Is this the death of the traditional employee?

Self-employment has exploded since the financial crisis. Ben Chu examines the causes and the implications of this workplace revolution

Through the traumatic months of 2011 and 2012 when the economy flatlined, David Cameron and George Osborne hugged data releases from the jobs market like a comfort blanket.

Job creation surged upwards even as the economy went nowhere, giving beleaguered ministers something positive to cite in speeches.

And the growth in the jobs market was largely driven by burgeoning self-employment. Around four in 10 of the jobs created between the formation of the Coalition in 2010 and the beginning of last year were in this category.

But self-employment has not been merely a stagnation story.

Since the recovery finally kicked in last year, there have been further stunning gains in the number of people classified as working for themselves.

The total number of self-employed has now hit 4.5 million. That's around 15 per cent of the workforce and the highest self-employment ratio on record. Analysts are now vigorously debating the significance of this explosion in the self-employment figures.

What does this trend tell us about the state of the economy and, indeed, our society?

Yesterday's minutes from the most recent meeting of the Bank of England's Monetary Policy Committee showed the experts of Threadneedle Street grappling with this question. Does the trend represent, they pondered, concealed unemployment and therefore temporary "slack" in the economy? Or is it a permanent structural change in the labour market? To put it crudely, the former strengthens the case for keeping interest rates on hold for longer, while the latter supports a hike.

Members of the MPC, the minutes related, hold a "range of views", which is a polite way of saying they disagree. And no wonder. The evidence informing this debate is ambiguous and fragmentary.

For one thing it is unclear as to what is driving the trend. Demographics seem to be part of the story. The surge in self-employment has coincided with a glut of baby-boomers reaching retirement age. Anecdotally, many of us know people from this generation who have quit full-time jobs and set themselves up as consultants. And the statistics show over 65s are more likely to be self-employed than other age groups. As the Bank's minutes put it, many of these workers are likely to be choosing self-employment as an alternative to retirement, rather than an alternative to employment.

But this is unlikely to be the whole story. The self-employment surge also coincided with benefits reform by the Coalition. This seems to have pushed more people into setting up shop on their own in order to protect their incomes. The number of women entering self-employment has been particularly striking. While historically they have accounted for 30 per cent of the total, since 2007 they have represented 60 per cent. Many less well off women have been hit by the Government's tightening of eligibility for lone-parent income support.

An important question, then, is: how comfortable are people with being self-employed? A recent survey by the Resolution Foundation think tank found three-quarters of those entering self-employment in the past five years were happy to be their own boss. But that still left a quarter, around 450,000 people, apparently hankering after a job in a firm.

There seems to be underemployment too. Around half of the newly self-employed of the past seven years are part-time. And the proportion of people working part-time who would like to work more hours is around 18 per cent, up from around 10 per cent before the financial crisis.

We know less about the financial circumstances of this group of workers than we know about those of regular employees. But the Resolution Foundation estimates that the median self-employed salary is £12,000 a year. That is only just higher than the minimum wage, implying that living standards for a large number of people have been battered (although one must, of course, take into consideration that many will be choosing to work fewer hours).

There are other vital economic questions too. How will the fact that one in seven of the workforce is self-employed impact on consumption? Can people be expected to spend less and save more if their income is more precarious? Will they work longer hours and more weeks if their holidays are not paid for?

There are implications for tax revenues here and, indirectly, the levels of public sector spending that Britain can afford.

Some regard the rise in self-employment as an encouraging trend, suggesting it indicates a blossoming of entrepreneurship among former wage slaves. Researchers at Morgan Stanley, however, doubt this, and point out that the number of self-employed individuals who have staff has fallen by around 10 per cent since 2007.

Others describe the trend as an inexorable reversion to an older pattern. They describe the "job for life" expectation of the post-war years as a historical aberration, which is now giving way to the rise of "portfolio careers".

Trade unionists, on the other hand, fear that the surge in self-employment is part of the pernicious casualisation of the workforce. The TUC argues firms have been sacking employees and hiring them back on temporary contracts in order to avoid the cost of pensions or the hassle of employee rights.

As with other puzzles thrown up by the economy in recent years, such as the collapse in productivity and the chronic weakness of exports, there is no shortage of solutions to the self-employment surge. But with our present state of knowledge it is impossible to say which one is correct.

Is the age of the traditional employee over? Are we turning into a nation of empowered entrepreneurs? Or will the new-born army of self-employed flow back to their old desks and workplaces as the economy returns to full capacity?

It is hardly a satisfactory answer when so much is at stake but only time – and more data – will reveal the answers.

Start your day with The Independent, sign up for daily news emails
Life and Style
tech
Arts and Entertainment
Rocky road: Dwayne Johnson and Carla Gugino play an estranged husband and wife in 'San Andreas'
filmReview: In the face of all-round devastation, even Dwayne 'The Rock' Johnson appears a little puny
Arts and Entertainment
Bright lights, big city: Melrose Avenue in Los Angeles by dusk
books
News
i100
Sport
Harry Kane makes Paul Scholes' Premier League team of the season
footballPaul Scholes on the best players, managers and goals of the season - and the biggest disappointments
News
i100
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club that later became synonymous with Hillsborough has dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor