The ‘Self-employment’ conundrum

Doing some research on earnings in Swindon I discovered on the HMRC website that for 2010/11 earnings for self-employed people are very low. The average for Swindon was £13,200. However, the median, or mid-point, however, was only £9,790. So half of self-employed workers in Swindon earn less than this.

As it happens Richard Murphy of the Tax Justice Network has been looking at self-employment, as one possible explanation as to why unemployment has not risen to the level that might have been expected given the economic conditions. (See Richard Murphy’s report at: http://www.taxresearch.org.uk/2013/12/03/the-fast-disappearing-income-of-the-uks-self-employed/)

There are according to the HMRC 5.1 million people who declare some self-employed income. There are 3.5 million taxable self-employed, and 3.9 million who consider this work as their main economic activity. In 2010-11 65% of self-employed earned less than £10,000 a year (83% less than £20,000). According to the Office of National Statistics the four most common occupations for self-employment were

• taxi or cab drivers – 166,000
• ‘other construction trades’ – 161,000
• carpenters and joiners – 140,000
• farmers – 123,000

Richard Murphy estimates that over a 12 year period up to 2011, the average wage of the self-employed, has fallen from £15,000 to just under £10,400, a decline of around 31% in real terms. Why the decline when the numbers have gone up?

In difficult economic conditions people do whatever they can to survive. Much of this work is precarious and episodic. There has also been an increase in bogus ‘self-employment’ where where employers have forced their employees to become ‘self-employed’ because it is cheaper for the company than employing them directly.

Unsurprisingly the ONS statistics suggest that a significant increase in numbers of self-employed is associated with the economic crisis.

• The number of workers who are self-employed (as their main job) rose 367,000 between 2008, the start of the economic downturn and 2012
• 60% of the increase in self-employed workers occurred between 2011 and 2012
• 83% of the increase since 2008 was people aged 50 and above

The extraordinarily high percentage of people aged over 50 suggests that these are people made redundant and or finding it difficult to get employee jobs. The precarious nature of this work is probably one of the major reasons for the low earnings. The 60% increase in 2011 and 2012 is undoubtedly associated with the government’s austerity programme.