The depressing truth about Britain’s labour market

There was something rather sad about some of the numbers out today from the Office for National Statistics (ONS).

They showed that the number of self-employed people is up by 367,000 since 2008, with the majority of the rise being between 2011 and 2012. Well over 80% of the rise was in the over 50s. There are now 4.2 million self-employed people in the UK.

The ONS aren’t the only people to have noticed this, of course. A report out in 2012 from economist Stephane Rapelli found that the number of “independent professionals” (a classification that doesn’t include the cab drivers, builders, joiners and farmers in the ONS numbers) rose by 82% between 2000 and 2011. And a study by Kingston University found that these professionals added around £202bn in sales to UK GDP in 2011 (that’s something like 8% of private sector turnover).

The same report found that working mothers make up 13% of independent professionals. This sounds nice doesn’t it? How great to be your own boss, to have no one to answer to etc, etc. 

But it isn’t quite like that of course. I asked Louis Clark of PCG (an association for freelancers, contractors and consultants) what has actually driven the rise. All their research points to much the same thing. Sure, it makes more sense in some professions to be self-employed than it used to (see the row under the last post about the way in which work has changed) but the majority go freelance “because they are forced into it by redundancy or other issues regarding permanent work.”

Once in, people also tend not to get out. You could take that positively (once they are freelance people rarely want to go back to having a boss) or it could be the case, particularly among the over 50s, that once you are out of employed work it is hard to get back in.

Note that the self-employed, says the ONS, tend to work longer hours than the employed (38 hours a week for freelancers vs 36 for employees), they tend to be older, and they tend to be male.

The good news here is that technology has made it a lot easier to be self-employed than it used to be, and the rise in self-employment has offset something in the region of 40% of the loss of employed jobs.

The bad news, as this report from last year notes, is that “it’s far from clear that the recent rise in self-employment marks a resurgence in British enterprise culture… many of those taking the self-employed route back to work looking more like an army of part-time ‘odd jobbers’ desperate to avoid unemployment.”
 
PS the ONS is very modern. You can see a graphic of the stats on YouTube here.

39 Responses

  1. 06/02/2013, GFL wrote

    Being a contractor is becoming a way of life for more and more people, the salary is double and the taxes are lower. Also the work-life balance is a lot healthier (especially for the very good professionals that can get work pretty easily or those people with a lot of contacts). I have heard countless people saying “once i get enough experience, I gonna try my hand at contracting”.

    I even asked my current employer to allow me to resign and bring me back as a contractor (but company policy dictates a 6 month cooling off period).

  2. 06/02/2013, Kiss wrote

    Employment is set to become a thing of the past over the coming years if government policy/legislation doesn’t lighten up. Why would anyone want to employ someone to pay 13+% employers nic + 28 days holiday pay + sick pay + compulsory employer pension contribution, then you have employment law to deal with,
    Alternatively you can use freelancers (with none of the above)
    Additionally the self employed generally use ltd co’s to extract income via dividends to avoid employee & er nic.
    Employment will soon be reserved for part time workers under the nic thresholds.
    Level the playing field abolish nic and unify corp tax and personal tax rates and get employment law simplified to 10000 words!
    Yes many are self employed as the unemployment alternative is not an option for anyone its more attractive to be a failing entreprenuer,a grim reality facing many unfortunate souls over 50.
    you can then claim your tax credits survive and keep the statistics looking good for uk plc

  3. 06/02/2013, Concerned of Teddington wrote

    “the salary is double and the taxes are lower.” …

    Which industry? IT typically has a lot of contractors, but even in the City its only the junior positions where its economically worthwhile.
    I manage a team that has about 50% contractors and I think
    contracting is the cheap option for companies, not employees.
    Freelancers allow managers to chuck people under the redundancy bus when it stops by once a year. Need to a 10% cut ? no problem – no worrying about performance reviews, dealing with HR and putting a permanent member of staff in the mud, just chuck forward a contractor…
    Contracting is ok if you have worked as a permanent employee for the same company for years and are getting a huge redundancy payoff – and you’re 10-15 years from retirement… tot up the pension, health care, death in service, serious illness cover, even basic salary and bonus – Contracting is rarely a good option for an employee.

  4. 07/02/2013, Shinsei1967 wrote

    I’v no doubt that these “independent professionals” aren’t the vanguard of a new bout of entrepreneurialism but that doesn’t mean the growth in their numbers is a bad thing.

    Surely its just lots of redundant/early retired bankers, accountants and lawyers who have earned enough during the boom years (coupled with house price inflation) who in their 40s have enough to live on without returning to full time “big firm” jobs but still want to work, just in smaller, less stressful & more flexible firms or as their own boss.

