Don’t encourage the odd-jobbers – we have enough already

The number of self-employed people has reached yet another record high. According to the BBC, the government’s work programme advisors have been helping things along by advising people to set up their own businesses. Doubtless, they would claim that they were helping to strengthen Britain’s entrepreneurial culture, or something like that. More likely, says the report, it is a quick way of getting people ‘into employment’, thereby meeting bonus targets. The newly self-employed person can claim in-work benefits like Working Tax Credit and Housing Benefits and the advisors get their payments. Everyone’s happy!

How widespread is this? It’s difficult to say. As far as I can see, there are no figures on how many self-employed people are claiming in-work benefits (though if anyone has any I’d be fascinated to see them). Given what we know, though, it is probable that a considerable number of them are.

According to TUC research, the newly self-employed account for 40 percent of the new jobs created since the recession. Of these, the vast majority are sole traders. (Many will have companies for tax and administrative reasons but they are still one-man/woman-bands.) The number of businesses employing more than one person has remained almost static for a decade.

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Most of them are probably not earning very much. As David Blanchflower says, in general, the self-employed don’t earn as much as those in employment. Of the newly self-employed, the majority are probably not making as much as they were in employment. On all fronts, tax receipts are almost static (See HMRC papers here and here.) Whatever else they may be doing, these new business owners do not seem to be contributing much to the exchequer.

But, while tax revenues have failed to increase in line with employment levels, the benefits bill has risen. Though the numbers in employment have increased, the numbers claiming in-work benefits such as Working Tax Credit and Housing Benefit have increased too.

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It is likely, given the financial precariousness of the self-employed, that at least some of this increase in benefit spending must be going to support the new army of sole traders.

So, far from heralding a journey towards self-reliance, or a return to some mythical era of independent yeomen and artisans, record self-employment is underpinned by dependence on state-benefits and crippling levels of debt. Small wonder, then, that high levels of self-employment are a feature, not of prosperous states, but of basket-case economies.

This is the worst time of year for the newly self-employed as they struggle to understand their tax returns and find that, if they are lucky enough to have made any money, some of it is owed to HMRC. All that stuff their employers used to handle through PAYE.

There is also a risk that those claiming tax credits may find their self-employment status challenged. This, like the joy of tax returns, is something many people will only discover after they have been running their businesses for a while.

As David Blanchflower said, “For most people, becoming self-employed is a bad idea.” For the most part, they earn less, have higher debts and struggle to keep up with the administrative workload. Even when people try to make businesses out of their hobbies, they often find that the thing they used to enjoy so much has become a chore.

Encouraging people to become self-employed, then, is even worse than pushing them into jobs they are not suited for. At least people can leave jobs they don’t like. Self-employment, on the other hand, can land them in all sorts of trouble, leaving them with debts and complex tax liabilities.

We don’t know how many people have been cajoled into self-employment by work programme advisors. We do know, though, that there are already too many odd jobbers and hobby jobbers trying to scratch a living, partially supported by the state and sliding ever deeper into debt. The last thing the government, or its contractors, should be doing is encouraging more of it.

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21 Responses to Don’t encourage the odd-jobbers – we have enough already

  1. Pingback: Don’t encourage the odd-jobbers – we have enough already - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. Annabel says:

    This is not a new phenomenon. At the end of the last recession I sat on a panel with various women who had professional expertise relevant to businesses – we were at a conference for entrepreneurs. Many of those had been funded by a government start up scheme and given mentoring and help during their first year. When we got to questions the biggest question was – where do we get a grant for year two and where is the manual for year two. It was plain that these individuals had no real desire or skills to run their own business, they simply being fed ‘self-employment by manual’ in the way they might have followed the ops manual at work.

    Very few of those individuals remained as ‘entrepreneurs’ most went back into employment as soon as the opportunity arose.

