What can be done about low-income self-employment?

Self-employment accounts for nearly one in seven jobs, and is often low-paid. Dr Mark Lang, who is working with the Bevan Foundation, highlights some of the policy options and possibilities that are emerging.

Despite a significant reduction during the peak of the Covid-19 pandemic, self-employment continues to represent a substantial percentage of the overall Welsh workforce. Nevertheless, it is a form of working that we know relatively little about and, in particular, it is not clear what policy responses are likely to have most impact in terms of addressing the challenges faced by the many low-income self-employed as highlighted in the first of the Bevan Foundation’s two reports published last year.

Our work has begun to develop four sets of recommendations for possible policy responses that may assist the low-income self-employed to help overcome their precarity and improve their financial resilience. These may be described as: helping the low-income self-employed to do business better; supporting them with normal everyday things; enhancing protections; and considering the impact on them of the regulatory context.

Doing business better

The first of these, doing business better, relates to those issues that directly affect the businesses run by and earnings of the low-income self-employed. Included in this, I suggest is a need to improve awareness of and the affordability and access to training that is specifically relevant to their own business activities. Closely connected is a need to improve networking for the low-income self-employed, the lack of which currently restricts their access to information and potential business opportunities. Part of the response to this might imply more active management of those sectors that feature a heavy presence of low-income self-employment. It may also require more intelligent targeting of business support.  

One aspect that is likely to feature quite significantly in our recommendations is the need to further develop co-operative and mutual forms of self-employment. I am continuing to work on these proposals, but they might, for example, include recommendations to support the establishment of alternative models of not-for-profit third-party platforms in Wales, or enhanced support for the establishment of self-employment co-operatives. Wales has a proud tradition of mutual aid, and these principles could add much to support the low-income self-employed.

Normal, everyday things

The second set of policy responses, normal everyday things, takes a wider perspective on the lives of the low-income self-employed. These policy responses are likely to need to improve access to affordable childcare, affordable housing, and improve options in relation to pensions and savings. These are, of course, issues that affect people and families that experience low-income regardless of their employment status, but may be particularly problematic for those who are self-employed.

Protections

The third set of potential policy responses, protections, include issues such as the lack of paid leave experienced by the self-employed and the consequent impact on their physical and mental health. They also include things like the lack of access to insurances, legal protections, and income unpredictability that particularly affect the low-income self-employed. Although the benefits system is, to a large extent,
determined at a UK level and therefore beyond the scope of this research, the range of Welsh benefits that exist must avoid unintentionally replicating the some of the failings of UK policy.

Regulatory environment

The fourth set of policy responses, the regulatory context, largely falls outside the scope of this research, but it is important to note its impact (or lack of impact), on the low-income self-employed in Wales. In this perspective we might include the tax and National Insurance system, IR35, and, indeed, the National Living Wage that does not support the self-employed.