Economists love a good mystery. Before the pandemic, one thing they puzzled over was the steady rise in the number of self-employed people in Britain’s labour market — a stronger trend than in most other developed countries. Now there is a new mystery: where on earth they’ve all gone. When the pandemic hit, the ranks of the self-employed fell sharply and they show no sign yet of bouncing back.
This abrupt change of direction matters because the rise in self-employment has been for decades one of the UK labour market’s defining features. The share of workers who were self-employed rose from about 8 per cent in 1975 to about 14 per cent in 2019. What exactly it means to be self-employed in Britain has also changed over that time. By 2019, it was much more common to be “solo self-employed” — a one-man band rather than someone who employs others. Nearly half of the UK’s self-employed had employees in 1975 but by 2019 the figure was just 15 per cent.
The growing army of one-man bands was an important contributor to the UK’s so-called “jobs miracle” that unfolded in the decade after the 2009 crash and pushed employment rates to record levels. According to the Institute for Fiscal Studies, solo self-employment accounted for a third of all employment growth over that decade. On the eve of the pandemic, the level and growth of solo self-employment in the UK were among the highest in OECD countries.
Other factors probably play a part. A fall in self-employed construction workers hints at a Brexit effect. A tight post-pandemic labour market might have meant better job opportunities for people who were “making do” with gig work. The Centre for Economics and Business Research consultancy has even mooted that employers’ shift towards hybrid work since the pandemic started means more people can gain the benefits of self-employment (flexibility, the chance to work from home) without giving up the security of employment.