Self-employed: £74 a week poorer but happier and more fulfilled finds RSA report

The typical full time self-employed worker earns £74 less per week than a full time employee but they are more satisfied in their jobs and enjoy the freedom and flexibility of being their own boss, according to a major study published by the RSA in partnership with Etsy, the marketplace for handmade and vintage goods.

Some of the key findings of Salvation In A Start-Up include:

• The number of self-employed increased by over 180,000 in the first quarter of 2014.

• ‘One-person businesses’ represent 95 percent of growth in self-employment since 2000, with many firms shedding second workers. 

• 84 percent of the self-employed are more satisfied than in a conventional job. 

• The report calls for an urgent review of the Government policy on self-employment.

View the Salvation In A Start-Up report

Taking an in-depth look at the UK’s growing self-employed workforce,  Salvation In A Start-Up showed that the full time self-employed earn 20 percent less than their employed counterparts, and their weekly earnings have fallen by ten percent in real terms since 2000. They also tend to work longer hours, have less holiday leave and can be at risk of social isolation.

However, the report dispelled the myth that most of the newly self-employed had been ‘forced into it’ by a shrinking jobs market. A survey conducted by Populus for the RSA of over 1000 microbusiness owners (those running firms with zero to nine employees), revealed that only one in four who started up in the recession said that escaping unemployment was a key motivating factor. A much more common answer was to achieve greater freedom or make the most of a good idea. 

The poll showed that the self-employed are also happier than typical employees. Eighty-four percent agreed that they were more satisfied in their working lives than they would have been in a conventional job (66 percent completely or strongly so). Two-thirds think that working for themselves is important for being able to live where they want (e.g. in a rural location), over half for working around their physical health conditions, and over a third for caring for older relatives or children. The report argues that forgoing material benefits for more meaningful returns is a sign of a new ‘creative compromise’ at work. 

The report disagreed with groups such as the TUC who have suggested that a large number of the self-employed are ‘odd-jobbers’ who are grabbing onto any and all kinds of work they can lay their hands on. An analysis of data from the Labour Force Survey showed that the biggest increase in self-employment since 2008 has been in highly skilled professional occupations (+35 percent). 

The RSA concluded that the growth in self-employment is not just a ‘cyclical blip’ and that the numbers of micro-businesses have been increasing long before the recession started in 2008. The numbers of self-employed people are now growing at their fastest rate despite the fact that the economy has returned to growth – responses to the Populus poll revealed that only nine percent of microbusinesses plan to close their business in the next three to five years.

Which self-employed tribe are you?

Following interviews with more than 50 expert stakeholders and microbusiness owners, alongside an in-depth segmentation of the Populus data, RSA researchers identified the ‘six tribes of the self-employed’. These include:

• Visionaries (22 percent of the self-employed): Optimistic, growth-orientated business owners who are usually driven by a mission and a sense of purpose. They are more likely to be younger and male, and to employ many employees.

• Locals (13 percent): Relaxed and generally free from stress, these operate low-tech businesses which serve only their local community. They earn a modest income and many are close to retirement.

• Classicals (11 percent): Generally older, these embody the popular image of the entrepreneur. They are largely driven by the pursuit of profit, and think the business is the be all and end all.

• Survivors (24 percent): Reluctant but hard-working individuals who are struggling to make ends meet, in part due to the competitive markets they operate in. They earn less from their business, and are more likely to be younger.

• Independents (19 percent): Freedom-loving, internet-dependent business owners who are driven by the opportunity to vent their creative talents. They are usually younger and left-leaning.

• Dabblers (11 percent): Usually part-timers, their business is more of a hobby than a necessity. A large number are retirees seeking to do something interesting in their spare time. 

Reasons behind the self-employment boom 

According to the Labour Force Survey, 15 percent of the workforce are now self-employed – the highest figure in living memory. Today there are 600,000 more microbusinesses in existence than when the recession began in 2008, and 40 percent more than at the turn of the century. RSA researchers predict that the self-employed will soon outnumber public sector staff (by 2018 five million people will be self-employed overtaking the numbers employed in the public sector which will fall to 4.9 million).  

The report identified several key ‘ingredients’ that we believe are essential to explaining this boom – yet which are often overlooked in mainstream debates. Demographic shifts, for example, such as an ageing population and consistently high levels of immigration may have served to bump up the numbers in self-employment, as these groups are more likely to start a business. Similarly, a gradual shift from ‘materialist’ to ‘post-materialist’ values means that greater numbers of people now prize the freedom and meaning that comes with self-employment. The emergence of new technologies – which we often take for granted – have also sent the cost of doing business into freefall. 

How should the UK respond to these trends? 

The Populus poll revealed that the self-employed are currently unimpressed with government policies to help their businesses. Only 14 percent agree that the Government does enough to help them. The poll also cast doubt on Labour’s appeal to small business owners, with only nine percent naming the Opposition as the party with the best policies for their company.  

The RSA is to publish two further reports outlining how the UK should respond to these challenges, but in the meantime recommended that the Government carries out an urgent review of government policy on self-employment – from welfare to taxes, all the way through to education and housing. The report also suggested that trade unions begin assisting the self-employed, even by bringing them into their ranks of members, and that co-operatives and other forms of collaboration should be encouraged to allow the self-employed community to achieve more than the sum of its parts. 

Commenting on the report, RSA Senior Researcher Benedict Dellot, said:  

“The fundamental lesson from our research is that we need to learn to live with the self-employed. Yes, there are a substantial number who are forced into the position, but there is little doubt that the vast majority enjoy being their own boss – and understandably so. At present, however, many commentators have failed to recognise this, and seem to want to hark back to a golden age when being an employee in a large organisation was the norm. Not only is this futile, it also distracts us from the task of improving the living standards of the self-employed and ensuring their needs are no longer overlooked in government policy.”

Data from the Labour Force Survey and Business Population Estimates point to several interesting trends:

• Self-employment accounted for 90 percent of the new jobs added since the economic downturn in 2008

• 95 percent of the growth in microbusinesses since the turn of the century is owed to an increase in one-person businesses, not employing firms

• The number of people in part-time self-employment has grown by close to 65 percent since 2000, compared to 20 percent in full-time self-employment

• Since 2000 the increase in self-employment accounted for 92 percent of jobs growth in the North West and 62 percent in the South West, compared to 35 percent in London

• The number of women in self-employment has grown at almost twice the rate of men since 2000

• Over the same period the number of over 65s running their own business has increased by a remarkable 140 percent, and the number of under 25s working for themselves has increased by 55 percent.

View the Salvation In A Start-Up report

Notes to editors

1. For more information contact RSA Head of Media Luke Robinson on 020 7451 6893 or 07799 737 970 or luke.robinson@rsa.org.uk

2. Microbusinesses are classed as firms with 0-9 employees and are a subcategory of the SME’s, which spans firms with 0-249 employees.

3. Populus undertook a major online survey of 1006 self-employed people in the UK, which took place between the 26th February and the 12th March 2014.

4. Etsy is a marketplace where people around the world connect to buy and sell unique goods. Their mission is to reimagine commerce to build a more fulfilling and lasting world. Etsy is headquartered in Brooklyn, NY. Learn more at www.etsy.com.