“Ordinary, working people” and the rise of self-employment

Theresa May undoubtedly has a lot to focus on, but she was clear last week that her government will be “completely, absolutely, unequivocally – at the service of ordinary, working people”. Which raises the question: who are these people?

We had a helpful reminder from the ONS last week that a typical working person is increasingly likely to be self-employed, and today’s labour market statistics suggest the rise in self-employment is continuing apace. Strikingly, almost half of the increase in employment over the past year has come from self-employment.

There are now a record 4.8 million self-employed people in the UK. The ONS ascribe around two-fifths of the increase in self-employment since 2001 to a greater propensity among the population to choose self-employment (the remainder of the rise is a product of demographics and increasing labour force participation).

What’s less clear is whether this is due to more people making a pro-active decision to work independently and flexibly, or because they are finding that self-employment is the only option available to them.

This matters because the self-employed have fewer workplace rights and certainties. They aren’t entitled to the minimum wage, sick pay or parental leave and their future pay level is rarely guaranteed. That might be a fair trade for someone who really values the freedom of working for themselves. But if people aren’t choosing this type of employment then its rise should be a cause for concern. It helps to explain why Uber –the poster boy for the gig economy – is being taken to court over whether the level of control over its drivers means that it shouldn’t class its drivers as self-employed.

Rising self-employment may be drawing some negative headlines at the moment, but looking at part-time work – the main source of rising self-employment in recent years – it is clear that the vast majority of these individuals are content. Almost none want a full-time job and most entered self-employment for ‘positive’ or at least ‘neutral’ reasons.

That’s not to say that all workers are satisfied. Across all age groups there are part-time self-employed workers who say they want a full time job. In fact, the majority of men aged 25 to 34 in part-time self-employment do so, and the main reason they give for entering self-employment is to boost their household income. There’s clearly a mismatch between the expectations of self-employment to provide sufficient income and the reality. As the ONS says, it is among these workers “that the evidence of dissatisfaction and of ‘under-employment’ appears strongest”.

It’s worth highlighting that across all of the part-time self-employed the incidence of under-employment only equates to something like 150,000 people. So though significant, the pockets of insecurity are quite small. For these people, the hope must be that the UK economy generates more full-time roles. Though, of course, the post-Brexit turmoil may have just made that harder, meaning a more pro-active policy response is required.

Overall, self-employment is forming an ever larger share of the workforce. Given this, there’s now no excuse for developing policy without a focus on the (admittedly diverse) needs of this group. For example, policy makers should keep the self-employed in mind as they reform Universal Credit, plan how to encourage private pension saving and implement changes to the tax system. If you want to govern for working Britain you can no longer ignore the self-employed.