Pandemic hits self-employed

There are dramatic changes in self-employment – an important but overlooked part of the labour market – says Dr Mark Lang, consultant at the Bevan Foundation

Self-employment has grown significantly in Wales and across the UK over the last ten years, accounting for 13.7 percent of the total Welsh workforce between April 2014 and March 2015. Despite this, comparatively little is known about the challenges faced by this group of people or how best to support them.

To some extent, this is a result of such a relatively recent and rapid rise in self-employment generally, as research has shown that four in every ten new job roles created in the ten years following the 2008 financial crisis were self-employed. This inevitably changed some of the traditional characteristics of the self-employment market. Whilst there is no doubt that many of those new roles were rewarding, there will inevitably have been a growing number of the self-employed who experience far more precarious and less rewarding patterns of work.

The pandemic

The Covid-19 pandemic has significantly affected self-employment, and by autumn 2020 self-employment across the whole of the UK had fallen by 650,000. This was, in part, likely to have been an impact of a disproportionate overrepresentation of the self-employed in sectors more likely to have been affected by ‘lockdown’ measures, such as those delivering social consumption or face-to-face services. Significant numbers of people fell through the gaps in financial support, and many will have been forced to leave self-employment in search of alternative forms of employment.

Nevertheless, self-employment continues to represent a sizable proportion of the overall Welsh workforce, and many of these remain low-income earners. The Bevan Foundation’s first report identified the low-income self-employed in Wales as those earning £18,848 per year or less. In 2016, research found that measured on an hourly basis, 49 percent of the UK’s self-employed were low-paid, compared with 22 percent of employees. Although the pandemic was not the origin of these patterns of low-income self-employment, it has certainly further exposed the precariousness of large proportions of self-employed people.

The first report also found that although the extent of male self-employment is higher than female self-employment in every local authority area in Wales, those places with the highest overall rates of self-employment (generally rural communities) also tended to experience the highest rates of female self-employment. These areas also tend to experience some of the lowest paid self-employment.

In 2016, five economic sectors accounted for 64 percent of low-paid self-employment, these were: construction (i.e. building site work, electricals and plumbing, decoration, and roofing); administrative and support activities (i.e. cleaning and gardening); transport and storage (i.e. taxi, lorry, and coach drivers); professional, scientific, and technical (i.e. design, photography, and translation services); and wholesale and retail trade. Other smaller sectors will, of course, also include significant proportions of low-income self-employment, such as the creative industries, where one recent study found that amongst respondents the average incomes in the sector in Wales were around £17,000 per year.

Over the coming months, we will be exploring and formulating policy recommendations that we hope will help address many of the challenges faced by the low-income self-employed in Wales. These challenges include those that directly affect the earnings of the low-paid self-employed, as well as those that have a wider impact on them and their families. We will, of course, share this work as the project develops.

This research has been funded by the abrdn Financial Fairness Trust.