One of the features of the credit crunch era in the UK has been the rise or growth if you prefer in the numbers of people who are self-employed. This has led to a debate as to whether it has been a voluntary choice or people have felt forced to do it or more likely a combination of the two. The overall effect from it has been to be one of the driving forces behind this recorded by the UK Office for National Statistics.
For September to November 2016, 74.5% of people aged from 16 to 64 were in work, the joint highest employment rate since comparable records began in 1971.
In terms of numbers the situation is as shown below.
self-employed people increased by 133,000 to 4.77 million (15.0% of all people in work)
If we start with the increase in latest figures we see that the rise in self-employment is only just shy of the rise in employees (144,000) . If we look back over the credit crunch era and start from the beginning of 2008 we see that self-employment has risen from 3.847 million to 4.775 million. Putting that another way the rise of 928,000 is some 44% of the overall rise in employment of 2,118,000. Thus the UK “jobs miracle” has seen self employment at the heart of it.
Putting it another way the numbers of self-employed look on their way to pass the numbers of people in public-sector employment.
There were 5.44 million people employed in the public sector for September 2016. This was: 12,000 more than for June 2016: 10,000 fewer than for a year earlier
So we may yet see a cross-over with the only issue being all the changes around how public-sector employment is defined and measured.
The sex issue
There is another quirk in the numbers which goes as follows. In relative terms men are more likely to be self-employed as in there are more than twice as many whereas total employment is only 13% higher. But in the credit crunch era the increase in female self-employment has been higher than the increase in male self-employment meaning that the proportionate increase is much higher. I would be interested in readers thoughts as to why there has been such a shift towards women and girls becoming self-employed?
Pay and wages
This is an issue because the official wages ( strictly average weekly earnings) data omits the self-employed entirely. Actually it also omits smaller businesses as the threshold last time I checked was 20 staff. This poses all sorts of problems especially as the number of selr-employed has been growing.
AWE is based solely on the Monthly Wages and Salaries Survey (MWSS), which covers employees working in businesses with 20 or more employees in all industrial sectors in Great Britain (an adjustment is made for smaller businesses).
Is adjustment the new word for imputed? Anyway this was all reviewed by someone who pops up on here from time to time which is Dr. Martin Weale who if you recall regularly flip-flopped when he was at the Bank of England. The lack of self-employment data did not seem to get a mention from the good Dr. who is now a fellow of the Office for National Statistics in a Yes Minister style move.
As we lack official data we need to dig and mine for what we can and the Royal Society for the encouragement of the Arts Manufactures and Commerce has been on the case. It gives us a bleak house style opening.
Bleak headlines such as ‘80% of self-employed people in Britain live in poverty’, and ‘Self-employment used to be the dream. Now it’s a nightmare’ are increasingly common.
Fortunately they decide that for many the outlook is in fact much brighter.
Previous polling by the RSA found that just 19 percent of the self-employed started up in business to escape unemployment — a finding that is repeated across multiple studies.
If we look at the earnings of the self-employed we again start with a troubling view.
A recent study by the Resolution Foundation found that the average pay packet of the self-employed has barely moved in 20 years, while research by the Social Market Foundation shows that half the self-employed now earn below the National Living Wage. The Family Resources Survey appears to corroborate these findings, showing that the median full-time self-employed worker earns a third less than the typical employee,
But there is again a response in that this may be how many want it.
According to the Understanding Society Survey, the self-employed are nearly just as likely as employees to say they are satisfied with their income
The Financial Times points out that it looks like self-employment earnings are indeed lower than otherwise for some at least if this is any guide.
A new report by the RSA (the Royal Society for the encouragement of Arts, Manufactures and Commerce) confirms this has come with a price tag for the public purse: 18.8 per cent of the self-employed are in receipt of tax credits — payments to low-income working households — versus 10.6 per cent of employees.
The FT takes this further.
One in seven workers is now self-employed but their typical weekly earnings are only about £240 a week, less than they were 20 years ago after adjusting for inflation.
So about half of the official average weekly earnings figure.The Resolution Foundation put it like this last October.
The recovery in earnings over the last year means that they are almost back to levels last seen in the late-1990s at around £240 a week, though this is still 15 per cent down on 1994-95 returns.
Also the RSA point out that as we have discussed on here many times the self-employed are a very diverse bunch to say the least. They identify some 6 sub-groupings or if you prefer they have four more tribes than Frankie goes to Hollywood. They are Visionaries (22%), locals (13%), classicals (11%), survivors (24%), independents (19%) and dabblers (11%).
If we move beyond pay there are of course other differences with the employed.
There is no access to Statutory Maternity Pay should they become pregnant, nor is there recourse to Statutory Sick Pay should they fall ill at work. Recent government moves to establish a National Living Wage and to auto-enrol workers onto a private pension scheme have passed them by. Insecurity is inherent across all the above tribes and is as much a problem for the high-skilled as it is for the low-skilled.
Back on the 14th of December I looked at the situation of the self-employed via what has become called the gig economy.
In total I did five shifts, and earned an average of £8.10 per hour. The London living wage is supposed to be £9.75, according to London authorities. The national required living wage is £7.20 but goes to £7.50 in April next year.
This was Izabella Kaminska of the FT and as it is often necessary to be critical of that media organisation let us today look at its good side which is research and writing like this. Indeed as today’s self-employment article is by Sarah O’Connor it is a case of lets hear it for the girls (of the FT). But as the RSA reminds us the gig economy is only one sector of the issue although it gets media prominence. We learn that overall the self-employed earn less than the employed often quite a bit less as we wonder if that is why Dr.Weale and others omitted them from the official data series. However we need to add that some prefer it that way although of course some will not.
Oh and the official wage data also omits smaller companies as I pointed out earlier. How is that going? From the RSA.
Equally impressive has been the growth in the number of micro businesses, defined as firms with zero to nine employees. In 2000 there were 3.5m micro businesses in the UK. Today there are closer to 5.2m. While much of the expansion has been driven by one-person firms, the number of micro businesses with employees has also increased. 8.5 million people in the UK now own or are employed in a micro business.