Policy Documents

No. 56 Entrepreneurial Independent Contractors vs. The State

John Enright and William Dale –
April 30, 1993

Entrepreneurship, independence, risk-taking, and freedom of contract were essential to America's development as the world's greatest economic power. Unfortunately, America appears to have lost its entrepreneurial "edge," and our economy shows it. Our future success in the face of growing international competition will depend on regaining the entrepreneurial spirit and returning to a business environment supportive of entrepreneurs.

Independent contractors lie at the most entrepreneurial extreme of a continuum that describes how individuals exchange their labor for payment from others. At the other extreme are employees, who receive a paycheck and substantial benefits from their employers but have little autonomy. In between these two extremes lie an unlimited number of contractual arrangements that can be made beween workers and employers in the market. It is often difficult to determine whether a given arrangement for labor is employment, independent contracting, or something in between.