The growth of self-employment has become one of the stories of the recovery. While the share of total UK employment accounted for by self-employment has risen for decades, bucking the trend internationally, its pace has accelerated since 2008. And while the number of employee jobs has only recently regained its pre-recession level, the number of people who are self-employed has grown by 650,000 since 2008 to reach 4.5 million, or nearly 15 per cent of all employment.
Our analysis of national datasets and a new survey of just under 1,000 self-employed people suggests that there is strong evidence of a significant structural element, but that there does also appear to be an important cyclical component contributing to recent self-employment growth.
Alongside what this means for the economy, we have looked at how self-employed people are faring financially. Our analysis finds that self-employed weekly earnings are 20 per cent lower than they were in 2006-07, while employee earnings have fallen by just 6 per cent. The drop has been seen across genders and industries but is particularly notable among people of prime earning age (35 to 50 years old) whose earnings are 26 per cent lower. As a result, the typical self-employed person now earns 40 per cent less than the typical employed person.
The analysis paints a worrying picture of the security and vulnerability of self-employed people on both a short and long term horizon. Only 30 per cent of self-employed people have any kind of pension, compared to 52 per cent of employees. Our survey also indicates that a minority of self-employed people are experiencing difficulties getting mortgages, tenancies and accessing personal credit and loans, specifically due to being self-employed.
If high levels of self-employment are set to be a permanent feature, it is crucial that this 15 per cent of the workforce are able to access basics such as housing and credit and have sufficient pensions and savings. Our analysis suggests that for too many self-employed people, these essentials are proving difficult to access with many looking to be poorly positioned to cope with unexpected financial demands and retirement. Reform of the mortgage market, the pensions system and the introduction of Universal Credit should take into account the needs of this ever-larger group.
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Date: 9 July 2014 | Author: Laura Gardiner