The growth of self-employment has been one of the key features of the UK labour market for the past two decades. At the end of 2019, there were more than 5 million self-employed people in the UK, representing 15.3% of total employment. Together with Stephen Machin, we are running a series of surveys to capture how these workers fare throughout [...

Blundell, Jack

Ventura, Maria

English

LSE Research Online

Self-employment	eight	months	into	the	pandemicThe	growth	of	self-employment	has	been	one	of	the	key	features	of	the	UK	labour	market	for	the	past	two	decades.At	the	end	of	2019,	there	were	more	than	5	million	self-employed	people	in	the	UK,	representing	15.3%	of	totalemployment.	Together	with	Stephen	Machin,	we	are	running	a	series	of	surveys	to	capture	how	these	workers	farethroughout	the	COVID-19	crisis.	Here	we	summarise	some	of	our	findings	and	discuss	other	recent	research.Incomes	and	hours	are	down	and	show	little	signs	of	recoveryIn	our	first	survey,	early	in	the	crisis,	we	showed	that	the	self-employed	saw	greater	drops	in	their	earnings	andhours	of	work	than	other	types	of	workers.	Following	this,	in	our	September	survey,	we	document	a	sluggishrecovery	in	hours	and	incomes	over	the	summer.	While	the	share	of	workers	that	report	working	fewer	than	10hours	each	week	fell	from	40%	in	April	to	32%	in	August,	the	figure	is	significantly	higher	than	it	was	in	February,prior	to	the	first	lockdown.	This	pattern	is	shown	in	Figure	1	below.	Similarly,	the	share	of	workers	earning	under£1,000	in	August	(50%)	is	barely	lower	than	in	April	(52%).	This	share	was	under	a	third	(33%)	in	February.Figure	1.	Hours	worked	by	self-employed	workers	in	2020LSE Business Review: Self-employment eight months into the pandemic Page 1 of 5		Date originally posted: 2020-12-01Permalink: https://blogs.lse.ac.uk/businessreview/2020/12/01/self-employment-eight-months-into-the-pandemic/Blog homepage: https://blogs.lse.ac.uk/businessreview/Notes:	Self-reported	hours	worked	in	February,	April	and	August	2020	among	self-employed	workers	(Blundell	et	al,	2020)This	slow	recovery	is	echoed	in	work	by	the	Resolution	Foundation,	who	also	demonstrate	that	workers	with	lowerqualifications	are	the	most	likely	to	experience	prolonged	earnings	losses.	One	well-documented	feature	of	thecurrent	crisis	is	the	disproportionate	negative	labour	market	impact	on	women.	Once	we	account	for	the	fact	thatself-employed	women	are	more	likely	to	be	able	to	work	from	home,	we	also	find	that	they	are	more	negativelyaffected	in	terms	of	hours	and	incomes.Different	concerns	arise	when	looking	at	the	situation	of	workers	in	the	“gig	economy”.	We	find	that	a	third	ofworkers	finding	work	through	apps	report	actually	having	more	work	than	usual.	On	the	other	hand,	they	also	aremore	likely	to	report	feeling	like	their	health	is	at	risk	while	working.	Three	out	of	every	four	(78	per	cent)	app-workerrespondents	perceived	their	health	to	be	at	risk	during	work	throughout	the	crisis.	Among	other	self-employedworkers,	the	figure	is	23	per	cent.Government	support:	good	for	those	who	can	get	itExcluded	from	the	furlough	scheme,	the	flagship	government	support	scheme	for	self-employed	workers	is	the	Self-Employment	Income	Support	Scheme	(SEISS).	The	first	grant	under	this	scheme,	with	a	generosity	of	80%	of	pastprofits	up	to	£2,500	per	month,	was	made	available	in	May.	The	second,	made	available	in	July,	came	with	aslightly	reduced	generosity.	Following	the	schemes	extension,	two	more	grants	will	follow,	with	the	third	at	a	furtherreduced	generosity	and	the	fourth	yet	to	be	determined.LSE Business Review: Self-employment eight months into the pandemic Page 2 of 5		Date originally posted: 2020-12-01Permalink: https://blogs.lse.ac.uk/businessreview/2020/12/01/self-employment-eight-months-into-the-pandemic/Blog homepage: https://blogs.lse.ac.uk/businessreview/Since	the	start	of	the	crisis,	commentators	have	highlighted	the	poor	targeting	of	SEISS.	To	be	eligible,	the	mainconditions	are	that	workers’	self-employment	must	provide	over	half	of	their	taxable	income,	a	tax	return	must	havebeen	submitted	in	2018-19,	and	profits	must	have	been	under	£50,000	for	that	year.	It	has	been	estimated	thataround	two	fifths	of	workers	with	some	self-employment	income	are	ineligible	for	this	support.With	eligibility	unchanging,	the	extension	of	SEISS	well	into	next	year	widens	the	gap	between	those	who	areeligible	for	SEISS	and	those	excluded.	