December 23, 2014

Self-employment in the UK: Pushed or pulled?

The proportion of self-employed workers in the UK has rapidly increased since the Coalition government took office in 2010.

The number of self-employed in the UK has increased by 14.2% in the last four years, bringing the total to 4.5 million. The self-employment rate is higher for men than for women: 19% compared to 7.9%.

According to the UK Office for National Statistics (ONS), self-employed people have also experienced a 22% fall in real pay since 2008-9.

It is estimated that, of those who have become self-employed since the recession, 88.8% work fewer than 30 hours a week, probably because they cannot secure more hours.

A recent report from the Institute for Public Policy Research (IPPR) has concluded that the UK is becoming the "self-employment capital of western Europe." 

According to the IZA’s Program Director David Blanchflower, there are two types of self-employed: those who are pushed, and those who are pulled. The former are typically low-earners who are self-employed as an alternative to unemployment, and the latter are individuals who leave their jobs to pursue entrepreneurial activities.

Blanchflower commented: "Recently, push seems to have dominated pull."

Spencer Thomson of the IPPR echoed this analysis of the jobs market: "The UK is as much a nation of shopkeepers as a vanguard of cutting-edge capitalism."

Trade Union Congress (TUC) General Secretary Frances O’Grady said that: "Self-employment is reducing people’s pay, job security and retirement income – and is likely to be reducing the government’s tax take, too."

Roy Thurik writes that opportunity entrepreneurship can have predictive power over the business cycle, whereas necessity entrepreneurship does not.

Meanwhile, Alexander S. Kritikos has urged governments to cut red tape, streamline regulations and prepare for layoffs in incumbent firms, to encourage entrepreneurs who create jobs, innovation and economic growth.

Read more here.

Related articles:
Entrepreneurship and the business cycle, by Roy Thurik
Entrepreneurs and their impact on jobs and economic growth, by Alexander S. Kritikos