Tom Abate's SF Chronicle story Laid-off workers start own businesses covers the growing trend of people turning to small business or self-employment after losing a job.
The article describes what UC Santa Cruz professor Robert Fairlie calls "necessity unemployment." This occurs when people start businesses because they don't have traditional job options.
Fairlie is the lead author behind the Kauffman Index of Entrepreneurial Activity and a leading entrepreneuship researcher. His work shows that self-employment increases during times of economic stress and flattens out during good economic times. This is due to necessity entrepreneurs returning to traditional employment.
The good news for necessity entrepreneurs is the cost of starting a small business, and especially a small business based at home, is lower than ever before. Technology has become inexpensive and in many cases even free.
And while most necessity entrepreneurs will return to traditional jobs, our research indicates that a growing number of displaced workers find they prefer self-employment. The reasons given by these people for preferring self-employment are the same as other small business owners. They prefer working for themselves, job and work flexibility, passion for their business and work/life balance reasons.
This group will continue as small business owners even after the economy improves.