4 Self Employment in Business

4.1 Introduction
You must have seen people working for others i.e. they are in others employment. They get a fixed amount from their employers for the services. You may have also come across a teacher teaching in a school, a worker working in a factory, a person working in a government office. All these persons are engaged in economic activities which are termed as wage employment or paid employment. There are other persons who engage themselves in one occupation or the other which they start and manage on their own. What ever they earn they keep with themselves. All of us have seen small grocery shops, tailoring shops, medical stores etc. in our locality. These are owned and managed by one person or with the help of one or two assistants. Their economic activities are based on self-employment. In this lesson we shall discuss self-employment as a career and its significance.

4.2 Objectives
After studying this lesson, you will be able to : explain the meaning of self-employment; state the points of difference between paid employment and selfemployment;

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enumerate the qualities required for success in self-employment; identify the areas of self-employment; recognise the need for and importance of self-employment as a career in modern times.

4.3 Meaning of Self Employment

As you are aware, there are two career options for you. One is wage employment in which you work for others on a fixed remuneration called wages or salaries. In wage employment you work as an employee of some one else. The other option is that you may set up an establishment of your own to earn your living. You may be engaged in running an enterprise of which you are the owner and manager. This is called self-employment. Most of the small medical stores, electrical goods shops, tailoring shops, stationery shops etc. are owned and managed by individuals and are examples of self-employment. In short, self-employment may be regarded as employment of ones own self. Following are the characteristics of self-employment: 1. 2. A person works for himself, not for others and earns his living. It involves ownership and management of activity by one person although he may take the help of one or two persons to assist him. Thus self-employment may provide employment to other persons as well. The earning from self-employment is not fixed but depend on the income one can earn by producing and selling goods or providing services to others at a price. In self-employment the owner alone has to bear the risk of loss. For self employment, some amount of capital is required even though it may be small.

3.

4. 5.

Thus, self employment may be defined as any economic activity which one may perform on his own as a gainful occupation. Such an activity may consist of producing and selling goods, buying and selling goods,

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or rendering services for a price. Business provides an opportunity of self-employment.

Intext Questions 4.1

Which of the following examples indicate self-employment? (i) (ii) (iii) (iv) A worker working in a factory. A person running his stationery shop. A person working as manager in a bank. A person running a chemists shop.

4.4 Self Employment and Paid Employment

As already stated, self employment means carrying on any economic activity on ones own. Wage employment, on the other hand, implies working for another person for which one receives wages or salaries. Following are the points of distinction between the two career options i.e. self employment and wage employment or paid employment.

1.

Status
A self employed person is an owner and may be an employer also, whereas in wage employment, the position of the person engaged is that of an employee.

2.

Earning
In self-employment, the earning is not fixed. It depends on the ability of the self employed person. The earning in wage employment is fixed and depends on the amount agreed upon.

3.

Nature of work
In self employment, the person may have to undertake activities which are necessary to attain his objectives. These activities may not be predecided and fixed. In wage employment, the work to be done is decided in advance and it is specific.

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5.

Risk
In self-employment, there may be risk of loss of income. In paid employment there is no risk of loss of income so long as the employer continues his activities.

6.

Freedom to work
In self-employment, a person is free to take decisions as to how to run his business profitably and avail of any opportunity that may come up for expansion of his business. In paid employment, the person is bound by the terms and conditions which he has agreed upon with his employer to work for him.

4.5 Qualities required for success in self-employment

For success in self-employment a person should have the following qualities:

1.

Abilities
A person in self-employment requires the ability to identify opportunities to earn. He must have new and creative ideas. He should posses the necessary mental abilities to take decisions regarding buying and selling or producing goods and to deal with different types of customers. He should be mentally alert to anticipate problems. He should also have the necessary attitude to bear risks.

2.

Awareness and foresight

A person in self-employment should be prepared to adjust to changes and avail of any new opportunity likely to arise. He should be aware of any changes taking place in the environment, such as changes in demand for goods and services, availability of raw material, etc. Further he should be able to anticipate changes which are likely to take place in the near future.