  3. Charis says:

    I’d be surprised if it was mostly driven by work programme style advisers. I used to work in that field several years ago, and we did encourage people to become self employed where this was a sensible option, but it wasn’t our preferred option, mostly because getting the proof of employment (required to get the bonuses you refer to) was much harder than most employers – it had to be receipts, they had to be over the whole period, the ‘in-work’ support was much greater. the paperwork much more (you have to help fill in those pesky tax credit forms etc). Much easier to put them in a shop and get a pay slip! As criteria for claiming payments and documentation has increased over the years since I left, I can’t imagine it’s any easier now.

    However, if there aren’t the jobs around, it may be that self-employment is being pushed as a way of meeting targets, but I doubt it will ever be, in an adviser’s mind, preferential to regular employment.

    Apart from that, I agree with the article!

    • Bear in mind the historic shift in the composition of work programme advisers, from civil servants in the 80s through charities and social enterprises to outright commercial concerns like A4E today. I don’t imagine Emma Harrison lost much sleep worrying about the paperwork challenges of sole trading versus employment.

  4. John D says:

    I taught business studies in a FE College between 1988 and 1997. We ended up assisting people who were out of work on 6-week training courses (attendance one day a week) on how to create business plans, marketing and promotion plans, legal forms of businesses, cash flow analysis, using spreadsheets, etc. They would then go on to attempt actually setting up new businesses, though – in those days – we rarely received any feedback as to how they were doing. I suspect that many of them just went through the motions in order to continue receiving job seekers allowance – or whatever name they used at that time. Overall, most of us involved felt is was just a device or ruse for the government of the day to massage unemployment statistics. The now deceased Alan Clark revealed in his memoirs that when he worked as a junior minister under Margaret Thatcher in the Department of Employment that he spent most of his time trying to invent new ways to massage down the unemployment figures. I think all governments have been involved in similar activities. They all find ways, in particular, to make it impossible to carry out any rational form of comparison and analysis between the performancces of previous governments and themselves. This has become an entire industry, possibly the very largest in Britain today. Just think of all the changes introduced in the NHS and national education service. How is it possible to carry out any useful comparison and analysis where they are concerned? Government – today – is more concerned with the manipulation of statistics and public opinion than on providing effective and inexpensive government. Look at the recent appalling record of waste in military procurement.
    I do not expect this to change anytime soon. Do others?

  5. Needs2Cash says:

    Dependency culture corrodes the spirit of individuals, families and communities. Can any of you image yourselves “taking the benefits until someone creates a job for me”?

    Are we to do nothing? Or are we to break this cycle by seeking volunteers and guiding them to see and take opportunities to create their own jobs by understanding and fulfilling customer needs?

    Self-employment should not start with business management. Start instead with what the individual enjoys doing for the benefit of others. The idea may not be viable but ensure the individual learns and adjusts their work and services. Help them to ensure their work and services satisfy customers. When the self-employed person is enjoying his or her work at satisfying customers then they are ready to learn management techniques in making their businesses more efficient.

    Remove from the programme any individual who is not committed. Persistence will falter and the failure rate will be high but from where will our future wealth creators come?

    If we are to pay for our public servants, we have to encourage wealth creation. Potential wealth creators exist in all parts of society. Why suggest that unemployed men and women must wait for public or private jobs to be created for them?

  6. Indeed, as ever right on the spot, Rick.

    There was an article on the Government’s Nudge Unit in yesterday’s Guardian: http://www.guardian.co.uk/society/2013/feb/05/david-halpern-government-nudge-unit

    In it we find the claim that more people with ‘nudge’ support got jobs. than people without this: Astonishing! Amazing! When we focus on people, they do better….

    … presumably at the expense of people we don’t focus on?

    The cynical focus on badly paid, or pretend entrepreneurial. ‘jobs’ is a way of taking our minds off real personal hardship and loss of hope. Heart-breaking, if we can bring ourselves to think about it clearly.

