What does the rise of self-employment inform us concerning the UK labour market? –

What does the rise of self-employment tell us about the UK labour market? -

In recent times, among the most talked-about developments within the UK labour market have involved the expansion of ‘non-standard’ or ‘different’ types of work. These have been central to issues over inequalities stemming from the world of labor – both as a result of they’re seen as signs of a state of affairs by which good alternatives in conventional employment are now not out there for all, or as a result of the newer types of employment are themselves seen as serving to to drive new inequalities by undermining staff’ protections or circumstances.

On this briefing word, we concentrate on a comparatively simply quantifiable type of ‘different’ working association: particularly, ‘solo self-employment’ – sole merchants or firm owner-managers with out staff. In recent times, this class accounts for a really great amount of the expansion in non-traditional employment types, and certainly a considerable amount of the expansion in general employment. It encompasses a wide range of non-standard preparations, corresponding to impartial contractors and ‘gig-economy’ staff. Rising issues concerning the employment circumstances, job safety and profession prospects of the solo self-employed have made this group extremely salient within the coverage debate. The self-employed have additionally been notably onerous hit by the present COVID-19 disaster.

We uncover quite a few information that assist us perceive the connection between solo self employment and inequalities. There’s nice range inside the group of solo self-employed, and the occupations by which solo self-employment has been growing embrace skilled jobs in addition to these usually discovered in the direction of the underside finish of the pay scale. However general this rising group are more likely to have low earnings than staff. Crucially, there are a number of items of proof that among the group are solo self-employed as a result of they can’t discover appropriate alternatives in conventional employment. They’re extra doubtless than staff to need to work extra hours than they at present are working, and to have not too long ago been unemployed or inactive – a spot that has opened up solely for the reason that flip of the century. And areas with extra development in solo self-employment are inclined to see much less development in worker wages. To some extent, then, evidently solo self-employment – and the weaker employment protections that usually exist inside it – is one thing that individuals have discovered themselves having to accept within the absence of higher alternate options.

Key findings

1. ‘Solo’ self-employment (that’s, sole merchants or firm owner-managers with no staff) has risen dramatically within the UK for the reason that Nineteen Seventies. In 1975, 8% of staff have been self-employed; by 2019, this had elevated to greater than 14%. This rise has been solely pushed by ‘solo self-employment’, i.e. own-account staff with out staff. Solo self-employment accounts for over a 3rd of all employment development for the reason that onset of the monetary disaster. The extent and development of solo self-employment within the UK are among the many highest in OECD international locations.

2. The solo self-employed earn lower than staff on common and the hole has widened over time. Median pre-tax earnings among the many solo self-employed in 2018–19 have been 30% decrease than these amongst staff. Over half of the solo self-employed earned lower than £300 per week, in contrast with only a third of staff, although the shares with very excessive earnings are comparable, owing to extra polarised earnings among the many self-employed. Their median actual earnings have dropped considerably for the reason that onset of the monetary disaster, and in 2018–19 have been nonetheless 13% under their pre-crisis stage. By comparability, worker earnings had recovered their pre- financial-crisis stage by 2016–17.

3. The current rise in solo self-employment has taken place throughout the wage distribution. The rise in solo self-employment has not been confined to low-paid jobs. Its prevalence elevated amongst high-paid occupations corresponding to managers and IT professionals in addition to amongst hairdressers, cleaners and drivers, reflecting a shift within the contractual nature of labor throughout a variety of occupations. The share of staff who’re solo self-employed has elevated comparatively evenly throughout the wage distribution.

4. Many enter solo self-employment from unemployment or inactivity. Practically 1 / 4 (23%) of recent solo self-employed staff have been unemployed within the earlier quarter, and an extra 31% have been inactive. The current rise in solo self-employment has not been pushed by flows from unemployment – not stunning on condition that, till COVID-19, unemployment had been at historic lows. However relative to staff, the solo self-employed do seem like an more and more marginalised group: they have been no extra more likely to have been not too long ago unemployed or inactive than staff in 2000, however by 2019 they have been 45% extra more likely to have been. Furthermore, per solo self-employment being a fall-back possibility, the share of solo self-employed staff who have been not too long ago out of labor elevated sharply across the Nice Recession.

5. Many solo self-employed staff are underemployed. The solo self-employed work fewer hours than staff and the self-employed with staff. They’ve had the best stage of underemployment all through the previous 20 years, with greater than 15% desirous to work longer hours on the peak of the recession and near 12% in 2019. Once more, the hole between the solo self-employed and staff has widened over time. While charges of underemployment have been roughly the identical throughout staff and the solo self-employed in 2000, by 2019 the solo self-employed have been 28% extra more likely to need longer hours. This means that the solo self-employed are more and more these with poor different choices. 

6. A better prevalence of solo self-employment is related to downward strain on worker wages – additional proof that it’s, partly, a symptom of a scarcity of alternative within the conventional worker–employer labour market. When trying each throughout international locations and throughout components of the UK, areas that have will increase in solo self-employment are inclined to additionally expertise slower development in worker wages. This means that among the solo self-employed play the same position to the unemployed, in offering a ‘reserve military’ of potential staff which reduces the bargaining energy of current staff, and therefore restrains wage development. This in flip means that among the solo self-employed would go for conventional employment if they might safe the chance: for them, self-employment is a fall-back possibility moderately than a choice. Notably, this appears to be true for some professionals in addition to these in lower-paid occupations.

6. Nevertheless, well-being is larger among the many solo self-employed. Previous to the pandemic, the solo self-employed had larger ranges of job satisfaction, have been extra more likely to report being glad and to contemplate their lives worthwhile, and reported decrease ranges of tension than staff. There could also be non-pecuniary advantages that compensate for decrease earnings, even for many who solely turned self-employed because of poor labour market alternatives. That mentioned, the well-being of the self-employed as measured in comparatively secure financial occasions might not totally account for the extra dangers and insecurities that a few of them face, which may come house to roost throughout extra turbulent occasions corresponding to the present disaster.

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