Your Choice of Employment Type

Intro:  This is a blog from 2014 so a bit dated but may be of interest

Your Choice of Career ‘Branch’

You can think of your working career as starting at the base of a tree trunk.

Above you there are several career “branches”; any one of which you can move down.

Employee

You can choose to go down the branch labelled “employee”.

If so, you may well rise up through a hierarchy of ever more senior positions if you remain competent at what you do.  The main risk you will be exposed to is that you can’t get promoted past a particular point – for any one of a number of reasons.  Your personal assets like home and car are at little risk unless you find yourself unemployed for any length of time and have to raise money by selling down assets.

On the other hand, your potential income and your future progress are limited by what your employers are prepared to pay you.  It is very common for someone who has chosen a career where the employment opportunities max out fairly quickly – school teachers and nurses might be examples  - that they will be on much the same wage for the rest of their careers. This, in turn, limits their choices in terms of housing, recreation and possibly retirement income.

You might find that you have a fair degree of management control over those that report to you but are, in turn, going to be directed down whatever path your superior wants you to go even if you disagree or don’t find it very exciting.  You will be reporting to someone pretty much for the whole of your career.  Even the CEO of a company has a Board of Directors ruling over them.

You will probably find many of those counselling you on career options such as teachers, parents and relatives and careers advisors will push you in this direction because it is “safe”.

The degree of ‘safety’ used to be pretty obvious.  Most safe were public service jobs such as teaching where you pretty much had a job for life.  Mid range were large companies where jobs were pretty secure except for periodic downsizings in tough times when both good and not so good staff are let go fairly arbitrarily.  Jobs in smaller businesses were a bit more risky because small business itself is fairly risky so a number of them cease to trade after a while and your job will therefore go as well.  Today, even the safety of some of the government and big company jobs is diminishing as increasingly the concept of a job for life is fading.  If this trend continues, you may well find yourself later in your life as an employee, unable to get a job that you like because your skills or age group are not what is in demand.

You will probably find that you remain a specialist at what you do for much of your working life.  This career silo offers you the opportunity to become well versed at what you do which tends to make your job easier as you float upwards because there can be less and less uncertainty in your working day as you have ‘seen it all before’.  The flip side to this is that, if you have either chosen a speciality that is fading away (like buggy whip makers and hat makers before you), you may find yourself unemployable in later life.  You might also find yourself locked into a specialist skill because you made a decision years ago at university to study something that you later find not so interesting.  Comparatively late in your career, you might become a generalist manager at the top of your career tree but, because business hierarchies are pyramid shaped, by definition, not very many employees will get to the top and move from specialist to generalist.

Self Employed

You may choose the “branch” labelled ‘self employment’.

Typically this will include many trades like plumbing, electrician, mechanic, florist and professions like doctor, surveyor, farming and many shop keepers of various types.

The self employed usually work by themselves or lead a very small team of staff.  The difference between the self-employed and the business owner discussed below is that the self-employed continue to work in their skill where as the business owner employs and manages others who work in that skill

The careers of self-employed people are more risky because their success or failure will depend a lot more on their skills and their ability to sell them themselves without the support systems that employment with others offers where the risk is ‘someone else’s problem’.

However, they will probably make more money than they will as an employee.  Not only can they often pay themselves more but the taxation systems will allow them to claim things on their tax that they can’t as an employee.  Car expenses, home offices, capital gains and losses can all get more favourable treatment than a wage or salary earner.  All this can mean that the same income will go further after tax for a self-employed person.

One of the most liberating aspects of self-employment is that there is no boss to tell you what to do and you can be free of the host of other irritations people who work for others experience on a day to day basis.

A major disadvantage of self-employment is that you are selling your time to others.  And you only have so much time in your day to sell.  So, even if you are a very successful doctor, you can only see so many patients in a day and so you can only earn a maximum amount in a day as you can’t sell time you don’t have.  It is the same with a lawyer and a plumber and the majority of other self-employment opportunities..

Friends and relatives and career advisors will often  recommend to bright young things that they do law or medicine because you can earn so much more.  To those ‘good with their hands’ they recommend a trade like plumbing.

Business Owner

A third “branch” is that of “business owner”.

Although I acknowledge that many of the self-employed discussed in the preceding section will own a business and many may employ staff, I use this term to refer to people who run a business with several employees and whose principle income is not from the sale of their own time but rather the sale of the time of others.

Without doubt this is the most risky “branch” for you to take.  Not only can you lose your job but you can also write off many of your other assets like house and car if things go wrong and the banks come round looking for their loan back.  A government wrapped in red tape can fine you heavily and even send you to jail for some things like industrial accidents and trading beyond the point where you can’t reasonably expect to pay your debts.

Worse for many is that the careers and financial well being of your staff might also weigh heavily on you.  There will be many times early on when you take no pay while having to pay your staff every week without fail if you want the business to survive and the staff to remain with you.

Even parents who are themselves are business owners, might not recommend this “branch” to their children because of their memories of the hard times.  Alternatively, as we discuss below, they might push you into this type of career when you are not well suited to it.  I think very few career advisors will steer you in this direction as it is probably so far removed from their “employee” mindset that it doesn’t really come up on their experiential “radar”.

The positive aspects of this ‘branch’ are all those listed as positives for the self employed plus the fact that the ‘sky is the limit’ to how far you can grow your business and therefore your wealth and the satisfaction you get from running a business.  Good business owners are the equivalent of elite sports people and artists - all of whom derive great personal satisfaction from taking their business, sport or art as far as they can.

Choosing your Branch

My guess is that your choice of branch is already fairly clear to you.

But consider the following couple of points.

You are probably going to be working till you are 70 or more if you are a young person.  The government is faced with an aging population that will have to be supported by fewer young people in the workforce so they will continue to move the retirement age upwards to keep people earning as long as possible.

That can easily mean working in your contemplated career for 50 years.  This is an awfully long time to be doing a job you don’t find interesting or facing more risk that you are comfortable with or working under someone else’s direction if that chafes you.

The younger generations are typically stereotyped as flitting from job to job as a new one takes their fancy.

Perhaps that will continue to be their ambition but the reality might get harder and harder.  The more volatile the employment market because of young people flitting, the less employers will feel any obligation to support staff beyond their immediate needs.

At some point in your life, usually around the time of starting a family, you are probably going to want income security to support your mortgage and to ensure you can pay for the expenses of child raising for the 20 or so years it takes to get them on their own feet.

Around about this time, you are going to find changing “branches’ to more risky ones increasingly difficult as your risk appetite becomes more conservative. So your range of employment options if you want to change ‘branches’ will begin to shrink and business ownership might seem just too risky at that point in your life

It is probably worse for those choosing careers with a lot of training like doctors, dentists and architects as it is even harder to change profession down stream due to the amount of time and money you have invested in your careers.

Over such a long working life, you might find that jobs with your skill simply disappear.  Milliners (hat makers) once plentiful are now scarce.  Many manual jobs have been replaced by machines, printers are being replaced by websites as are journalists and so on.

Ironically, we place much of the decision making on a life time career on the shoulders of 18 year olds leaving school who certainly need to make their own choices but may not be experienced enough to consider all the options or just find the whole thing so overwhelming that they do what friends and relatives or careers advisors say.

This book is written for those taking the “business owner” branch of the career tree.  In the following section we do a bit of a reality check on whether you are suited to that “branch.

If you would like to read more on the pros and cons of career choice,  “Rich Dad, Poor Dad” by Kiyosaki (Kiyosaki, 1997) is the best book I have read on this topic and one of my five star reads.  Kiyosaki also introduces investment as another career “branch” but that is more a later-in-life career choice.

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