The rapid growth of self-employment in the UK has been driven more by people in higher-paid than low-paid work, according to a new report.
The analysis comes from the Resolution Foundation, an economic think tank.
It says the “privileged” self-employed, with good educational qualifications and higher earnings, made up 57% of the growth in self-employment after 2009.
Among them were people working in law, accountancy, health services and management consultancy.
The think tank says they typically earned much more than the average worker, at between £45,000 and £65,000 a year.
“Debate has focused on differences in employment rights which do matter for the ‘precarious’, but tax is a much bigger driver of the rise in ‘privileged’ self-employment,” said the Foundation.
Precarious or privileged?
There are now nearly five million people in the UK classified as self-employed (including those self-employed in a second job) and the rise in their numbers in recent years has contributed almost half of the country’s growth in employment
In fact, there are many more self-employed people than either agency workers (approximately 850,000) or workers on zero-hours contracts (roughly 900,000).
Much public discussion has focused on the self-employed who earn very little in the so-called “gig economy”, such as Uber drivers and delivery drivers.
The Resolution Foundation says their work is indeed precarious.
But whether precarious or privileged, self-employment has been spreading in many other sectors, including those where being self-employed has been a way of life for decades.
The 10 biggest groups of self-employed workers are, the think tank says, in joinery and plumbing, construction, education, retail, cleaning, taxis, hairdressing, health, agriculture and design.
Meanwhile, the fastest growth of self-employment since 2009 has been in advertising, public administration and banking, but self-employment among taxi drivers has risen by only 7% in that time.
Is this a problem?
The Resolution Foundation says the division between the privileged and precarious self-employed means that this category of worker is in effect split into two tribes.
As well as earning less and having poorer educational qualifications, the precarious group are more likely to be young, immigrants, underemployed, living outside south-eastern England and in receipt of tax credits.
The report also argues that the growth of self-employment is very significant for the public finances because those with high earnings can cut their tax and national insurance payments by operating as companies.
That will become even more attractive if, as promised by the government, the rate of corporation tax is cut to just 17%.
“The Office of Budget Responsibility (OBR) estimates a £3.5bn exchequer cost in 2021-22 from incorporations rising faster than employment,” said the report.
It also points to other well-known problems with self-employment, such as the lack of legal protection currently given to employed workers, and the fact that the self-employed are less likely to save for a pension.