  7. Fiona Worthington says:

    I’m not really sure what you expect people to do though. When there are 50 people chasing each job in some areas, then what does an unemployed person do? Becoming self employed and being your own boss is surely better than working 30 hours a week for JSA and becoming ever more depressed because of increasing loss of self esteem.
    Workfare won’t get you a job at the end of 6 months, employers just want their signing on fee, so they will ditch the unemployed person and take on another. If jobs are not there and you want to work there is only one solution and that is going self employed. The irony is that the longer Workfare goes on the more unemployed there will be, why would Tesco take on a salaried worker when they get paid to take on someone for free? So shop workers will become unemployed, find unpaid “work” back at Tesco and still not show up on the unemployment figures. The only way out of that sorry mess IS to become self employed.

  8. John D says:

    It seems a number of you need reminding of the original principle which lay behind the creation of unemployment and other benefits. They introduced the concept of national insurance contributions by both employees and employers so that if it became no longer possible for employers to continue employing workers, then national funds were available to fund the payment of unemployment benefit while former workers sought employment. Every unemployed worker has paid contributions into the national insurance fund and they are fully entitled to claim against their unemployment insurance policy in the same way as flooded householders claim against their home insurance policy. I do wish people would stop being taken in by cheap propaganda which implies that people who are going through temporary hard times are joining-up to something called dependency-culture or whatever pejorative term is lately being employed by individuals who, in the main, are the beneficiaries of accumulated wealth from earlier generations, which they themselves have contributed little or nothing towards.

  9. If as it seems there are far more people wanting jobs than vacancies, is it not a good thing that at least some of the unemployed should be volunteers?

    • Fiona Worthington says:

      A lot of unemployed people ARE volunteers, if for nothing else it looks better on the CV, and it may lead to a paid position within the charity. Sadly though, it still doesn’t pay the bills, and JSA stops after 6 months if your partner is working, or you may be branded “not available for work” if you volunteer TOO many hours and bang go your Benefits.

  10. John D says:

    Insured unemployed workers mitigate their loss of employment by seeking fresh work opportunities.
    If people are unemployed, they can seek fresh employment opportunities or spend their time in volunteering – they cannot do both at the same time.
    If people volunteer, then they have to commit to times and days and are not available to attend job employment interviews at those times, are they?
    For myself, I view this whole volunteering industry with a highly sceptical outlook. Not everyone in that industry works for nothing. Some of the NGO executives and managers have very comfortable lives as a result, unlike many of the volunteers or beneficiaries of their services.
    It seems like a re-creation of the clerical Middle Ages to me, when the poor and hungry were expected to be grateful for what little help they received from allegedly charitable individuals.
    I wonder if that early version of the UK was also the world’s sixth richest nation at the time?

  11. John D says:

    Fiona: I agree with what you are saying. My last job (I am finally permanently retired now – at least I think I am !!) was as a manager of a local community centre. In that capacity, I brought in three people who had previously had mental health problems and had had to give up previous positions they had held. I gradually worked with them to build up their self-confidence and capabilities, as well as gradually increase the hours they worked. After about 2 years, we had all reached the point where they were able to either work full-time or work the numbers of hours they actually wanted to work. I think that volunteer-organisers should only take on volunteers if they have the intent, capacity and finances to be able to appoint them to permanent positions in due course.

  12. Neil P says:

    The BBC in my area ran a report a few days ago on how Poole was “bucking the economic trend” as it had more than the average new companies being registered. The examples they cited of ‘entreprenuers’ were just one-man-bands who couldn’t find full-time work. As you say, the rise in self-employment is a symptom of recession and not a thing to be celebrated.

    Have you noticed how parcels are often being delivered these days by ordinary looking people who drive non-liveried vehicles and wear no uniform? These poor souls are delivering parcels in their local area, often for around 50p per item, and earning less than the minimum wage. They are also compelled to be self-employed to relieve their ‘employer’ of the burden of PAYE, NI, sick pay and paid holidays.

    This is the flexible labour market the Tories think we need to compete with the developing economies. It brings only insecurity, stress and perpetual low-pay to the employees and contributes little to the economy. Low pay and self-employment reduces tax receipts while coporate accounting ensures profits are laundered offshore to benefit the few.

