What's behind the 367,000 new self-employed people?

It could be an outbreak of entrepreneurism, tax avoidance, or maybe just plain old unemployment

The strength of the UK labour market has been an on-going puzzle. Despite a 4 per cent drop in GDP, employment has risen, and more people are in work than in 2008. Yet the rise hasn’t been in full-time employee jobs. Part-time work has accounted for some of the increase, but most of it has been a result of self-employment. New figures released today (6 Feb) by the ONS show self-employment has grown by 367,000 since 2008, with the trend most pronounced amongst males and older workers.

So what’s behind this trend? There are a number of possible explanations. Ministers will no doubt claim it as a resurgence of entrepreneurialism, with new companies emerging from the ashes of the old economy. Yet this is unlikely, and few of the newly self-employed will be starting the Facebooks of tomorrow: 66,000 fewer self-employed workers are actually employing staff.

A second potential culprit is the Work Programme. Long-term unemployed jobseekers may be encouraged into self-employment by providers who are incentivised to get them off Jobseekers Allowance. However, this effect is unlikely to be significant enough to explain the overall trends: ERSA estimate that only 10% of those who have found work have entered self-employment. Assuming around 300,000 job starts, only 30,000 will be self-employed (even if all survive in self-employment).

A third explanation may be more significant: firms are shifting workers onto self-employed contracts to avoid paying National Insurance, holiday pay and benefits. Yet while such contracts are increasingly used in construction, the explanation doesn’t quite fit with the characteristics of many of the newly self-employed. Research by the TUC shows that the biggest rise in self-employment has been in professional occupations.

This leaves a fourth culprit looking increasingly guilty: the weak economy is pushing workers into self-employment. The evidence fits. Underemployment amongst the self-employed has increased from 6.4 per cent in 2008 to 10.8 per cent in 2010, and is now slightly above the rate for employees. So while some will find self-employment a good way to earn a living, for others the situation is decidedly bleaker. Professionals don’t want to be unemployed, so they become “self-employed” as a way of saving face.

The rise has been most pronounced for older workers, which is perhaps not all that surprising since this is the group with the most contacts, experience and start-up costs to move into work on their own. Some will also be deferring retirement to avoid the low value of pensions. Others will find self-employment an attractive alternative to a tough formal labour market.

So why does the rise in self-employment matter? Surely self-employment is better than unemployment?

Yet self-employment can be tough – many will be building up debt as they scrape along. And later this year, Universal Credit will be introduced. It will assume that the self-employed earn a certain amount, regardless of whether this is actually the case. Those with low incomes in self-employment will find they lose benefits. For many workers now, self-employment is tough. But it is likely to get tougher in the future.

Photograph: Getty Images

Neil is the Senior Economist at The Work Foundation

 

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Where are the moderate Tories condemning Zac Goldsmith’s campaign?

Conservative MPs are reluctant to criticise the London mayoral candidate’s dogwhistle rhetoric.

Very few Conservative politicians have criticised Zac Goldsmith’s campaign to be elected London mayor. And, amid repeated accusations of racial profiling, Islamophobic undertones, and patronising London’s Indian communities, there has been plenty to criticise.

Ever since describing his rival, Sadiq Khan, as having “radical politics” at the end of last year, Goldsmith’s campaign has come under fire for attempting to sound a dogwhistle to voters for whom racial politics – and divisions – are a priority.

You may feel it’s naïve of me to expect Tory MPs to join in the criticism. Presumably most Tory MPs want their party’s candidate to win the mayoralty. So it is unlikely that they would condemn his methods.

But I’d argue that, in this case, we can’t excuse dodged questions and studied silence as good clean tribalism. Granted, Conservatives only want to see their party make electoral gains. And that is understandable. But trickier to explain away is how willing all of the party’s MPs – many of whom are as moderate and “cotton-wool Tory” (in the words of one Labour adviser) as we once assumed Goldsmith was – are to ignore the campaign’s nastier side.

Why aren’t the Cameroons (or neo-Cameroons) who wish to further “detoxify” the party speaking out? There are plenty of them. There is more enthusiasm on the Tory benches for David Cameron than is generally assumed. Many of the 2015 intake are grateful to him; those in marginal seats in particular see him as the reason they won last year. And in spite of the grumbling nature of the 2010-ers, a number of them are keener than appears on Cameron. After all, plenty wouldn’t be in parliament without his A-list and open primaries (a time when the party was supposed to be opening up to candidates of different backgrounds, something Goldsmith’s rhetoric could threaten).

And we know it’s not just Labour whining about Goldsmith’s campaign. It makes Tories uncomfortable too. For example, the Conservative Group Leader at Watford Council Binita Mehta, former Conservative candidate Shazia Awan, and Tory peer and former minister Sayeeda Warsi have spoken out.

And it’s not just non-MPs who are riled by Goldsmith’s rhetoric. Behind the scenes, Conservative MPs have been muttering for weeks about feeling uncomfortable about the campaign.

“There has been a sense that this is a bad dogwhistle, and it’s a bit of a smear,” one Tory MP tells me. “I don’t think Sadiq Khan’s a bad man at all – I think his problem is, which happens to all politicians, is some of the platforms in the past and the people he shared them with, and maybe he didn’t know – I mean, the number of times David Cameron or Gordon Brown or Tony Blair were shown at some fundraising thing, or just visiting somewhere, shaking hands with somebody who turns out to be a crook; that’s the nature of mass politics.”

There is also a mixed view among London’s Tory MPs about the tone of Goldsmith’s campaign generally. Some, who were frustrated in the beginning by his “laidback, slightly disengaged” style, are simply pleased that he finally decided to play dirty with the more energetic Khan. Others saw his initial lighter touch as an asset, and lament that he is trying to emulate Boris Johnson by being outrageous – but, unlike the current London mayor, doesn’t have the personality to get away with it.

One Tory MP describes it as a “cold, Lynton Crosby calculation of the dogwhistle variety”, and reveals that, a couple of weeks ago, there was a sense among some that it was “too much” and had “gone too far and is counterproductive”.

But this sense has apparently dissipated. Since Labour’s antisemitism crisis unfolded last week, moderate Conservative MPs feel more comfortable keeping their mouths shut about Goldsmith’s campaign. This is because racism in Labour has been exposed, even if Khan is not involved. Ironic really, considering they were (rightly) so quick to condemn Ken Livingstone’s comments and call on Jeremy Corbyn and Labour MPs to speak out against such sentiments. It’s worth noting that Labour’s moderates have been significantly less reluctant than their Tory counterparts to call out such problems in their own party.

There is also the EU referendum to consider. Tory MPs see division and infighting ahead, and don’t want to war more than is necessary. One source close to a Tory MP tells me: “[Goldsmith’s campaign] is uncomfortable for all of us – it’s not even considered a Conservative campaign, it’s considered a Zac Goldsmith campaign. But [we can’t complain because] we have to concentrate on Europe.”

So it makes sense politically, in the short term, for Tory moderates to keep quiet. But I expect they know that they have shirked a moral duty to call out such nasty campaign methods. Their calls for Labour’s response to antisemitism, and David Cameron’s outrage about Jeremy Corbyn’s “friends” in Hamas and Hezbollah, are simply hollow attack lines if they can’t hold their own party to higher standards.

Anoosh Chakelian is deputy web editor at the New Statesman.