re-categorizing of traditional employees as 'independent contractors' in order to avoid employer overhead costs.

[lektrode]

Re: All Work & No Pay

I'm longtime (30 years) self-employed - wouldn't have it any other way - but what's being missed above is the re-categorizing of traditional employees as 'independent contractors' in order to avoid employer overhead costs.

+1, i'm with you there mr D
and yeah, eye caught that, know quite a few suffering from the effects.
but isnt this due in no small part because of gov policies that make hiring REAL, fulltime, full-bene'd employees too expensive ? (as evidenced by both the 'boom' in temp labor outfits here and the 'permanently under/unemployed in the EU? - biz is afraid to hire because they cant easily trim the labor component when demand for goods and services drops?
(i'm asking an honest question, not grinding an axe)

the numbers that eye have seen indicate the fringes cost/add something on the order of 40% of payroll?
(tho quite frankly i never had a 'job' that offered fringe bene's worth anywhere near 40% of my gross wages, never mind NET = why i've been self-empl'd for most of the past goin-on 38 - the current gig - no pun - being 22 of em ;)

[don]

Re: All Work & No Pay

Yes to all of the above. Another piece of the picture is the mega chains practice of keeping the worker bees at 24 hours a week or less to ring fence benefits to full-timers (management) only.