How more people than ever are becoming their own boss, and what this will mean for the UK economy
By the summer of 2011, 2.6 million people were unemployed in the UK, making it the worst job market in more than two decades. Despite this, throughout 2011 and 2012 statistics showed that the job market was booming, and that the hangover of the recession was, at last, starting to lift.
Unfortunately for the millions of jobseekers still out of work, the statistics were a little skewed: 4 in 10 of the newly created jobs were being held by the self-employed meaning that almost half of the growth in the job market wasn’t coming from companies with the power to hire. This massive rise in self-employment means that currently a whopping 1 in 7 workers in the UK are self-employed, which is not only the highest level of self-employment in UK history, but the highest in Western Europe, too.
However, why are so many people rejecting traditional jobs in lieu of becoming their own boss, and what effect will the large number of entrepreneurs have on the UK economy in the coming years?
Why Have So Many People Chosen to Work for Themselves?
The effect of the recession can’t be underestimated when discussing the current UK job market. Without doubt, many self-employed people became their own boss due to losing their jobs and being unable to find a new one. For even more people, becoming an entrepreneur was less a lifestyle decision and more a desperate measure to keep a roof over their heads.
One such entrepreneur is Emily Hung, the MD of London Actors’ Hub. Before the recession hit, Emily was regularly working as an actress and producer, but after the recession hit, arts funding was massively cut.
Unable to find work, Emily decided to take matters into her hands: “I decided to start running dance and acting workshops, advertising them through social media and sites like Gumtree. At first, it was just a desperate measure to try and get money together to pay rent, but within a couple of months it had become a good source of income.”
However, Emily continued: “I would still prefer the security of a job with another company. Some weeks I’ll work 60 hours or more, and then not even sell enough tickets to live off. If I could click my fingers and find myself a long term job working for someone else, I’d take it in a second.”
Emily is not alone in wanting to return to working for someone else. A recent survey of self-employed people found that 25% of respondents would rather work for someone else, saying that they missed the job security and higher rate of pay of traditional jobs.
However, the increasing levels of self-employment in the UK might have more to do with technological advances than economic issues. In the last few years, technology has advanced to the point where anyone can quite feasibly run a business from their smart phone, with little or no capital behind them. Internet marketing and the popularity of social media means that business owners can easily and cheaply find customers in ways which were inconceivable just 10 years ago. Belinda Love Lee, a freelance graphic designer said: “Marketing for me isn’t so much of an issue, because I see my business and life integrated as one. So, when I’m using social media, which is my marketing, I enjoy it as it’s become a part of my daily habits in life.”
The same went for large companies who hired employees. Because the technological infrastructure simply didn’t exist decades ago, workers couldn’t work remotely and independently – everyone needed to work in an office with access to expensive office equipment. However, the internet and modern technology now means that employees can work from anywhere, at any time.
This has fundamentally changed the way companies look at employment. Instead of having to hire a permanent member of staff, and having to shell out for:
- A pension
- Health insurance
- Sick days
- Sick cover
- Holiday pay
- Maternity leave
- Other HR costs
they can simply outsource work to freelancers on a project-by-project basis.
This evolution in the way services and skills are traded is the biggest driving force behind the rise of self-employment and entrepreneurialism in the UK. But are these changes in employment really a step forward, or is there a more sinister truth hiding behind the statistics?
How Will Entrepreneurism Affect the UK?
Although self-employment has had a huge effect on the job market and put hundreds of thousands back into work, the reality of being self-employed isn’t as positive. The average self-employed person takes home only £12,000 a year, which is substantially less than someone would make working full time for minimum wage. For the UK as a whole, this means that almost 20% of employed people are barely earning enough to survive on, let alone spend in a way which will bolster the UK economy.
The huge numbers of freelancers and micro-businesses are also indicative of a rising problem: traditionally, small business owners and entrepreneurs have strived to expand their businesses, and it is this ambition which created new jobs and contributed so much to the UK economy. However, this desire for expansion doesn’t exist amongst the legions of freelancers and micro-businesses who are struggling to squeeze a living out of their businesses, let alone aggressively expand. Even if thei ambition was there, most self-employed people have neither the money or the time to invest in their own businesses.
So, if the picture looks so bleak, can we expect to see levels of self-employment suddenly drop as the job market stabilises and grows? Some thinkers, such as Andrei Cherny, don’t think so.
Because of the technological revolution, Andrei and many of his contemporaries think that companies will increasingly outsource skilled work and so in the coming decades we can expect to see permanent jobs start to dwindle and a more fluid job market develop where people sell their skills.
What Can Britain Do to Support its Entrepreneurs?
Mark Pearson, CEO of My Voucher Codes and award winning digital entrepreneur, thinks that perhaps the answer lies in giving entrepreneurs more support to become better business people.
“When a person starts a new job, it’s inconceivable that you’d just let that person get on with it without any guidance or instruction. It’d be a catastrophe! Yet this is an attitude that is taken towards many self-employed people in the UK.
For example, if you’re a freelance graphic designer, your job stops being solely graphic design and you become a business owner, too. With that comes the responsibility of handling the logistics of running a business, combined with the pressure of finding new clients. Just marketing yourself effectively can be an enormous task, one which requires skills and expertise as well as time and effort.
As it stands, the education system is very good at giving our children the skills they need to be good employees, but it doesn’t necessarily equip them to run their own businesses, nor does it encourage and nurture entrepreneurial tendencies.
Until our support network for entrepreneurs catches up with the demand for it, however, the responsibility falls to the UK’s self-employed to educate themselves. If you’re self-employed, you need to surround yourself with inspiration, and learn for yourself how to become a better business person. The internet has not only given you the tools you need to start your own business, but it has also given you an extraordinary learning resource, right at your fingertips. Twitter alone is a constant source of advice and inspiration which could prove revelatory to your business.”
So, the perhaps the solution to the problems caused by high levels of self-employment isn’t to herd people back into traditional jobs, but to give entrepreneurs the support they need to create successful businesses, which will in turn bolster the UK economy.