A strange thing started happening in the UK throughout 2011 and 2012. While the economy continued to flatline and people all over the nation struggled through the hangover of the recession, we were told time and again by government spokespeople that the job market was exploding. Unfortunately for the 2.6 million unemployed people looking for jobs at this time, this surge in the job market was being driven mostly by self-employment and people starting up micro-businesses. In fact, since 2010, more than 40 percent of newly created jobs are held by the self-employed, and a whopping 16 percent of the total workforce, around 5 million people, fall into this category.
This is not only the highest ever level of self-employment in the UK, but it also makes us the self-employed capital of Western Europe.
However, is this entrepreneurial boom solely the byproduct of the recession and a broken economy, or does it tell of a deeper shift in the UK’s attitudes towards work? Furthermore, what effects will this trend have on the UK’s economy and society in the future?
What Really Caused the Rise of Entrepreneurialism in the UK?
The recession definitely played a huge part in the rise of entrepreneurialism in the UK. Many self-employed people became their own boss not in order to live out a life-long dream, but merely to keep a roof over their heads.
One such example of a person becoming a business owner through necessity is Emily Hung, a London based performer and owner of London Actors’ Hub. Emily lost her job as a receptionist in a London-based hairdressers in 2009 and found it impossible to find more secure work. “At one point I was applying for 20 or more jobs a day.” Emily told me. “At the same time, some clerical errors meant that my housing benefit was being withheld, and I was very quickly running out of money. 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 added “I would still prefer the security of a job with another company. Working for yourself has few real advantages — you work all the time, and money is not guaranteed. 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’s story is representative of a large number of self-employed people in the UK. In a recent survey of self-employed people, around 25 percent of respondents said that they would rather work for someone else, listing job security and higher rates of pay as the main reasons.
However, for every person who was forced into self-employment due to personal circumstances, there are many more who saw it as a natural progression.
Perhaps the biggest catalyst for the explosion of self-employment in the UK has been advances in technology. The effect the Internet has had on attitudes to work is immeasurably large. Thirty years ago, working for someone else was an almost de facto decision; only those fortunate to have large amounts of capital behind them could feasibly imagine becoming self-employed. Even a modest company would require enormous startup costs to buy telephones, printers and other prohibitively expensive office gear, before they even started trading. On the other hand, for larger companies, the technology simply didn’t exist to allow employees to work independently and remotely; the technological infrastructure simply wasn’t there. Instead employees had to come in to the office every day, to be able to correspond with each other, and use the professional resources which they could not personally afford.
Fast forward to today, and almost all of the essential technology a person could need to feasibly run a company can be squeezed into a smart phone. Anyone, with a little imagination and creativity, can run a business from one laptop, and not have to spend a fortune doing so.
This flexibility means that any skilled professional, instead of working for someone else, can market and sell their skills to anyone, potentially upping their earning potential in the process and getting to work the hours they choose.
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This is an excellent proposition for firms and companies too. Instead of hiring a permanent member of staff, they can outsource work to freelancers and avoid the headache of HR costs, pension schemes, benefits, and many other small costs which accompany hiring an in-house worker.
This amazing flexibility in how services and skills are traded, both from an employer and employee perspective, is one of the driving forces behind the boom in self-employment in the UK. However, is this trend a positive step forward for the way we work in the UK, or is there a darker truth hiding among all the statistics?
What Does the Rise of Entrepreneurialism Mean for the UK?
Small businesses have traditionally been the backbone of any local community and were a vital component of the UK’s economy as a whole. However, this latest wave of entrepreneurialism may be doing more harm than good as the nation continues to limp towards full economic recovery.
The median self-employed salary has dropped to just £12,000 a year, which is less than someone would make working full time in a minimum wage job. This means that 1 in 7 employed people are barely earning enough to scrape by, let alone spend enough to spur economic growth. As well as this, small business owners and entrepreneurs have traditionally strived to expand their companies, evolving over time into larger companies and firms which in turn hire more people, therefore pumping more money into the economy. However, the vast majority of newly self-employed people are freelancers and micro-business owners who don’t have the means, or the money, to expand beyond the scope of a lifestyle business. This essentially means that skilled workers who would be earning high salaries working for someone else are being trapped in low paying jobs of their own creation, working long hours.
In the long term, the picture looks even bleaker, as the self-employed don’t have the advantages of company pensions and benefits behind them, which means that in a couple of decades we could be facing huge numbers of chronically poor older people trying to survive on dwindling state pensions, or literally working themselves into the grave.
So, can we expect to see the levels of self-employment quickly drop as the job market becomes increasingly robust and more and more people can abandon their own struggling businesses for the comfort and security of working for someone else? Well, not necessarily.
Many thinkers, such as Andrei Cherny, argue that because information technology makes it increasingly easy and cheap for companies to simply hire freelancers, we can expect to see permanent jobs start to dwindle. You can understand why a remote workforce of freelancers is becoming an attractive proposition for larger companies: with no office costs, no hiring costs, no employee benefits, a smaller chance of legal disputes, fewer workers’ rights, no pension costs, no insurance costs and no issues around firing staff, companies can shave hundreds of thousands off of their bottom line. So, in the coming decades, we might see an incredibly disruptive employment “revolution” in which people make their living selling their skills as freelancers in a more open, fluid job market.