Is the rise in self-employment good or bad?

Self-employment has been in the news again this week, with many papers now dubbing the UK as the self-employment capital of Western Europe. Are we really seeing a boom in self-employment and is this good or bad?  

Latest figures on self-employment

Figures from the Office of National Statistics (ONS) indicate that the number of self-employed workers has increased by 8% from March 2013 to March 2014. This percentage is much higher than most other European companies for the same period and means that self-employment now accounts for almost 15% of the UK labour force.

This figure still means we’re far behind other European nations such as Greece, Italy and Spain in terms of overall self-employment levels. However, if the self-employment rate continues to rise as it appears to have this year, then we may surpass them in the next few years.  

Debates over success or failures

Depending on your political stance and the data you review, the rise in self-employment levels could be positive or negative. The reality is that it is probably a bit of both.

In the positive camp, the rise is seen as evidence that people are taking hold of their dreams, and choosing to be their own boss to have more flexibility and freedom.  

The negative camp sees this rise as a sign of a poor jobs market, with evidence that self-employed workers now earn 20% less than in 2006/7 and that there is a negative correlation between per capita GDP and rates of self-employment.

There is also debate over the extent of the rise, with arguments that fewer self-employed workers are retiring skewing the results. Plus, many of those who register as self-employed are simply supplementing their wages, which skews the self-employed income data.  

Is the data accurate?

This leads to perhaps the real issue surrounding the self-employment hype, which is one of data -how it’s compiled and what it includes.

Official employment figures don’t include self-employed income, plus many surveys rely on people identifying themselves as self-employed or otherwise. In a recent blog we discussed the fact that self-employment covers a wide range of occupations and types of business, from sole traders to high-growth entrepreneurial start-ups. This makes it hard to compare employee and self-employed incomes and judge whether the rise in self-employment is good or not.  We think this detailed blog from Crunch does a good job of looking at the whole picture.  

Whether the data is accurate or not, there seems to be increasing support for self-employment in our economy. Just today at the Home Business Summit organised by Enterprise Nation, Mathew Hancock announced the government’s new package of support for home businesses.