NCPA - National Center for Policy Analysis

Probing A Self-employment, Productivity Link

June 12, 2002

Declines in self-employment in recent years have almost invariably been accompanied by rises in productivity growth.

Economist Mark Zandi of Inc. observes that the self-employed work force has fallen from its 1997 peak of 9.3 million workers to nearly 8.2 million -- cutting its share of total employment by a full percentage point, to around 6 percent. Meanwhile, productivity has been rising.

Is there a cause and effect?

  • Zandi theorizes that much of the trend reflects the failure of mom-and-pop retailers pummeled by competition from national retail chains such as Wal-Mart, Target and Home Depot.
  • Their sophisticated inventory and logistics techniques, as well as economies of scale, have been displacing local proprietors around the nation.
  • Nationwide restaurant, video-store, and even homebuilding companies have had similar impacts.
  • According to a McKinsey Global Institute study, retailing was one of six industries that accounted for almost all of the nation's productivity jump in the last half of the 1990s.

Source: Gene Koretz, "Economic Trends: Productivity: A Retail Link," Business Week, June 10, 2002.

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