Spare a thought for the self-employed

The Independent Contractors Association's compilation of the most recent Australian Bureau of Statistics figures show that in November 2010 there were 1.1 million independent contractors not employing anyone else and another 1 million business operators who did employ others.

But despite the hefty numbers, the self-employed's clout seems to be the opposite of the mortgage belt's. Barely a third of Australians have a mortgage, yet they dominate the media's monetary spotlight any movement in interest rates is painted as being all about mortgage repayments and politicians react accordingly. It's a federal crime for a bank to fail to pass on a few points of a Reserve Bank movement to its home mortgage clients, but no one seems to know or care what's happening to business loans.

And the home mortgage is as good a place as any to demonstrate blatant discrimination against the self-employed. Want to take advantage of UBank's attractive refinancing deal? Before you even start to fill out a form, you have to specifically confirm that you are not self-employed.

The banking system overall is more subtle than UBank in its application of higher interest rates and, more recently, a credit squeeze. Small-business campaigner David Koch argues that the pendulum swung so far against the self-employed during the global financial crisis that an employee who has been in their job for six months may well have a better chance of getting a cheap mortgage than their employer who might have run the business for a decade.

The box-ticking credit score mechanism plays a role in disadvantaging many self-employed, but it can also be an excuse for a higher interest rate.

The image of the typical self-employed individual was once a tradie, farmer, professional or small-business owner any shopkeeper, your dentist but the casualisation, contracting and outsourcing phenomenon has spread the class far and wide. Bigger business likes independent contractors because they're much cheaper. No holiday pay, no superannuation, maybe no payroll tax either. And they're easy to get rid of when they're not required or if they're not good enough unlike employees.

Little surprise then that parts of the union movement don't like them. It's not hard to be cynical about the ACTU's success in pushing Labor into targeting "sham contracting" as a major Fair Work Australia issue I somehow doubt the CFMEU is primarily concerned about tax evasion.

For highly skilled contractors in areas of scarce supply, the opportunity is there to negotiate pay that compensates for the lack of fringe benefits, but average contractors are more likely to get caught up in undercutting each other in less than wildly buoyant times. They also suffer the freelancer's curse of finding it hard to say no to a job because they're not sure there will be something else. The independence of self-employment often comes at the cost of insecurity.

And while the wage and salary classes are painlessly accumulating superannuation, those 2.1 million self-employed have to have the discipline and ability to find the money left over after immediate needs to take advantage of tax incentives for saving. And if they're not in a high tax bracket, there's not much incentive. There are plenty of small-business owners paying superannuation contributions for their employees while accumulating little for themselves.

Another common problem with the self-employed is that they buy themselves a job, not a business, and therefore build up no equity to cash in on retirement.

As for governments in general, I suspect masochism must play a role in any individual deciding to operate a small business that employs people. The systems and division of labour that have evolved to make big business possible translate into hours of unproductive time for the small-business owner dealing with three levels of government and various statutory bodies with a statute, form or licence for everything from registering that they own the equipment that they own to how many chairs that might be placed on the footpath.

Unions and government, geared to their own ponderous scale of operations, consistently impose administrative systems out of all proportion to the self-employed experience. The promise to "cut red tape" is an election perennial and meaningless as red, green, pink and polka dot tape abound.

The amazing thing is that so many self-employed nonetheless get on with it and successfully go about their business. That a proportion fail gets back to the banks' credit scoring. On those Bureau of Statistics figures, getting on with it comes at a cost. More than half the business operators worked on both weekdays and weekends. Of the men, 73 per cent worked 40 hours a week or more in their main job, with nearly two-thirds of that group working more than 49 hours.