    I’m pretty sure there are plenty of Moneyweek writers who fall into this category.

  5. 07/02/2013, JT wrote

    Shinsei1967

    I agree. Why is it ‘depressing’ that lots more are going independent and earning a living through self employent? It’s a tremendously liberating way to work, free of all the career-ladder b*ll*cks and politics which comes with climbing the greasy pole at a company or partnership.

    It’s not without its own stresses but provided you can maintain a good pipeline of work it can be very lucrative. I don’t know a single ‘freelancer’ who would now choose to go back into full time employment. Why work 25% harder for no greater reward? You’re just flogging yourself to make money for other people.

  6. 07/02/2013, Shinsei1967 wrote

    I’m somewhat going back on the point I was making on another blog that the world of work hasn’t changed much in the last 20 years to say that one change that has happened is for people’s careers to be supercharged.

    Look at banking or politics. Partners of Goldmans or City law firms are being “let go” in their 40s. We have a PM who is mid 40s and a Chancellor who is barely 40.

    So the idea of staying in one career all one’s working life and becoming “the boss” in your late 50s is a thing of teh past.

    Thus as JT correctly points out there are plenty of people in mid career being given the opportunity to restructure their working life and go freelance or downsize. And most seem to like the opportunity.

  7. 07/02/2013, Martin wrote

    What is depressing about the fact that people have at least a chance to remain in workforce?
    What is depressing about the fact that they have chosen to work instead of going on job seekers?

  8. 07/02/2013, Romford Dave wrote

    I’m guessing the author thinks they’re depressing Martin #6 for the reasons outlined in her article.

    (i) “because they are forced into it by redundancy or other issues regarding permanent work.”

    (ii) The bad news, as this report from last year notes, is that “it’s far from clear that the recent rise in self-employment marks a resurgence in British enterprise culture… many of those taking the self-employed route back to work looking more like an army of part-time ‘odd jobbers’ desperate to avoid unemployment.”

    Based on those reasons alone, it’s hard not to agree.

    Those posters posting about a section of the workforce having the luxury of opting for their own proprietorship from a position of choice, wealth or idiosyncrasy, seem to be glossing over the reality for a larger proportion who haven’t.

  9. 07/02/2013, Shinsei1967 wrote

    Romford Dave:

    “Those posters posting about a section of the workforce “

    That’s because we are discussing “independent professionals”.

    As Merryn points out the independent cab drivers or plumbers are a separate category altogether. We’re discussing those with a professional qualification. (ie well paid people).

    Yes. Many people have been “forced out” by redundancy. But then almost nobody leaves the City or law at 65 with a carriage clock and no one expects to be able to.

    And due to property inflation and generous salaries for professional jobs most 40-50 something year old professionals will be relatively comfortable financially (excluding any divorces).

  10. 07/02/2013, JT wrote

    Not all of this trend is down to redundancy. My perception (from my own network of freelancing professionals) is that a sizeable minority have seen professional life for what it is and decided, quite freely, to try a different way.

    Gone are the days when the majority of partners earned broadly the same, and accepted they’d earn less during a downturn (in the interests of the firm and its employees). Now there are a very small group of highly paid partners at most firms and everything is geared to maintaining the status quo. Everyone else is basically just flogging themselves for the benfit of that small group.

    In fact, law in particular is seeing limited company practises start to emerge following deregulation, owned by small groups of ex-law firm lawyers who are challenging the traditional model of billing by the hour from expensive offices with huge overheads. It’s an interesting time to be part of a changing marketplace.

  11. 07/02/2013, THE COMMON MAN wrote

    I look forward to the day when one of your articles begins “The cheerful truth about…..”

  12. 07/02/2013, Merryn wrote

    @thecommonman You made me laugh – thank you!

  13. 08/02/2013, Boris MacDonut wrote

    #11 Now there ‘s a challenge. Stretching but achievable perhaps Merryn can include it on her annual performance appraisal.

  14. 08/02/2013, MaryKid3 wrote

    d got same answer from all of them – “No Company will employ you again as you’ve worked to long for yourself. Interviewers would find it very intimidating that you’ve run a business”.

    Load of crap as we all know but in the next instance when people are clinging onto their jobs, the last thing they want is anyone with more confidence / knowledge as competiton beside them.
    This is why a lot of people in their 50′s are finding it difficult to get new positions, especially if interviewed by younger staff.

    On that basis, my company continues to grow and I can have a work life balance which I’d hate to give up now and so glad the Employment agencies basically laughed me out the door in 2010.

