Benedict Dellot on how government can help those who go it alone

Take the wages. People who strike out on their own earn a third less than someone in a typical job. They are also half as likely to contribute to a private pension, and considerably less likely to engage in regular training. This is not to mention the myriad personal pressures: isolation, a lack of affirmation and an abiding sense of precariousness.

Why, then, do the ranks of the self-employed continue to grow? The number of people who work for themselves has risen by 40% since 2000, compared with a 10% increase in the conventional workforce. The result is that one in seven of the working population now answer to themselves – the highest figure on record. Should this trend continue, the RSA predicts that the self-employed community could soon outgrow the public sector workforce. 

For the unions and other sceptics, the explanation is simple: in the absence of good quality jobs, people are being forced to create their own. There is no doubt some truth in this assessment; several studies have demonstrated a correlation between unemployment and start-up rates. And it now appears that some of those who started up in business during the recession are beginning to return to typical employment.

But the ‘pushed-into-it’ thesis is only one part of the story – and a small one at that. Polling by the RSA and Populus last year found that the vast majority of the newly self-employed (those who started since the economic crash in 2008) did so in the pursuit of greater autonomy and creativity at work. Our research also showed that over 84% of self-employed people are more satisfied with their job than they would have been working for somebody else.

So let’s be clear: this is a positive trend to be lauded not lamented.

The question we must now ask is what we can do to help this growing band of self-starters to flourish, for their benefit and the wider economy. One option is to focus on familiar policy levers. Reduce burdensome taxes, boost access to finance and pare back unnecessary red tape. And true to form, this is precisely what the present government has done. Thanks to policies such as the one-in, two-out ruling on regulation, the UK now ranks 9th on the World Bank’s Ease of Doing Business Index.

Such efforts should be applauded. But take a step back and a common pattern comes into view: nearly all focus on supporting the business rather than the individual that sits behind the business. By this I mean that policymakers have tended to overlook personal issues such as people’s access to mortgages, pension provision, maternity pay and general wellbeing. Little wonder that our poll showed just 14% of the self-employed think the Government adequately supports people like them.

So what needs to change? Among the RSA’s ideas are to extend automatic pension enrolment to the self-employed, establish a ‘right to request’ for more flexible payment terms in the housing market, overhaul the design and delivery of Universal Credit, and introduce equal treatment under the Work Programme. Behind every proposal is a recognition that the self-employed have both rights and responsibilities, which is why we also recommend changing National Insurance levies to finance extra protection. This should not be seen as unnecessary meddling by an overreaching state, but rather as a strategic investment in the country’s wealth creators.

The alternative is to carry on as usual. But we should know that doing so will deprive many people of the chance to enter the world of business. Indeed, entrepreneurship is already the preserve of the privileged. Our latest research finds that people who have received a windfall of more than £10,000 are twice as likely to work for themselves, and that the self-employed who own their home outright are 30% more likely than renters to last three years or more in business.

Self-employment is not meant to be an easy-ride, of course. Not everyone is cut out to work for themselves, and failure is an inevitable aspect of entrepreneurship. But too many people are struggling unnecessarily. Let’s hope this Government can get to grips with the real issues facing people who go it alone. 

Benedict Dellot is Senior Researcher at the Royal Society of Arts (RSA). He originally wrote this piece for the December edition of Bright Blue's Centre Write magazine.