    I genuinely believe governments no longer care. What is needed is investment, yes funded by borrowing, but done properly the multiplier effect will shrink the short-term cost. We need a return to the post-war attitude to rebuilding though I fear our politicians are too lazy and selfish to extend their care beyond their core supporters. It’s deeply depressing.

    • Needs2Cash says:

      What a great idea. Let us show how much we care. Let’s borrow money from our great-grandchildren to give their great-grandparents a temporary job today.

      As a Tory I’d rather we learned and worked collectively or individually to add value for customers so we earn enough to look after our families, our communities and ourselves.

      Already the savers are penalized in favor of the borrowers as Britain treads water in not paying down its debts. We have run out if other people’s money to show how much we care.

  13. John D says:

    I don’t know where – exactly – simple-minded Tories like Needs2Cash get their simple-minded platitudes from. It was never from people like Edmund Burke or Adam Smith – their contributions, even from so long ago, tower over anything s/he has so far contributed. No wonder s/he is reluctant to reveal a true identity. I apportion no blame, as if my mind was possessed of such simple-minded nonsese, I too would be reluctant publicly to admit it. S/he talks about paying-off debt. We only finally paid-off war-debt during the 1980s. On that basis, we should never have been involved in the Second World War. Call yourself a Tory? What sort of mindset is that?
    The principal reason for low interest rates is because we are all still bailing out the banks through the use of quantitative easing (QE), which means that the government “prints” money and hands it over to the banks at 0.5% to 0.75% rate of interest, which they then lend on at anywhere from 15% to 25% annualised rate of interest. Very nice business – if you can get it.
    As the banks are being given ultra-cheap money by the government (at taxpayers’ expense) they (the banks) have no need to pay competitive interest rates to savers, which is why unintelligent individuals like Needs2Cash are being taken to the cleaners these days.
    Indeed, when you bear in mind the obvious inflationary effects of QE, it is actually worse because the real value of money is declining. This means all our incomes and wealth have been steadily diminishing over the last 30 years or so, with only the really rich enjoying any income and wealth growth. If it were not for the property market continuing due to a chronic shortage of housing stock, the economic facts of life would be brought home to the likes of Needs2Cash in very short time.

  14. Needs2Cash says:

    Watching the banks design and sell bundles of shady mortgages fueled a housing bubble and tax revenues that funded government spending to show how much we care.

    This led to QE because the government was too scared to ask the people if the designers and sellers of fraudulent products should be bailed out. The low interest rates predate the bubble and opened the market for selling bundles of fraudulent mortgages for a “6% return”.

    Gordon “Prudence” Brown presided over the three-fold increase in house prices and the five-fold increase in benefits. He had to express surprise at the bubble existing or bursting to cover his tracks.

    I am not sure why learning and working to add value for customers is a problem for some readers. Perhaps it is the same people who welcome house price inflation or any other way of generating taxes so they can be spent on showing how much the Party cares.

    Finally, notice how the debate degenerates to insults when the insulters are forced to look at their profligate spending of other people’s money.