  15. 08/02/2013, sysdevman wrote

    Maybe things are not so depressing; just more people choose to do things differently. The recent Census showed how demographics & culture is changing in Britain.
    Using ONS figures, working age people in UK comprise:
    29.2m employees
    4.2m self employed
    2.49m unemployed
    9.0m economically inactive
    Taking employees away leaves 28% of working age population as either “unemployed” or “economically inactive” and a further 10% self-employed.
    How accurately does income get reported in these sectors? Not just mini cab drivers, builders & carpenters, but “students” working casual in coffee bars, pubs, restaurants, shops and freelance work over the internet, e.g. web sites for cash.
    So is the UK labour market really depressing or are people changing how they work to fit in with a chosen life style? Perhaps productivity in Britain isn’t really going down & there’s no triple dip recession. Could it be certain sectors exercising economy with the truth?

  16. 08/02/2013, Boris MacDonut wrote

    #15 sysdevman. Your figures add up to fewer than 45 million. With our now 63.5 million population that would mean 18.5 million kids (under 18′s ). My figures show 49 million adults. Have you missed something? Probably Scotland and N Ireland. Many people do.

  17. 09/02/2013, sysdevman wrote

    I used the ONS figures:

    For labour market stats:
    http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/january-2013/statistical-bulletin.html

    For the self employed:
    http://www.ons.gov.uk/ons/rel/mro/news-release/self-employed-up-367-000-in-four-years–mostly-since-2011/senr0213.html

    My figures come to 44.9 m which is the correct total for England.

    Elsewhere on the ONS site I found:
    http://www.ons.gov.uk/ons/rel/migration1/migration-statistics-quarterly-report/august-2012/population-by-country-of-birth-and-nationality.html

    The data here gives:
    England 45m
    Wales 2.8m
    Scotland 4.8m
    Northern Ireland 1.7m

    United Kingdom Total 54.2m

    Elsewhere I found a figure of 61.8m resident, so there must be 7.6m non UK citizens staying in UK

  18. 09/02/2013, Teign Girl wrote

    I gained a great deal of experience and a satisfactory income from being freelance/contract/temp. Although, I admit, I was only able to do this because my husband had an ongoing numpty job that paid the mortgage. I liked contracting – I felt far more valued than I ever did in a ‘permanent’ job, and I believe I enjoyed a far steadier stream of employment. I enjoyed keeping my skills honed in order to get the jobs, and I enjoyed being part of a flexible workforce. The only ‘permanent’ job I ever tried to stick with badgered me into joining their crumby occupational pension scheme, and then made me redundant after 2 1/2 years, giving me back just my bare contributions and not even any interest, let alone gains. I’m retired now, but I’d say if you’re older and you’ve got good skills, don’t even bother looking for a ‘permanent’ job – if there is such a thing. One last point – HR departments’ main field of endeavour is the ‘firing’ side of employment law.

  19. 09/02/2013, joe roberts wrote

    I was self employed, bringing up a family as a single parent, and latterly part time with tax credits. These are not full time gainfull employment jobs, these are people getting by, in this misery. Also last year as a baby boomer, I retired to my lucrative state pension, HA Ha, along with thousands of others, so no longer on tax credits, but not unemployed either, now a pensioner, Yippee!!, born 1947-2012, pensioner, thats where all the new jobs have come from, we’ve retired. Thats why GDP, has not gone up either, am the only one who can see this.

  20. 09/02/2013, pete wrote

    A As a ex self employed electrician who had been contracting many years i have found that the contractor was regarded as cheap to employ,(no redundancy,no sick pay,no holiday pay,just use and abuse),easy to manage,(no health and safety complications,demand of time,violation of humanities) A contracting firms delight,maximum profits,no overheads,a wealth of experience at no cost and happy shareholders, But you do generate a disgruntled workforce,unhealthy workforce,uninspired and sick people,with no enthusiasm for the job in hand.Yes and these people are the role models for tomorrows society.Need i say more?

  21. 09/02/2013, Andy wrote

    As David Willetts puts it so eloquently, “this is the generation that listened to punk and rioted against the poll tax….” Im a 50 something who has recently started to work for myself. I’m not a professional doing freelance but probably do fall into the, “or other issues” bracket, Merryn quotes.

    I chose to take the self employed route as a way to stay sane and try and achieve something worthwhile. It was not about money or security but what some probably call mid life crisis.
    Quick web check for the opposite of crisis is: Calm, peace, tranquility.

    Not sure any of those apply but one thing I can say is that now the alarm clock gets set earlier and that is MY CHOICE.

