Can the left learn to live with the self-employed?

The self-employed appear happier and more content than typical employees.

The self-employed appear happier and more content than typical employees

The UK is experiencing a boom in microbusinesses and self-employment. Since 2008, the number of microbusinesses has grown by 600,000, while the size of the self-employed community has swelled to record levels.

Around 1 in 7 of the workforce now answer to themselves. Nor are these trends waning. The first quarter of 2014 saw 183,000 more people become self-employed – a remarkable figure by any stretch of the imagination.

But what to make of this phenomenon? Is it a sign of a resurgent entrepreneurial spirit? Or is it a symptom of a deeper malaise in our economy?

So far the debate has been distorted by a number of myths – the first being that most of the newly self-employed are there through no choice of their own.

While there is no doubt some truth in this, the results from our RSA/Populus survey found that only one in four of those who started up since the downturn in 2008 did so to escape unemployment.

Another myth is that a significant number of the new starters are ‘odd jobbers’, scratching around for work. Yet look closer at the data and we see that the biggest rise in self-employment has actually been in professional occupations – one of the highest skilled labour groups.

A third myth propagated by some is that this boom in self-employment is just part of a cyclical trend and will die down when the economy returns to full health. However, this ignores the fact that self-employment has been increasing year on year since at least 2000.

In short, the boom is as much to do with structural changes as with cyclical ones.

All of which begs the question of whether we really want more people to be working for themselves. What does being self-employed mean for their living standards, financial security and wellbeing?

At first sight, life appears to be very tough for these workers. Our analysis shows that the full-time self-employed earn 20 per cent less than their counterparts in typical jobs, and their weekly earnings have fallen by 10 per cent in real terms since 2000.

They also appear to work longer hours, have less holiday leave and be at risk of isolation.

Yet dig a little deeper and we find that a strange paradox exists: the self-employed appear happier and more content than typical employees. Eight in 10 of those we surveyed felt they were more satisfied in their working lives than they would have been in a conventional job.

Indeed, the vast majority said the work they do is more meaningful, and that they have more freedom to do the things they want. For many, these virtues are worth the average £74 a week in earnings that full-time workers sacrifice when becoming their own boss.

But this isn’t just about abstract benefits – there are also plenty of practical advantages too. For example, two-thirds thought that working for themselves was important for being able to live where they want (e.g. in a rural location), over half for working around their physical health conditions, and over a third of caring for older relatives.

As our population ages and chronic health problems become more commonplace, it is not difficult to see how important self-employment could be in future years as a flexible form of work.

Self employment 2j

The fundamental lesson from our research is that we need to learn to live with the self-employed. Yes, there are a substantial number who are forced into this position, but there is little doubt that the vast majority enjoy being their own boss – and understandably so.

At present, however, many commentators like the TUC have failed to recognise this, and seem to want to hark back to a golden age when being an employee in a large organisation was the norm.

Not only is this futile, it also distracts us from the task of improving the living standards of the self-employed. In our report, we recommend that the government conducts an urgent review of policies that may affect these workers – from welfare and taxes, all the way through to housing and education. We also call upon trade unions to begin assisting the self-employed, even by bringing them into their ranks of members.

A third proposal is to support the creation of more co-operatives, which would allow the self-employed community to achieve more than the sum of its parts.

Believe it or not, this is an agenda that the left are well placed to drive forward. Yet at present, Labour is viewed with a great deal of suspicion by many in the business community.

Our survey reveals that less than 10 per cent of the self-employed think Labour are the best party for their business. This is despite several policy announcements such as the energy price freeze and a pledge by Ed Miliband to “go into the next election as the party of small business and enterprise”.

The overriding message is that policy tweaks and pro-business speeches will no longer suffice. Rather, the left needs a root and branch re-think about its approach to small businesses – from Labour HQ to the trade unions, and all the way down to local activists.

In short, can the left learn to live with the self-employed?

Self employment graph3j

Benedict Dellot is a senior researcher at the RSA

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