The figures may surprise you. 1 in 7 of today’s workers are now self-employed. At the end of 2013 more than 4 million people in the UK were working for themselves. This is a 15% increase since the start of the last recession but interestingly most of the increase has been since 2011.
There continues to be a debate about what this actually means for the UK economy. Specialists suggest some of the increase has compensated for the loss of jobs during the recession. And certainly other figures suggest that of the people newly employed in the last year about 40% are working for themselves. In other words, the current rate of unemployment might be much higher if self-employment opportunities weren’t taking up the slack.
All this is against a back drop of low productivity and wages. In previous recessions a growth in jobs helped the economy grow again. That doesn’t appear to be happening this time hence some commentators have said the current recovery is “fragile”.
In fact some have suggested growth in self-employment may partly account for low productivity and wages. The arguments are two-fold. Firstly, there has been a marked impact on the earnings of the self-employed with earnings falling faster than those of employees. Second, research suggests that since 2008/9 nearly 90% of the self-employed work less than 30 hours a week. This research dovetails with other data which points to an underemployment problem in the UK economy: nearly 20% of part time workers would work full time if they could.
All this suggests the self-employment boom is in part a reaction to the economy with many people ‘making do’ with self-employment. This view is boosted by an analysis of the structure of today’s self-employed: A greater proportion now work in low skilled services. There’s also been a marked increase in high level managers turning self-employed, including those from the public sector. It’s possible to imagine this is a reaction to redundancy.
Of course none of this means you can’t be successfully self-employed. But as far as the UK economy is concerned we can be more certain growth in self-employment is a reaction to the wider economy.