  22. 09/02/2013, Trev B wrote

    I’m no expert in this field, but I have it on good authority from someone who works in a Council benefits office that large numbers of people register as self-employed for the simple reason that they automatically become exempt from the £26,00 benefits cap – even if they don’t actually do any work of any significance. Obviously this wouldn’t apply to the ‘independent professional’ category as they are unlikely to be on benefits, but it could be a significant distortion of the overall employment situation enabling the Coalition to claim more credit for their employment policies than they deserve.

  23. 09/02/2013, Andy wrote

    I’m no expert either but I suspect that “good authority” explains why they work in a council benefits office.

  24. 09/02/2013, Susan wrote

    I talked to someone who is trying to run an advice service in a north east community. About 40% of the clients are functionally illiterate. They take the letters from the council about the rent and the letters from the benefit agency to them so they can explain what they mean. The benefits system is shrinking and they are finding it harder and harder to stay out of debt. If you struggle with arithmetic how can you shop wisely? With male unemployment at about 10% finding a job is hard even if you can fill in an application form. The only glimmer of hope was to find a way of helping the more able clients work towards becoming self-employed. If the choice is between being on benefit or being self-employed many choose the latter. This is life on the front line in some communities today.

  25. 09/02/2013, Susan wrote

    Self-employment can be an act of desperation. No one will give me any work so I will have to make myself a job. I see the rising numbers of self-employed people as a sign that all is not well in the British economy. The strange thing is though that the funding for business startup advice has gone down and the number of start ups has gone up. Some say that this means that many startups are calamities waiting to happen. No one is on hand to say this will not work so they try it and it does not work so they are in a worse mess than ever. If the number of failures is going up as well as the number of self-employed people increasing overall what does that mean for these figures?

    Start a business is what desperate Russians did in the 1980s and desperate Americans did in the 1930s.

  26. 09/02/2013, Andy wrote

    In 2007, the Engineering business I part owned went under. I was 49, and had no joy at all securing a job in my core industry.

    I decided to re-train in a new discipline and try to make my own job. Going back into education and training, taking new qualifications, was stimulating, challenging and theraputic after the traumas of losing a business.

    So I went from being an employer (hold on, make that unpaid tax collector) to a sole trader.

    I have made a moderate success, have developed a whole new set of skills, and it is like my engineering career belongs to the life of someone else, not me. I pay some tax, I am not stressed out (unlike before), and I enjoy a wonderful work/life balance. And I’m now studying for another qualification, trying to move forward.

    It is not for everyone, but being forced out of your comfort zone can be the making of you, so don’t knock it until you’ve tried it!

  27. 09/02/2013, Boris MacDonut wrote

    #15&17 sysdevman. You must learn not to take “statistics” at face value. Keep double checking to verify them. The 2011 census gave a UK population of 63.2 million and it is rising at 400,000 a year so will now be close on 64 million. Scotland is at 5.2 million, N Ireland at 1.8 and Wales at 3. Leaving England with 54 million.
    It is also well known we have more people in the workforce than ever before as it has just exceeded 30 million for the first time.Your figures suggest 33.4 million. I think the figure you quote for employees is actually all in work …of whom about 4 million are self employed. There are 49 million adults and 15 million kids.

  28. 09/02/2013, alanmrob wrote

    Clearly whoever wrote the original article doesn’t understand freelancing. To operate as a freelancer, the first thing to be clear about is that it is very difficult to do so self-employed for anything longer than a few months. For long term freelancing you have to set up your own limited company and become an employee of it as companies that hire people who are self-employed for more than 6 months or so are deemed to be employing them full time. So to try and tie in self-employed statistics and freelancers taking away permanent roles is completely “off-piste” – doesn’t tally at all.

    One of the advantages of companies taking on “free-lancers” is indeed the minimal committment compared to taking on a permanent employee. But the real attraction is that free-lancers generally are the the most experienced and capable. Why wouldn’t you go freelance if the knew you are worth more that way. Hope that helps a bit..!!

  29. 09/02/2013, Benifit trap wrote

    For most of my working life, I have been Self-employed, my reason, Dyslistic, there were was nothink wourse then not being able to fill in forms, As you people above, say Freedom, yes that as well, The people out there, in there 50′s, of late, should be awhere, when it comes to benifits, You see, with this recetion, even I have had to sign on, the problem is; Stamp Self-employed, don’t count, towards Benift!, I carnt claim, the reason, my wife is working 25hours, is (catch 22) 30hours, we could get tax credit, 15hours, they would us with Rent & Council Tax, I carnt even make a single cliame, all becourse, of a Self-employed Stamp! So all You new Self-employed, Make sure, You top up, Your Stamps, You don’t wont to end up like I have!

