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Almost half the self-employed are on poverty pay

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Almost half of self-employed adults aged over 25 are earning less than the minimum wage, according to new analysis by the TUC, that punctures the myth of a growing army of wealthy entrepreneurs.

The figures also reveal that self-employed women fare particularly badly, with over half (52 per cent) earning less than the minimum wage of £8.21 an hour.

The low-paid self-employed face a double whammy of disadvantage. They miss out on key rights and protections that come with being an employee, such as sick pay. But the low wages many earn mean they often cannot afford to protect themselves against risks such as illness.

Rise in self-employment

The numbers of self-employment workers has soared since the early 2000s.

In early 2001 there were 3.2 million self-employed people. By the end of 2007 this had reached 3.8 million.

Following the 2008 downturn, self-employment accelerated. This initially cushioned overall employment falls and then contributed to job growth. The self-employed now makes up 15 per cent of the workforce, some 5 million people.

While men are more likely to be self-employed, 3.3 million compared to 1.7 million women, the number of women in self-employment has grown much faster, up 57 per cent since 2008, compared to 17% for men.

Women are also more likely to be in part-time self-employment. More than half of self-employed women are part-time, compared to a fifth of men.

The graph below shows the striking contribution of self-employment to employment growth post-recession.

Net change in employee jobs vs self-employment, 2008-2019 (000s)

Net change in employee jobs vs self-employment, 2008-2019 (000s) graph
Source: ONS, TUC analysis

The chart also shows the increasing contribution of employee jobs to net growth in employment in the last couple of years. However, since the beginning of this year this trend has reversed, with the self-employed again driving employment growth.

Contributions to net employment growth 

Contributions to net employment growth graph
Source: ONS, TUC analysis

While we should not make too much from data over a short period, at the very least it shows that self-employment continues to contribute significantly to employment growth.

Concerns about the rise in self-employment

The TUC has long held concerns around the growth in self-employment.

While some people move into self-employment as a positive choice, others are forced into low-paid self-employment because they cannot find suitable work.

The TUC is worried that the growth in self-employment is also driven in part by sham forms of self-employment, which are used by some employers to reduce their tax liability, avoid the minimum wage and deny workers their rights. Sham self-employment includes some gig economy workers, and people who are contracted to a single employer through a personal service company, rather than being contracted as an employee.

Self-employment should be a choice made by the worker, not the employer.

The 1.85 million people in low-paid self-employment [1] are part of at least 3.7 million people in insecure jobs . The other 1.83 million include agency workers, casual workers, seasonal workers, and those whose main job is on a zero-hours contract.

We need to see a proper crackdown on bogus self-employment and concrete action by the government to tackle other forms of insecure work .

[1] For low-paid self-employment: The minimum wage for adults over 25 is currently £8.21 and is also known as the National Living Wage. The number of working people aged 25 and over earning below £8.21 is 1,850,000 from a total of 4,030,000 self-employed workers in the UK. The figures come from analysis of data for 2017/18 (the most recent available) in the Family Resources Survey and were commissioned by the TUC from Landman Economics. The hourly earnings figures are based on individual hours worked rather than an assumption applied across the sample. The Family Resources Survey also suggests that fewer people are self-employed than other data sources, including the Labour Force Survey.

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