3.

Self confidence
To succeed in business or in any other occupation run by him a

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person must have confidence in his own capabilities. Self confidence helps in resolving the problems and difficulties. A person in self-employment should be confident of dealing with customers, suppliers, creditors and government officials.

4.

Knowledge of business
To be successful in self-employment one should have the knowledge of the business or occupation in which he wants to engage. In case he wants to run a business, he should have sufficient technical knowledge and skill with regard to of business activities.

5.

Knowledge of relevant laws

Business or service units are regulated by certain laws. A person who wants to engage himself in self-employment should have the knowledge of laws which are relevant for running a business or service unit in a particular place.

6.

Knowledge of Accounting
It is desirable for a business unit to maintain record its transactions so as to ascertain the profits and losses of business. A self-employed person should therefore have some working knowledge of keeping records of transactions, particularly cash transactions.

7.

Personal Qualities
A self employed person should be honest, hard working and tactful. He should have drive and initiative.

Intext Questions 4.2

A. Which of the following statements are right and which are wrong? 1. Knowledge of accounting is not essential in self employment. There is no need for a businessman to have any knowledge of legal provisions as lawyers can be engaged for a fee.

2.

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3. 4.

For success in business, its knowledge is essential. Success in self employment requires mental and physical abilities to take decisions.

B.

Fill in the blanks : 1. A self employed person may be an employer whereas in wage employment he is an _________________. In self-employment the earning is not fixed whereas in wage employment it is _________________. In wage employment a person works for the benefit of his employer whereas a self employed person works for _________________. In wage employment ones chances to rise are limited whereas in self employment there is _________________ to rise.

2.

3.

4.

4.6 Areas of Self Employment

Following are some of the areas where there is opportunity for selfemployment.

1.

Small business units

Business units which can be easily and profitably run on small scale can be run by single owners by themselves or with the help of one or two assistants. Stationery and grocery shops are examples.

2.

Providing individualised services

Trailoring, repairing, dispensing of medicines are some of the business activities which provide individualised services to the consumers. These can be easily started and run by individuals.

3.

Professional occupations
Occupations which require special knowledge and training in a particular field also provide opportunities of self employment

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called professions. Lawyers, doctors, chartered accountants, architects and journalists are in this category.

4.

Occupations requiring personal skills

Hair cutting, fashion designing, interior decoration etc. are activities which are based on the personal skills of those who perform them. These are also avenues of self employment.

5.

Small Scale Farming

Farming is another such area in which a person can work all alone or take the help of one or two persons. This is an age old area of self employment. Orchards, dairy, poultry, seri-culture, fisheries, horticulture, etc. provide self employment.

6.

Cottage Industries
In villages, small industries can be set up with small capital and simple tools. Raw material is locally available.

7.

Small artisans
Blacksmiths, carpenters, gold smiths are all self employed persons. These and such other areas provide opportunity for self employment.

8.

Other areas
Occupations of hawkers, peddlers etc. also provide self employment.

4.7 Need for and importance of self-employment

Career is a way of making ones livelihood. Self employment is also a career because one may employ oneself in business or service activities and earn ones livelihood. With growing unemployment and lack of adequate job opportunies, self employment has become more significant. The points which highlight the significance of self employment are as follows.

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1.

Advantage of small business

Even though business can be run on a large scale, the importance of small business has not diminished. Small scale business has several advantages over large scale business. It can be easily started, and requires small amount of capital. Small scale business offers good opportunities of self employment.

2.

Preference over wage employment

In self-employment there is no limit of earnings as in wage employment. In self employment one can use ones own talents for ones benefit. He is also free to take his own decisions. All these factors act as strong motivators for self employment to be preferred over wage employment.

3.

