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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Watch Ian Paisley Jr thank Martin McGuinness for partnership that "saved lives"

The son of Ian Paisley said he "humbly" thanked the man who was both his father's enemy, and then friend. 

Northern Irish politics started 2017 at a low point. The First Minister, the Democratic Unionist Arlene Foster, is embroiled in scandal - so much so that her deputy, Sinn Féin's Martin McGuinness, resigned. Then McGuinness confirmed speculation that he was suffering from a serious illness, and would be resigning from frontline politics altogether. 

But as Ian Paisley Jr, the son of the Democratic Unionist founder Ian Paisley and a DUP politician himself, made clear, it is still possible to rise above the fray.

Paisley Sr, a firebrand Protestant preacher, opposed the Good Friday Agreement, but subsequently worked in partnership with his old nemesis, McGuinness, who himself was a former member of the IRA. Amazingly, they got on so well they were nicknamed "The Chuckle Brothers". When Paisley Sr died, McGuinness wrote that he had "lost a friend".

Speaking after McGuinness announced his retirement, Paisley Jr wished him good health, and then continued: 

"The second thing I'm going to say is thank you. I think it's important that we actually do reflect on the fact we would not be where we are in Northern Ireland in terms of having stability, peace and the opportunity to rebuild our country, if it hadn't been for the work he did put in, especially with my father at the beginning of this long journey.

"And I'm going to acknowledge the fact perhaps if we got back to some of that foundation work of building a proper relationship and recognising what partnership actually means, then we can get out of the mess we're currently in."

Questioned on whether other unionists "dont really get it", Paisley Jr retorted that it was time to move on: "Can we please get over that. Everyone out there has got over it. We as the political leaders have to demonstrate by our actions, by our words, and by our talk that we're over that."

He said he was thanking McGuinness "humbly" in recognition of "the remarkable journey" he had been on. The partnership government had "not only saved lives, but has made lives of countless people in Northern Ireland better", he said. 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.