  15. John D says:

    Bank of England interest rates stood at 5.25% on 01March 2008, 5.0% on 01 April 2008, 4.5% on 01 October 2008, 3% on 01 October 2008, 2% on 01 December 2008, 1.5% on 01 January 2009, 1.0% on 01 February 2009, 0.5% on 05 March 2009, since when they have stayed at that level.
    The Bank of England purchased around £165 billion of [quantitative easing] assets by September 2009 and around £175 billion of assets by end of October 2010. At its meeting in November 2010, the Monetary Policy Committee (MPC) voted to increase total asset purchases to £200 billion…In October 2011, the Bank of England announced it would undertake another round of QE, creating an additional £75 billion, in February 2012 it announced an additional £50 billion, in July 2012 it announce another £50 billion, bringing the total amount to £375 billion.
    [Source: http://en.wikipedia.org/wiki/Quantitative_easing%5D.
    As you can see, the reduction in interest rates took place at the same time as the global economic crisis – started in the USA – and has continued with the change to a coalition government in 2010.
    The same is even more true in the case of quantitative easing, as most of this has happened since the general election of 2010.
    I wish Needs2Cash would stick to one subject at a time – or is that not possible when reading the Daily Mail or some similar publication every day? House prices are not controlled by central government – unless you have a government which makes it policy to force local authorities to sell-off their housing stock, making the availability of social housing less, thus leading to increases in property prices in the privately owned and rented sector.
    As the court case yesterday demonstrated, some of the “free” labour schemes introduced by the present government have been ruled illegal. Some aspects of these schemes are almost certainly unethical too. Forcing people to work in non-jobs does not help them to gain any useful work experience for positions such as a graduate geologist or a fully trained mechanic.
    As for ‘profligate spending of other people’s money’, who is Needs2Cash referring to – himself?
    Do please try to assemble some actual facts in future and do try to marry those with some original thinking, rather than the tired, stale headlines of the unthinking end of the UK downmarket press.

    • Needs2Cash says:

      Thanks for calming your invective. In choosing 2008 you’ve not gone back far enough, which is strange when you repeat Brown’s lament that the collapse came from America.

      Greenspan put the world on notice that interest rates will remain low in 2002. These 1% rates continued until 2004 when everyone could see, who wanted to see, the housing price bubble forming. Brown chose to do nothing about it. I sold my home in 2006.

      Brown could of stopped the banks mortgaging people unable to pay but he didn’t. He could have stopped the sales of 125% mortgages but he didn’t. He could have taken the heat out of the housing market but he chose not to. I

      Not possible you say, but we now have these common sense responsible lending (and borrowing) rules after the inevitable collapse of the house-price bubble.

      Indeed, instead of cooling the boom in house prices, Brown announced “the end of Tory boom and bust” after announcing this as New Labour’s plan in 1997 and reaffirming it in 1998, 2001, 2006 and just as the bubble burst in 2007. I refer you to Alwyn Edgar’s highly entertaining but tragic account of “Boom, boom Brown”.

      Brown running the country to benefit his Party is gladly at an end.

      Other people’s money can enable learning so working, collectively or individually, serves customers. Then, through our learning and work, we should earn enough to care for our families, our communities and ourselves.

      But according to the ONS, 1,086,000 Brits have never been in paid employment. Waiting for government jobs or jobs with large companies will not solve this waste of human potential. I am glad that some are trying any form of learning and working even if it is not a perfect solution.

      I am sorry if this is not creative enough for you. That is difficult when stating the facts including the facts of a life spent learning, working and serving instead of relying on the kindness of the State. I must admit to one year long ago when I gratefully accepted £3,000 of OPM to help fund my M.Sc. studies after failing my 11plus (twice!) and leaving school as factory fodder at 14.

      I invested in my education to be reasonably sure of being able to care for my family. Perhaps we should now be investing in the education of parents so they prepare their children for the ongoing effects of globalization (and for the next recession!).

  16. Gosh, what a happy and uplifting bunch. Look, the key thing is this – if you believe in something and it drives you to start a business, go for it. Economies are built on people who are driven, people who won’t accept “it can’t be done” theories. Entrepreneurs are not driven by politics, they are driven by ideas, desire and success. If you believe it can be done … it can!! Yes, there are “fairytale” success stories, but are they really fairytales or are they simply success stories where driven people built successful enterprises? Hard to believe, for example, that Nike started life selling running shoes to student and local athletes from the boot of a car. To all those people out there starting up their own business, I salute you, no matter the “reason” you are driven to do it. If each one ends up employing just one person, great for the economy. If every sole trader is buying services for their business, awesome!! If it means creating money to spend on the High Street, brilliant!!! Who cares about stats and percentages and Westminster when people are living their dreams, having fun and doing something positive and constructive for themselves, their families and the economy.

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