An interesting thought from Ben Dellot at the RSA. If current trends continue, sometime before the end of this decade, the number of people working for themselves will be greater than the number working in the public sector. What, he asks, might the political implications of this be?
The first thing to say about this is that I would be extremely surprised if either of these trends continue
The OBR forecasts that, according to the government’s projected public spending cuts, 1.1 million public sector jobs will disappear by 2018. The trouble is, no-one actually believes that the Coalition (assuming it is still in power) will be able to deliver these cuts. The IFS doesn’t and, reading between the lines, neither does the OBR. Cutting at this rate, while continuing the ring-fence on health and education, would leave only around 3 percent of GDP for everything else. As a recent joint IFS and JRF report put it, 1.1 million cuts to the public sector workforce would mean a 40 percent fall in everything that isn’t health or education. Even George Osborne has tacitly admitted that public service cuts on this scale are unlikely, which is why he is talking about cutting welfare instead.
So much for the public sector workforce, what about the number of self-employed people?
According to the latest figures, the number of self-employed people has has reached another record high. It seems to be setting a new record every few months now. I’d be surprised if it can continue along this path for much longer though. The number of self-employed people might have increased but between them, they earn less than they did five years ago. There are half a million more people fishing in a much smaller pond. Consequently, their earnings have crashed.
Source: Resolution Foundation
According to the Resolution Foundation, the median self-employed salary is now £12,000 a year. In other words, half the self-employed earn £12,000 a year or less. That’s barely above the minimum wage. A report from the IFS last year estimated that 40 percent of the self-employed were at or below the minimum wage.
All of which suggests that the rise in self-employment is unsustainable. As long as the self-employed are competing with each other for a limited supply of work, which is what seems to have been happening over the past few years, there isn’t much capacity for an increase in numbers. As the economy picks up, more work will become available but so will the number of permanent jobs. At least some of the self-employed are likely to return to permanent employment.
One should always beware of making predictions, of course, but I would be surprised if the two lines on Ben’s graph cross over quite so soon, if at all.
Having said that, he is right that there has been a shift from public sector to self-employment and that at least some of this shift will outlast the recession. Over the next ten years, we will have more self-employed workers and fewer public sector workers than we have known in recent decades.
Will this labour market shift see a corresponding shift in political attitudes?
The most obvious conclusion is that we would see a more individualistic and less collectively minded electorate; anti-tax, anti-public spending and anti-welfare. As Ben says,
The last British Social Attitudes survey in 2012 showed that the self-employed were the least likely to support an increase in taxation and spending than any other labour market group – and by some margin.
Being self-employed certainly makes you more aware of tax. When you actually have to hand over the money, rather than just see it as a line on the payslip, even the most left-wing tend to have a ‘Bloody hell! How much?’ moment.
For all that, though, the sharp increase in the number of self-employed has changed the nature of the self-employed workforce. The number of skilled tradespeople, the classic white van man image of the self-employed, has actually fallen since the start of the recession. The ranks of the self-employed have been swelled by administrators, managers and those in personal services. At least some in those first two categories are people who have left the public sector and are contracting back to it. Their livelihood depends to an extent on continued public spending.
I have no data for this (and couldn’t find any) but, given the level of their earnings, it would be astonishing if a significant number of self-employed people were not on housing benefit or tax credits. Assuming that the self-employed vote will be in favour of welfare cuts may, therefore, also be wide of the mark.
What, perhaps, is more likely is political pressure for self-employment to be recognised as normal. Punitive rates for mortgages and some forms of insurance are particular sources of grievance. So too is the clampdown on the use of contractors, particularly in the public sector. (Which stems from a government over-reaction to a tabloid non-story a couple of years ago.)
More self-employed people and fewer public sector workers may change our political landscape to an extent but the rapid changes in the nature of self-employment may have blurred the lines between self-employed and public sector workers and between the self-employed and benefit claimants. Both these factors will affect the political views of the self-employed. Time was when the Conservatives could rely on the votes of the self-employed. That may not be so any more.