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Average wages for self-employed still lower than two decades ago

The Resolution Foundation estimates that average earnings for people in the group in 2014/15 are only around £240 a week, 15 per cent down on 1994/95 levels in real terms

Ben Chu
Economics Editor
Tuesday 18 October 2016 17:51 BST
Self-employed Deliveroo riders went on strike over pay this summer
Self-employed Deliveroo riders went on strike over pay this summer

The average earnings of Britain’s still growing army of self-employed workers are still lower than they were two decades ago, new research from the Resolution Foundation suggests.

The think tank estimates that average earnings for people in the group in 2014/15 are only around £240 a week, 15 per cent down on 1994/95 levels in real terms.

Over that time the earnings of employees are up 14 per cent at around £400 a week.

No growth in two decades

According to the latest labour market report from the Office for National Statistics there are 4.76 million self-employed people, accounting for around 15 per cent of all those in work.

Since the 2008-09 recession their ranks have swelled by almost one million. And since 2000 the numbers are up by 1.5 million.

Yet the average wages of the group are £60 a week lower than at the turn of the Millennium, according to Resolution’s calculations.

Official data on the earnings of the self-employed is patchy and only produced with a considerable time lag, so Resolution has to use statistical interpolation techniques to estimate the latest average earnings for the group.

Rising numbers

There is a vigorous debate among economists and analysts over whether the sharp rise in the numbers of self-employed in recent years reflects the preferences of workers for greater autonomy and fewer hours, or whether it is a symptom of a labour market that is still under capacity.

Some suggest the rise in self-employment reflects the enforced casualization of the work force by companies that want to reduce their labour costs.

The bulk of the decline in average real wages since 2000 is accounted for by self-employed workers doing fewer hours in a week.

But since the financial crisis this has changed and such “compositional effects” have not explained the earnings shortfall.

Theresa May has appointed Matthew Taylor, the former head of Tony Blair’s policy unit, to head a review of workers’ rights and firms’ employment practices, which will cover the issue of self-employment.

The proportion of self-employed business owners with staff of their own has fallen from 23 per cent in 2000 to 15 per cent today.

This has been interpreted as suggesting that the surge of self-employment is not evidence of a major flowering of entrepreneurial activity.

This year has seen strikes by technically self-employed workers in the so-called “gig economy” against the pay and conditions imposed by the smartphone apps UberEats and Deliveroo.

“With so many self-employed workers earning so little, it is right that the government investigate how public policy should catch up to meet the needs of these workers,” said Adam Corlett of Resolution.

“For many people, self-employment brings a freedom that no employer can provide. But the growth of low pay and short hours, along with a summer of protest about conditions, means that it’s no surprise some workers in the gig economy feel that self-employment is just a positive spin on precarious work.”

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