Self-employment boom: Good or bad?

carpenter Does more self-employed people mean more skilled workers for the economy?

Related Stories

Britain now has more people working for themselves than ever before.

As of the last quarter of 2013 some 4.3 million of us earn our own crust and are officially self-employed.

This represents a pretty stonking increase. Though there was a slight trend upwards for many years in the early to mid-2000s, the number of self-employed has increased by 573,000 since the recession of 2008-09 - a rise of 15%.

Interestingly, over 60% of this increase has actually taken place even more recently - from around the middle of 2011.

UK self-employed workers (1,000s)
Chart 1

The net result is that a staggering one in seven of the workers in this country are now working for themselves.

It's something that has passed relatively unnoticed but it is worth considering how much more negative the overall unemployment picture would have been had it not happened.

The HR professionals body the CIPD estimates that the rise in self-employment has compensated for around 40% of the loss in employee jobs.

Had that not happened we could have seen unemployment nudging three million, with unemployment for women, who represent more than half of the self-employment growth since the recession, taking the brunt of that.

And the trend shows no sign of abating - if anything it seems to be getting stronger.

Compared to a year ago the Office for National Statistics (ONS) says there are now 395,000 more people in employment overall.

Of that, some 273,000 are employees, i.e. people working for firms or public sector bodies. That means that some 150,000, or 38%, are self-employed.

job centre The rise in self-employment has helped unemployment fall

If we look at the gains in recent quarters the trend is even starker. In the latest quarter's data around three quarters of the 193,000 increase in people in employment comes from people employing themselves.

For some this will be a cause of jubilation, proof that the UK is more entrepreneurial than ever before.

Indeed there are signs that the UK's more flexible labour force has more room these days for freelancers and people starting their own businesses which can only be a good thing.

But others say the speed at which the rate has increased in such a short time it is proof that our recovery isn't creating the jobs that it ought to be, and the jobs market remains insecure.

Break with the past

Whatever your view there is no doubt that this is a major change in the manner in which our economy operates and in how its recent recovery has come about.

For a start the trend might mark a divergence from how our economy has recovered from recession in the past.

If we look at the recession in the early 1990s, for example, we see that self-employment declined as firms began to hire again.

Although the UK economy is now recovering strongly that doesn't seem to be happening to the same extent.

And this surge in self-employment may be part of the explanation for two of the UK's big problems right now: productivity and low wages.

As several studies have shown, the self-employed have had an even tougher time in recent years with their real wages falling faster than those of employees.

The growth in self-employed workers might feed into our underemployment and productivity problems.

Whereas more than two-thirds of self-employed people work more than 30 hours a week, it's estimated that of those who have become self-employed since the recession, 88.8% work less than 30 hours a week.

Now this may because they're earning enough money to work less or (probably more likely) that many can't secure enough employment to work more.

This feeds into an overall underemployment problem in the British economy where 18% of people who work part time say they would like to work full time.

Part-time workers who would like to work full time (%)
Chart 2

Some have also expressed concern that the sort of jobs the new class of self-employed are involved in simply aren't as productive as those which the self-employed have historically done.

For example, although skilled trades-people - typified by so-called "white van man" - have the single largest share of self-employment (almost 30%), their numbers have actually declined since the start of the recession.

Compare this to the big increases in those employed in "personal services" (often low-skilled employment), administration or "elementary occupations" which have all seen increases of 33-37%.

Interestingly, there has also been a 26% increase in the number of "managers and senior officials" becoming self-employed.

Some have speculated that this represents a trend in managers going freelance, typically from the public sector into consultancy.

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

BBC Business Live

  1.  
    VIRGIN MONEY FLOAT 07:26:

    So, will ordinary folk be able to buy shares in the Virgin Money offering? Not until they start trading. The offer is open to "certain institutional investors". Although they are giving staff £1,000 of shares apiece.

