Figure it out! Self-employed numbers add up

Figure it out! Self-employed numbers add up

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By now you probably know this. Self-employment is surging. More people are making the decision to go it alone. We’ve gone from well over 4.5 million a year ago to almost 4.8 million today.

Did you know this growth equates to around two in five of the jobs created in the past 12 months? September 2016’s data on employment showed the labour market is going from strength to strength. Despite everything that’s been going on post Brexit vote, from losing and gaining a Prime Minister to a falling pound and further Bank of England intervention. The total number of people in work grew by 559,000 year on year. Almost half, 224,000 of this number came from people who started working for themselves.

But a lot of people are questioning whether the rise of the self-employed is a good thing. If you open up the papers you see stories about people being pushed into working for themselves by unscrupulous companies just out to exploit people who should really be employees, denying them basic rights like holiday entitlement, sick pay and national insurance contributions. It makes you ask the question – are all these new jobs related to precarious, bogus self-employment?

Let’s take a look at the facts.

In the past five years low skilled self-employment grew by 22%. That’s everything from window cleaners, to Uber drivers and home carers. In 2011 there were just 622,000 self-employed people that were categorised as low skilled. Five years later that number has reached 758,000.

Some low skilled roles are increasingly likely to be filled by self-employed people. In 2011, there were 701,000 cleaners working in the UK, one in seven of whom were self-employed. Fast forward to 2016 and it’s one in five – a significant shift towards self-employment.

But what about the rise of Uber and delivery services. Taxi driving has always been a traditionally self-employed profession. Uber hasn’t changed this. Compared to five years ago, when these services didn’t exist we have only seen a small rise of professional drivers on the road. And if you look at the percentage that are self-employed, it’s pretty much unchanged.

That doesn’t mean we should be complacent, but there are two sides to the story. When companies like Hermes make all of their delivery drivers self-employed is it a case of bad practice or genuine self-employment. In my opinion it’s absolutely correct that HMRC should look at their arrangements. That shouldn’t detract from the fact that the vast majority of the self-employed workforce love what they do and have no desire to be given the same rights as employees.

The other side of the story

What’s the real story then? High fliers. This is the group of self-employment which is storming ahead. The number of this type of worker far outstrips low skilled self-employed people, rising from 1.8 million to 2.3 million since 2011. So not only is the number of highly skilled self-employed people much bigger, growth has been faster among this group.

A new survey of independent consultants by Eden McCallum, a management consultancy firm, gives an indication why this might be the case. They found that 89% of consultants enjoyed independence from bureaucracy and three quarters (74%) found it gave them a greater variety of work.

Looking at the workforce as a whole, it has become more skilled in the past 12 months, with the fastest growth being among professionals. This trend has been particularly strong in women at work and these developments are much stronger among the self-employed compared to the rest of the labour market.

The fastest growth amongst the most skilled self-employed people has been with media professionals. Their numbers have more than doubled in the five years to 2016. IT professionals have also seen a rapid rise in number over that period – from 86,000 in 2011 to 127,000 this year.

What is motivating people to work for themselves?

The same Eden McCallum survey found that independent consultants weren’t going it alone because they were forced to. For six in ten, becoming self-employed was a deliberate choice – either because they wanted to work with clients in a different way, gain more control over their schedule or because they wanted a career change. Our own research shows that four in five (79%) freelancers like working for themselves because they like to be in control of their own work. As a freelancer, you don’t have to answer to anyone but your customers and yourself. Working for this way frees you from the employee mind-set as you can choose the people that you work with. And making the tough decisions is your responsibility; you are in control. Better work life balance also drives people to set up on their own, and far from bringing precarity, almost two thirds (59%) of IPSE members are motivated by the opportunity to maximise their earning potential.

What does the future hold – Is self-employment going to keep growing?

Increasing numbers of self-employed people seems inevitable. There has been a structural shift in the labour market driven by cultural and technological shifts. It’s only a matter of time before their number outstrips the total working population for the public sector. As long as this way of working delivers higher satisfaction than traditional employment it will only go in one direction.

Analysis put together by IPSE Economic Policy Advisor, Lorence Nye. Lorence is our resident economist and works on most research reports we put together. He can be found tweeting from @LorenceIPSE​

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