26 October 2016 13:15
The self-employment reality - earnings are down
A dramatic rise in the number of self-employed people in the UK over the past 20 years has been accompanied by a discernible drop in earnings according to new research.
The latest Earnings Outlook from the Resolution Foundation shows that the UK's self-employed workforce has grown by 45% since 2001-02, but its earnings have fallen by around £60 a week over the same period.
The report shows that typical weekly earnings for self-employed workers grew steadily in the late-1990s and early-2000s, stagnated in the run-up to the financial crash in 2008 and then fell by a quarter in the wake of the crisis.
The recovery in earnings over the past year means that they are almost back to levels last seen in the late-1990s at around £240 a week, though the report reveals that this is still 15% down on 1994-95 returns - which means that many self-employed workers hit their earnings high about 20 years ago.
However, the authors of the report note that the characteristics of the self-employed population have significantly changed in 20 years and they conclude that this has some bearing on the findings. For instance, the proportion of business owners who have staff fell from 23% to 11% between 2001-02 and 2014-15, as did the share of those working over 40 hours a week (from 51% to 35% over the same period).
Adam Corlett, Economic Analyst at the Resolution Foundation, said:
"Almost five million workers across Britain are now self-employed. But while the self-employed workforce is getting bigger, typical earnings are actually lower than they were 20 years ago.
"Prior to the financial crisis, this stagnation was as much about the changing nature of self-employed work, rather than individual rewards. But since the crisis, the returns to self-employment have fallen sharply even when measured on a like-for-like basis."
The Resolution Foundation said it welcomes the Government's plan to review modern working practices, including a focus on conditions for the self-employed.
"It is right that the Government investigates how public policy should catch up to meet the needs of these workers. For many people, self-employment brings a freedom that no employer can provide. But the growth of low pay and short hours, along with a summer of protest about conditions, means that it's no surprise some workers in the 'gig economy' feel that self-employment is just a positive spin on precarious work."