     
  2.  
    VIRGIN MONEY FLOAT 07:11:

    Virgin Money has announced details of its share sale. The firm hopes to raise £150m from the sale of about 25% of the bank, it said. If the sale is successful the Treasury will receive £50m, which was part of the deal when Virgin Money took over assets from Northern Rock.

     
  3.  
    ECB MEETING 06:57: BBC Radio 4
    Eurozone sign

    The European Central Bank (ECB) hosts its monthly meeting in Naples today, amid worries that the eurozone economy is deteriorating. "The ECB can buy time for governments to act... but it cannot generate lasting growth," says Moritz Kraemer from Standard & Poor's on Today. He says Europe needs to reduce the debt load of households, firms and governments.

     
  4.  
    PIMCO EXODUS 06:48: BBC Radio 4

    Investors have taken £14.5bn out of the investment firm Pimco since its founder Bill Gross resigned last week. Andrew Balls, chief global investment office at Pimco, says "it's calmed down very quickly though". The departure was not a huge surprise, he reckons. Mr Balls reminds listeners to Today that Mr Gross was 70 "and wouldn't be there [Pimco] for ever". Ouch.

     
  5.  
    PARIS MOTOR SHOW 06:40: BBC World News
    Rolls Royce chief executive, Torsten Muller-Otvos

    (Imagine a German accent) "We are on the roll ja," says the German chief executive of Rolls Royce Motor Cars, Torsten Muller-Otvos on World Business Report. He expects the company to have another record year. He is standing in front of a limited edition Rolls-Royce Phantom, only 20 were made and, sorry readers, they are all sold out.

     
  6.  
    SHARING ECONOMY 06:31: Radio 5 live

    What is the sharing economy? "The sharing economy defines the assets you own and skills you have" says Debbie Wosskow, chief executive of Love Home Swap on 5 live. (Any the wiser?) Customers need protection, but regulation needs to keep up with this emerging market, she says. She's writing a review into the sharing economy.

     
  7.  
    CONSERVATIVE CONFERENCE 06:17: Radio 5 live

    Lord Digby Jones, the crossbench peer and businessman is on 5 live after his appearance at the Conservative Party conference. He is worried people think money grows on trees, rather than coming from business, but also says business should mend its image: "I don't want chief executives paying themselves big bonuses [right now]. They may deserve it, but it sets a lousy example."

     
  8.  
    ARGENTINA 06:13: Radio 5 live
    President Cristina Fernandez

    The boss of Argentina's central bank has resigned. Juan Carlos Fabrega had been calling the government to tackle inflation and rein in spending. That created conflict with the nation's economy minister. The BBC's South American Business Reporter Katy Watson says the resignation doesn't make President Cristina Fernandez de Kirchner look good either.

     
  9.  
    PARIS MOTOR SHOW 06:07: Radio 5 live

    Jurgen Stackman, chairman of carmaker Seat is on Radio 5 live. Ten years ago electric vehicles were seen as the future, so what went wrong? Industry watchers were very optimistic about the speed of people picking them up, he says. Electric cars still have mileage and range limitations and families with one car don't want to rely on an electric car, he adds.

     
  10.  
    US SHARES SLIDE 06:00: BBC World News
    New York Stock Exchange

    There were sharp losses for US shares overnight. On World Business Report, Michael Hewson, chief analyst at CMC Markets reminds us that the US market has had a good run recently. But there is not much to be positive about at the moment, he says. The recent economic data from China and Japan has not been great. Traders are also preparing for higher interest rates in the US, Mr Hewson says.

     
  11.  
    06:00: Howard Mustoe Business reporter

    Good morning. You can get in touch via email bizlivepage@bbc.co.uk and on twitter @BBCBusiness

     
  12.  
    06:00: Ben Morris Business Reporter

    There were sharp losses for US shares overnight, so it will be interesting to see how Europe responds to that later. Plus we'll have reports from the Paris Motor Show. It should be a fun morning, so stay with us.

     

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.