permaculture

["Lawrence F. London, Jr." <lfl@intrex.net>]

<http://www.economist.com/blogs/freeexchange/2007/04/neighborhood_waxing.cfm>
Sunday April 29th 2007
Keep it in the neighbourhood
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WHILE driving through rural South Carolina recently, I was surprised to find that nearly every home I passed had a sign 
advertising some cottage industry. Each offered a range of services from “small welding projects” to “bikini waxes” 
(though no one I surveyed had ever patronised that particular business). These businesses were not necessarily limited 
to modest homes; it spanned a spectrum of income levels.

Cottage industry has traditionally been a building block of economic development. In industrialised countries it was the 
first form of manufacturing and paved the way for the industrial revolution. Home production has traditionally been 
common to low income, less skilled workers and its popularity counter cyclical. When the economy provides less jobs 
workers become more likely to engage in home production.

In developed economies home production is generally inefficient. Take the at home bikini waxer, whom I assume is female. 
Performing bikini waxes from her home, on a back country road, limits the scale of her business. If she set up a 
commercial shop in a central location she would attract more customers and have the space to employ others. Working at 
home saves overhead, but limits the scope of her production; the increased volume means commercial waxer will be able to 
charge less and serve more customers.

But does this hold in the internet era?  For waxing, yes.  But for other home production businesses, not so much. 
Through forums such as ebay, their client base has been extended to the global community.

It is still unclear what the impact of this will be on the labour market. The number of workers who claimed to be 
engaging in home self employment, as of 2003, still seemed to vary with the business cycle.  This may not reflect the 
scope of the industry, because many home entrepreneurs have their home business to supplement other income. But it does 
seem to be the case that women and the elderly have become more likely to become self-employed.

It will be interesting to see what the impact on the labour market will be. On the one hand cottage industry provides 
income to those who normally may not work such as retirees, and women engaged full time in child care. It also 
encourages more entrepreneurial activity which can spur growth. On the other hand, workers who forgo other employment 
opportunities will not receive the level of benefits they would get with a traditional employer; and economically, their 
labour will not reap the productivity benefits of scale and network effects.