Even though the number of employees is now rising steadily, self-employment continues to increase as well, hitting another record level this month.
As ever, the Resolution Foundation were quick off the mark with a chart.
Politicians and journalists seem to have stopped hailing this as the sign of an entrepreneurial revolution, though, which it quite clearly isn’t.
The Social Market Foundation published a report last week comparing entrepreneurship across a number of different countries. They defined high value entrepreneurs as those who go into self employment because they see an opportunity and want to build a business which will increase their income.
Drawing on the data from the Global Entrepreneurship Monitor, they found that, despite having a relatively high rate of self-employment, the UK had a relatively low number of high value entrepreneurs.
There is no relationship between the number of self-employed in a country and the number of people engaged in building new businesses. Countries with low self-employment, like Norway and the US, have higher percentages of entrepreneurs than countries with high self employment, like Spain and Italy. These findings are similar to those of a Centre for Policy Studies report a couple of months ago (see previous post). They found that, if anything, countries with high levels of self-employment were less likely to produce entrepreneurs. The number of self-employed people has no bearing on the creation of new businesses. The idea that persuading more people to go self-employed makes a new Apple or Google more likely is simply deluded.
Looking at the story of self-employment over the last decade and a half, it’s quite clear what has happened. Since 2000, the number of businesses employing people has increased roughly in line with the size of the workforce. Over the same period, the number employing only the owner has shot up.
Of these businesses, relatively few are turning over enough to be above the VAT threshold. Again, the growth over the past decade or so has been among low turnover businesses.
Recently, I have been invited to a number of round-table discussions on self-employment. The participants had varying backgrounds and a wide range of views on the subject but most of us came to the conclusion that, with the rapid increase in self-employment, we are seeing the rise of a different type of worker.
Traditionally, we have seen the self-employed as business people and public policy, for the most part, still treats them as such. However, an increasing number of them are not in business because they like running businesses. Their businesses are simply the means which enable them to do the sort of work they want, or are forced by circumstances, to do.
A study by the RSA earlier this year grouped the self-employed into tribes. Only around a third were business builders (the visionaries and classicals). The rest were self-employed for other reasons.
The new self-employed are workers but not employees and business owners but not necessarily business people. They don’t behave like entrepreneurs or employees. They have different priorities and needs.
The rise in self-employment pre-dates the recession and, if current trends persist, it looks as though it will continue during the recovery. It’s possible, though I’m somewhat sceptical, that there will soon be more self-employed people than public sector workers. But, while this is a significant shift in the labour market, it’s not an entrepreneurial revolution. It’s something different, though as yet, we’re not quite sure what.