  30. 10/02/2013, sysdevman wrote

    #27. Boris MacDonut. Who’s taking the figures at face value? Of course I am aware these will always be a moving feast. Hence the intention of my original post (#15) was only to indicate a trend that a significant proportion, other than employees, could be doing their own thing and were not fully understood. AFAIK this still holds even if the figures do change slightly. Also, I was also only looking at England, whereas you keep quoting UK population figures.
    Anyway, we digress of the topic of this thread. However, happy to take off line and discuss further as I think there are some important trends to be understood in order to try and understand how our future economy and way of life could be affected.

  31. 10/02/2013, Boris MacDonut wrote

    #30 sysdevman.Population is not a moving feast. There is one correct figure and you have it wrong. At post 15 you do NOT quote England, but UK.Your figures are wrong. You suggest 33.4 million workers…in England! and only 45 million people ,which is out by about 50%. At post 17 you backtrack and offer 54 million as our population ,which again is wrong, by 17%. The accuracy of statistics is very important and merely quoting whatever you first find, without question, detracts credibility from your argument. You must try harder.

  32. 10/02/2013, Jane wrote

    I agree with Merryn. Start up business stats. are not necessarily an indication of the number of people who earn, or will earn a decent amount of money over a long period.

  33. 11/02/2013, Mr B wrote

    Any accountant or HR types out there?

    I think consultants tend to come from a different budget than employees. Charged to project, rather than a company overhead…

    Maybe this is a bad sign. That companies are trying to wring the last drops by using accountancy tricks…..

  34. 11/02/2013, carolina wrote

    I first began self employment in 1978 age 30 in aviation, oilfield and exedition PR and never looked back. Having worked since 19 I had plenty of work experience by then and my decision proved to have a profitable, interesting and generally rewarding outcome and it also enabled me to move into a further fascinating industry. As a consultant PR you don’t report to a minion – its the chairman or MD. My advice on self employment – go for it – especially if you have good specific knowledge of an industry, are prepared to develop contacts and are happy to work long hours. Finally, get a very good accountant. Well worth the cost. Good luck out there.

  35. 11/02/2013, Bayard wrote

    IMHO, the rise in self employment relects the increasing cost of employment (in the sense of taxes and employment law, not in the sense that politicians invariablely use, wage levels). A self-employed person who is the sole director and memeber of staff of their own limited company can largely avoid paying any NI and doesn’t have to worry about holiday pay, employers liability insurance, maternity pay, sick pay etc as they don’t employ anyone.

  36. 11/02/2013, adwilliams134 wrote

    Just remember, Big Issue sellers are registered self-employed. That’s why so many foreigners sell it – it gains them access to a National Insurance number.

  37. 13/02/2013, Ph wrote

    At 51 I have been in finance for more than 30 years…

    I’ve known a fair few people over the years and have to agree with the article – the most common new employment on Linkedin for old business associates of mine is ‘consultant’….

  38. 24/02/2013, ray wrote

    I resigned my position at the age of 32 and have since been self employed for the last 25 years. It is a position I have had to defend, rejecting several offers of employment from companies trying to get me to go staff. Being self employed allows you to dictate where you will work, under what conditions you will work and how much you will receive. Furthermore it often keeps you out of the domain of the HR departments who employees seem to regard as the most despised profession.

    My tips. Know your business, build up a good list of contacts, then get started. Unless you are in senior management with the potential of a board position then you are almost certainly going to be better off financially than if you remain an employee. Being self employed is not without its challenges, and its better that you embrace it on your own terms than having it forced on you.

  39. 24/02/2013, Boris MacDonut wrote

    #38ray. I quite agree. HR department seem to attract teh most jobsworthy types. My own organisation insists we undertake a H&S manual handling course each and every year even though the biggest thing we lift is a laptop computer or a ring binder.Waste of time for nearly all concerned and a pointless non-job for some petty minded lickspittle.

Commenting on this article closed

MoneyWeek magazine

Latest issue:

Magazine cover
Heading higher?

Or are house prices set to fall?

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

'Would you rather upset God, or have Him just ignore you?'

In the first of three interviews with Merryn Somerset Webb, Hugh Hendry, manager of the Eclectica Fund, talks about what it takes to be a good hedge fund manager – and how he learned to stop worrying and love central banks.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


21 November 1969: The first permanent Arpanet link

A milestone in the formation of the internet, the first permanent Arpanet link was established on this day in 1969 between researchers in the United States.