To	help	plug	the	gap,	in	Scotland	and	Wales	additional	grants	have	beenmade	available	to	newly	self-employed.	However,	these	are	small	in	value	and	affect	a	minority	of	ineligibleworkers.	Ineligibility	matters:	we	find	that	those	who	did	not	receive	support	are	more	than	twice	as	likely	as	otherself-employed	workers	to	report	financial	difficulties.	Reflecting	this,	self-employment	has	played	a	prominent	role	incampaign	groups	such	as	ExcludedUK.Eligibility	conditions,	particularly	the	exclusion	of	those	without	a	2018-19	tax	return,	demonstrate	the	challenge	ofdesigning	equitable	transfers	for	the	self-employed.	This	is	also	evident	in	the	loose	conditions	on	claims	among	theeligible.	Unlike	furloughed	employees,	the	self-employed	are	allowed	to	continue	working	while	receiving	the	grant,and	grant	levels	are	fully	independent	of	financial	loss.Recent	research	using	novel	bank	account	data	has	shown	that	on	average,	among	those	getting	the	SEISS	grant,net	income	has	declined	by	just	4%.	On	average	then,	SEISS	is	very	successful	in	smoothing	the	income	shockcaused	by	COVID-19.	However,	this	masks	substantial	variation,	with	some	workers	seeing	large	positive	ornegative	changes	in	net	income.	This	echoes	another	survey’s	finding	that	one	in	six	claimants	saw	no	loss	in	pay.From	boom	to	bustAfter	two	decades	of	growth,	this	year	has	seen	the	sharpest	decline	in	self-employment	since	records	began,	withthe	latest	ONS	data	showing	8%	fewer	self-employed	workers	this	summer	compared	to	last	summer.	This	is	instark	contrast	to	the	experience	of	wage	employees,	as	shown	in	Figure	2.Figure	2.	Self-employment	and	employee	growth	2015	to	todayLSE Business Review: Self-employment eight months into the pandemic Page 3 of 5		Date originally posted: 2020-12-01Permalink: https://blogs.lse.ac.uk/businessreview/2020/12/01/self-employment-eight-months-into-the-pandemic/Blog homepage: https://blogs.lse.ac.uk/businessreview/Notes:	Cumulative	%	growth	in	number	of	employees	and	number	of	self-employed	workers.	Source:	“Employment	in	the	UK:October	2020”,	ONSIn	our	survey	we	found	that	one	in	five	current	self-employed	workers	think	it	likely	they’ll	leave	self-employment.This	is	higher	among	younger,	higher	income	workers	and	those	with	a	greater	risk	tolerance.	Coming	out	of	thecrisis	then,	self-employment	will	not	only	be	smaller	but	will	also	consist	of	different	types	of	workers.Looking	further	ahead,	the	chancellor	has	indicated	tax	reforms	that	are	likely	to	involve	an	increase	in	self-employed	workers’	National	Insurance	Contributions	(NICs).	This	would	please	many	commentators	who	havecriticised	the	inequity	and	distortionary	incentives	of	the	current	system.	The	ONS	estimates	that	almost	300,000workers	changed	their	status	from	self-employed	to	employee	between	the	second	and	the	third	quarter	this	year,the	highest	number	since	2005.	Removing	some	of	the	tax	incentives	to	become	self-employed	would	push	moreworkers	towards	wage	employment,	compounding	the	disproportionate	effects	of	the	crisis	on	self-employedworkers.♣♣♣Notes:This	blog	post	is	based	on	Covid-19	and	the	self-employed:	Six	months	into	the	crisis.	CEP	Covid-19	analysis012.The	post	expresses	the	views	of	its	author(s),	not	the	position	of	LSE	Business	Review	or	the	London	Schoolof	Economics.Featured	image	by	Super	Straho	on	UnsplashWhen	you	leave	a	comment,	you’re	agreeing	to	our	Comment	PolicyLSE Business Review: Self-employment eight months into the pandemic Page 4 of 5		Date originally posted: 2020-12-01Permalink: https://blogs.lse.ac.uk/businessreview/2020/12/01/self-employment-eight-months-into-the-pandemic/Blog homepage: https://blogs.lse.ac.uk/businessreview/Jack	Blundell	is	a	PhD	economics	candidate	at	Stanford	University	and	an	occasional	researchassistant	at	CEP.		j.r.blundell@lse.ac.uk		Maria	Ventura	is	a	PhD	student	at	LSE	and	a	research	assistant	at	CEP.		M.Ventura@lse.ac.uk				LSE Business Review: Self-employment eight months into the pandemic Page 5 of 5		Date originally posted: 2020-12-01Permalink: https://blogs.lse.ac.uk/businessreview/2020/12/01/self-employment-eight-months-into-the-pandemic/Blog homepage: https://blogs.lse.ac.uk/businessreview/

Self-employment eight months into the pandemic

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Self-employment eight months into the pandemic

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