Developing the spirit of entrepreneurship

Entrepreneurship involves taking risks because the entrepreneur tries to innovate new products, new methods of production and marketing. Self-employment on the other hand involves either no risk or very little risk. But as soon as the self employed person starts becoming innovative and takes steps to expand his business, he becomes an entrepreneur. Therefore, self employment becomes a launching pad for entrepreneurship. Many enterprises have been developed by self employed people.

4.

Promotion of individualised services

Self-employment may involve individualised services like tailoring, repairing, dispensing of medicines. Such services are helpful in providing better consumer satisfaction. These can easily be started and run by individuals.

5.

Scope for creativity

It provides opportunity for development of creativity and skills in arts and crafts, and thereby it may enable preservation of the cultural heritage of India. For example, we can see creative ideas reflected in handicrafts, handloom products, etc.

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6.

Reducing the problem of unemployment

Self-employment provides opportunities of gainful occupation to those who otherwise remain unemployed. Thus it reduces the problem of unemployment.

7.

An alternative to large scale industries

Self-employment involving activities on a small scale is an answer to large scale industrialisation which has brought various evils like environmental pollution, development of slums, exploitation of workers, etc.

8.

A boon to under-privileged in studies

Everyone may not be able to pursue higher education after 10+2 examination due to one or the other reason. Such persons can start their career as self employed in occupations which do not require higher education. Vegetable vending, cane furniture making, running beauty parlours are some examples.

Self-employment has been given high priority in government policies and programs. A number of schemes have been initiated all over the country to encourage entrepreneurship and self-employment.

Intext Questions 4.3

A. Write True if the statement is correct and False if it is incorrect. (i) (ii) (iii) To practice fashion designing one must have personal skill. A lawyer is not a self-employed person. There are no motivating factors which can persuade a person to prefer self employment over wage employment. Self-employment is a measure against environmental pollution.

(iv)

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B.

Fill in the blanks with suitable word or words given within brackets. (i) Self-employment _________________ the problem of unemployment. (Increases / Reduces) Self employment is a ________________ to those who cannot get higher education. (boon / curse) _________________ is an important area of self employment. (big business / small business) Persons possessing professional degrees, like lawyers, chartered accountants _________________ self-employed. (can be / cannot be)

(ii)

(iii)

(iv)

4.8 What You Have Learnt

(i) Self employment means an occupation in which a person employs himself either in producing and selling goods or providing services. Difference between self-employment and wage-employment Wage Employment (a) Status (b) Earning Employee Fixed and depends on the employer Self Employment Owner Not fixed and depends on the abilities of the self employed Flexible Self Works at his free will.

(ii)

(c) Nature of work (d) Beneficiary (e) Time of work

Fixed & routine The employer Is bound by the terms & conditions of employment

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(iii)

Qualities required for success in self employment are: (a) (b) (c) (d) (e) (f) Ability to identify opportunities. Awareness and foresight. Self-confidence and other personal qualities. Knowledge of the business. Legal knowledge. Knowledge of accounting.

(iv)

Points that explain the need for and importance of self-employment are: (a) (b) (c) (d) (e) (f) (g) Advantages of small scale business Preference over wage-employment A launching pad for entrepreneurship Consumer satisfaction by operating among them Promotion of personalised services An answer to the evils of large scale enterprises Promotes creativity, reduces the problem of unemployment and is a boon to those who cannot pursue higher studies.

Areas of self employment are small business, businesses which provide individualised services, professional occupations, and occupations based on personal skills.

4.9 Terminal Exercise

1. 2. State the meaning of self-employment. Explain its characteristics. In what way does self employment differ from wage employment? Explain. Explain any four qualities required for success in self-employment.

3.

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4.

What makes self employment important in this age of technical advancement and large scale enterprises?

4.10 Answers to Intext Questions

4.1 Correct (ii), (iv)

Wrong(i), (iii) 4.2 A Right 3, 4 Wrong 1, 2 B (1) (2) (3) (4) 4.3 A (i) (ii) (iii) (iv) B (i) (ii) (iii) (iv) Employee Fixed His own benefit More scope True False False True Reduces Boon Small business Can be