A revolution in how we work has taken place in the years since the start of the recession with thousands pursuing self-employment, according to a major report published today.
Research by the Resolution Foundation shows the number of self-employed jobs in Wales increased by 10,000 between 2008 and 2013 while the number of traditional “employee” positions crashed by 46,000.
The report flags up fears that these workers may be suffering from lower wages and failing to save for the future.
Victoria Winckler of the Bevan Foundation warned that growing self-employment was often not a sign of increasing entrepreneurship but a “contractual trick to shift the risk from the employer”.
The findings also demonstrate the growing divide between London and the rest of the UK economy. London and the East of England were the only regions to see an increase in the number of employee jobs between 2008 and 2013, with hikes of 285,000 and 4,000 respectively.
Across the UK, the number of people who are self-employed has grown by 650,000 since 2008 to 4.5 million – nearly 15% of all employment.
The report suggests that low levels of pension saving may be driving people who would normally have retired to opt for self-employment.
It claims that “self-employed weekly earnings are 20% lower than they were in 2006-07, while employee earnings have fallen by just 6%.”
The Resolution Foundational also highlights a “worrying picture of the security and vulnerability of self-employed people on both a short and long-term horizon,” stating: “Only 30% of self-employed people are contributing to a pension, compared to 51% of employees.”
Its report states 27% of those who became self-employed in the post-recession years did so due to a lack of “better work alternatives”.
Ms Winckler said: “Self-employment is often simply a contractual trick to shift the risk from the employer, and is no longer a sign of entrepreneurship. Self-employment is often a very unreliable way of earning a living, and is associated with relatively low incomes not great riches. The recession has brought some dramatic shifts in the labour market, with ordinary people bearing the brunt, with self-employment being just one feature.
“Perhaps we should more accurately call it casual employment.”
Janet Jones of the Federation of Small Businesses in Wales said Government policy must now reflect the needs of the self-employed.
She said: “As an organisation we provide practical assistance to members who are self employed, providing legal support and help with tax issues. However, with an increasing number of self-employed people it is essential that policymakers take into account the needs of these smallest businesses when it comes to issues such as regulation.”
A spokesman for the Department for Work and Pensions said: “Small businesses and entrepreneurs are the heartbeat of the continuing success of the country and as the economy grows, these self-starters may well become the employers of the future. This month Wales saw the largest annual increase in the employment rate – up 2.2 percentage points on the year to 71.1%, and across the UK there are record numbers of people in a job. This means more people with a wage who are benefiting from the improving jobs market and the growing economy.”