UK leads western Europe for self-employment
When it comes an increase in the number of people who are self-employed, the UK is now ahead of its western European neighbours, according to think tank IPPR.
Britain has experienced a rapid growth in its workforce over the past year, with net job creation exceeding 900,000 in the 12 months to April 2014, and it seems that this was fuelled in part by an increase in the number of people registering themselves as self-employed.
Figures from the Office for National Statistics (ONS) show that for the 12 months to March 2014, the number of self-employed people in Britain increased by eight per cent, which was more than any other Western European economy.
When combining the seasonally-adjusted figures for full-time and part-time self-employment, the increase was 376,000, which was more than the 350,000 increase for regular employment during the same period.
Since 2010, self-employment has accounted for about a third of the total rise in employment in the UK.
“Whether they are a growing underclass or a sign of the UK economy’s bright future, the growing army of self-employed warrant our attention,” said Stephen Thompson, a senior economic analyst at IPPR.
Self-employment capital of Europe
For many years, at an international level the UK had low levels of self-employment. But now, with 14 per cent of its work force being self-employed, it is catching up with the European average and has surpassed its western European neighbours.
It looks as though it could now be heading towards a work force more similar to those found in southern and eastern European countries, which generally have higher proportions of self-employed people. In Spain and Portugal, self-employed people constitute 17 per cent of the work force, while in Italy and Greece the proportions are even higher at 23 and 32 per cent, respectively.
What's driving the change?
Economists have offered a number of possible explanations for the shift towards self-employed in the UK, and they are divided over whether it is likely to persist in the aftermath of a full economic recovery.
Around 2,000 people a month are moving off unemployment benefits to start business of their own, and the government presents this shift as a sign of the country's “newfound economic zeal”, according to Thompson.
But some are questioning the extent to which these newly self-employed individuals are actually working, and believe that the statistics may be giving us a false view of workforce growth. The trade union centre TUC, for example, views the increase in self-employment as a sign of growing labour market insecurity.
Other unions suggest that employers may be the source of the change, since by reclassifying employees as self-employed, they can avoid paying pension contributions and some other benefits.
Also, the country's ageing population may be giving a false impression the number of people who are choosing to become self-employed, since the increase could be the result of people remaining in the group rather than joining it. “Many older self-employed workers are simply working longer, due to a combination of rises in the pension age and recession-induced falls in the value of wealth stored up for retirement,” said Thompson.
“Looking forward, what is key is whether recent trends in the labour market are a blip or something deeper. It could be the case that we are just working through some post-recession quirks in the jobs market, and the structure of employment will return to normal in due course.”