Self-employment is a much older way of working than modern corporate ‘employment’- people have been doing it since the year dot and many of its characteristics seem old fashioned too.

Firstly, money is not the only payment, barter can work very well too, not just because of the possibility of paying less tax but also because the parties may not have the money at hand to buy the product/services. It can also help to increase co-operation, an other important difference.

Working as a ‘sole trader’ means some jobs are just too big to be do-able. A tree surgeon for instance will probably manage most jobs with just one labourer but if a big or technically very difficult job comes up he’ll call in friends, even competitors to lend a hand and make it possible. This is often not payed for but done on the expectation of similar favours repaid in the future. To a limited extent the same may be done with plant or equipment.

Flexibility is another aspect. I mentioned a labourer but he is probably not employed by the main man. Money may be shared by ‘you take the money from job B and I’ll take it from A and C.

For most self-employed people is is vital to keep earnings below the VAT registration threshold. VAT, like PAYE is a major administrative burden for tiny businesses and it effectively puts up your prices by 20%, making it very difficult to compete. Staying below this level is easy for some, like say acupuncturists who have very few expenses but hard for say plumbers who have to supply a lot of expensive equipment that soon bumps up the turnover. As you’d imagine there are work-arounds here too.

Finally, there is the flexibility that is forced on the self-employed by irregular demands of jobs. No work for a couple of days? Time to service the van, fix the lawnmower, do some promotion. Self employment is a very different country where things are often not what they seem from the ‘top’.

“I just wonder what their thinking is on this.”

In my experience there are three kinds of forecasts. The first kind just project current trends out into the future and usually end with “… and a catastrophe ensues”, eg extinction from below replacement rate fertility or whatever. No one really believes these forecasts but they can serve a useful purpose as a wake up call.
The second kind is typified by the Met Office. They have very sophisticated mathematical models and a ruthless commitment to comparing last week’s forecast to this week’s outcome so as to further improve their models.
The third kind involves making some assumptions about what might happen (so they aren’t in the first category) and then projecting the future again. This can look a bit like the Met Office, except that the assumptions are usually chosen to get whatever result the authors want and there is never any review of previous forecast attempts to improve the process.

The third case fits somewhat with your observation below about the OECD “just being PC”. If they have taken care to choose assumptions that give the result they want, then that could explain your difficulty following their thinking – you don’t share their self-serving choice of assumptions.

This is why I brought up the issue of how the forecasts they made in the past compared with subsequent actual events. If they had a history of being right much of the time then they are worth listening to – even when their predictions seem strange. If not, then what does it matter what they say?

I get the point about primary balances and that Italy had already reduced its deficit. What I find harder to accept is that countries with similar (or worse) demographic problems to the UK but lower growth, higher historic debt and endemic tax evasion can maintain such low deficits relative to the UK.

I wonder if the OECD is just being PC in saying that all Eurozone countries will achieve the Fiscal Compact targets by 2030. The Eurozone lines on the graph do merge at a convenient point in 2030. I’m not convinced that they will all be able to do this.