The gig economy is back, it seems. Yesterday’s ONS employment data showed self-employment at a record high both in terms of absolute numbers and as a percentage of total employment.
For a while it looked as though the post-recession increase in self-employment was unwinding. As the number of employee jobs rose, self-employment fell. Then about a year ago the numbers began to rise again. Shortly afterwards, at around the turn of the year, the rate of increase in employee jobs tailed off.
The slowing down of employee hiring may be due to concerns over the referendum and Brexit. The rise in self-employment may be a result of companies switching to using contractors while they wait to see what happens. It may also be, in part, a response to the increase in the minimum wage. It’s still too soon to say how far this is a temporary blip or a symptom of something longer term.
The forecasts don’t look good though. As the Resolution Foundation reported yesterday, since the referendum result most of the economic forecasters have revised down their projections for GDP growth. Some are even predicting a recession.
Most also expect slower employment growth and their forecasts suggest a return of the pay squeeze in 2017. Average pay is still not back to its pre-recession levels and it now looks likely that it won’t be for some time. The long pay squeeze will be even longer than we thought.
Given that self-employment incomes collapsed after the recession and there has been little sign of much improvement since, an increase in self-employment is likely to depress overall earnings even further.
The UK economy, like those of many other countries, still hadn’t fully recovered from the crash in 2008. A few months ago, with per capita GDP finally clawing its way back to its pre-downturn level, we were at last getting to the point where we could believe the Great Recession was over. The last thing we needed was a major upheaval like leaving the European Union.
Of course, it could be that all the forecasters turn out to be wrong. Maybe, once we ‘just get on with it’ and leave the EU, the economy will soon be back on track. The trouble is, no-one is quite sure what just getting on with it means. The process of disentangling the UK from the EU will be fiendishly difficult. As Patrick Wintour pointed out, even the simplest option, which would still not be popular with many Leave voters, is subject to 32 potential vetoes.
Dougan: To secure an EEA agreement, UK must avoid a veto by Swiss, 3 EFTA countries, 27 EU countries and European Parliament. 32 vetoes.
— Patrick Wintour (@patrickwintour) July 5, 2016
It’s difficult to see how this could be over quickly. The long period of limbo is likely to be a drag on the economy for some time.
We may not see a recession and, even if we do, it is unlikely to be anywhere near as bad as the one in 2008-09. But, if things are not quite 2009-ish, they certainly have a bit of a 2012 feel about them with slow growth in employee jobs, stagnating pay, rising self-employment and, as seems likely, very low growth. Let’s hope that’s as bad as it’s going to get.