Story by Julianne Morris
When you think about the decision to shop locally, do environmental sustainability, lower taxes, creating job opportunities or giving back to the community ever factor into your decision? Perhaps they should.
The recent election and the general interest in shopping at local businesses in the past couple of years make the issues of local businesses and self-employed people relevant. Shopping locally is environmentally friendly. When the recession hit, people started shopping local because it didn’t use as many resources to ship everything from China and it created less pollution. According to careerbuilder.com, “The U.S. has an estimated 10 million self-employed jobs. That’s 6.6 percent of all reported jobs, but down from a high of 7.2 percent in 2006.”
For self-employed people or people working for small businesses, benefits are not easy to come by. Most states do not require businesses that have fewer than 50 employees to offer healthcare. Tammy Bleck from Huffingtonpost.com states, “These jobs don’t come with a cushion of a 401(k), paid vacation, sick days and a boss to take the fall if we don’t do it right.” Self-employed people have to pay their own expenses. Some of them are health insurance, retirement savings, licenses, taxes, organization fees, advertising, website maintenance, computers and office equipment, travel expenses, vehicle maintenance, and they don’t get to have sick days.
The struggle for self-employed people and small businesses mainly come down to insurance. Hali Araneo, the manager of the downtown Salt Lake City cookie business Ruby Snap, pushed hard to get insurance benefits for all of their employees An insurance agent was hired to discuss insurance for Ruby Snap. Araneo says, “The cost was so high, that it would’ve bankrupt Ruby Snap within a year. After Obama care was enacted, we were even more hesitant to get healthcare for employees because there were not a lot of incentives for the company to offer health care.” This leaves employees of small businesses or self-employed people to take the cost of Obama care on themselves; which isn’t cheap either.
Baker has not tried to get insurance for his business yet because, in reality, every month is a struggle to make payroll for them. How could they cover the cost for another $3,000 in healthcare? For them, it just isn’t a reasonable option at this point in their business. Baker pays $900 a month for Obama Care. That is a big expense for him when there is no flow or continuity in his business.
Then, we have to think about a 401k. At any corporate business, an employee used to be guaranteed health insurance and a retirement plan. Now in many cases, employer contributions to these are getting smaller or disappearing. For most business owners, they go into it thinking they don’t have a 401k right now but they think their business will be successful and that they will make up for it later. However, a lot of times they never really make it and they end up with no retirement savings. According to forbes.com, “businesses with less than 50 employees shows that only about 24 percent offer a 401(k) plan.”
Self-employers also have the issues with tax. Their taxes are twice as much as what employees pay for their Social Security and Medicare taxes. Nancy Humphreys from Huffington Post says, “SE tax is similar to the part of payroll tax called FICA, but employees pay only half for their Social Security and Medicare taxes. Their employer pays the other half. Make no mistake – SE and FICA taxes are taxes on workers’ income.”
People who earn more than $110,000 a year don’t have to pay social security taxes. They only pay 2.9% for Medicare. According to huffingtonpost.com, it is not true that 98% of Americans are getting tax breaks. For workers that make less than $110,000 a year, they get the highest tax rate, which falls on the self-employed.
There are also some situations where a lot of local businesses will hire many employees that are all in the family. Then their business starts to lose money but they won’t let any of their family go. The whole business ends up failing and everyone loses their jobs. But at what point do you decide you can’t do everything on your own anymore and hire an employee?
If you are used to shopping online at big corporations, think about these factors when thinking about the decision to shop local.