SELF EMPLOYMENT – A PEAK OR A PAUSE?

SCOTBUZZ editor BILL JAMIESON asks if the self-employment boom peaked. According to latest labour market data from the ONS, levels of self-employment are on the wane.

The number of people in self-employment fell by 3,000 in the three months to end November and by 76,000 in the quarter before that (Jun-Aug 2014).

In contrast, the number in “typical” employment grew by 187,000 over the same period. The result is that self-employment accounted for just 22 per cent of all jobs growth over 2014, compared with 82 per cent during the 2008-13 period.

Now an insightful blog by Benedict Dellot on the RSA website points out that this is at odds with the economic trend everyone has been talking about. The number of people self-employed has grown by 30 per cent since 2000, with a record one in seven of the workforce now working for themselves.

The ONS figures show that from September to November 2014, there were 30.80 million people in work, some 37,000 more than for June to August 2014 and the smallest quarterly increase since March to May 2013

Taking an annual view, the figures show that between September-November 2013 and September-November 2014,  self-employed numbers rose by 122,000 to 4.5 million.

By contrast, there were 5.4 million people employed in the public sector for September 2014, some 302,000 or 5.3 per cent down on a year previously, and the lowest figure since comparable records began in 1999.  Were these trends to continue, the numbers of self-employed could be challenging the numbers in the public sector by the end of the decade.

But has self-employment reached a peak? And what does it mean? Does it indicate that the resurgent entrepreneurial spirit is petering out?

WEATHER WOES

As with all monthly or quarterly data, caution should be exercised in drawing conclusions, particularly on a decline of just 0.1 per cent between quarters.  This may be a temporary downturn, reflecting an evident slowing of the growth pace in the final two quarters of last year. More recent business appraisals – for example, the CBI forecast out this week showing a rise in its 2015 growth forecast to 2.7 per cent – suggest a recovery may be underway from this dip.

Many businesses have also suffered from weather-related problems at the start of the year.

And in any event, it would be equally if not more surprising were self-employment to maintain the red hot pace of 2010-2012. No trend continues inexorably upwards forever – especially in economics.

Others, however, have been sceptical of the whole self-employment phenomenon.

HUTTON WOE

Take for example, the Leftist Guardian economist Will Hutton, author of The State We’re In, who has constantly belittled the self-employment/business start-up phenomenon. Surely any sign of a downturn would be music to his ears?

Apparently not. He forecast at a recent RSA Self-Employment summit that self-employment would grow to 30 per cent of the workforce.

No entrepreneurial resurgence this, he argued, but baleful evidence of a moribund economy, the figures pointing instead to a fragmented labour market as broken and battered casualties limp out of “proper” employment into the desperate straits of start-ups and self-employment.

This, in the Hutton universe, is about as economically uplifting as an upsurge in homeless beggars, stretched out in pavements holding out battered boxes for donations as their rain-soaked dogs howl lachrymose tunes into mouth organs.

Don’t expect a sympathetic donation from Will Hutton. In fact, like The Casual Vacancy on speed, don’t expect anything that suggests cheerfulness, optimism or even a semblance of recognition about economic recovery.

On this view we’re really going from bad to worse. The slowdown in self-employment points to the worst news of all:  that the final fragmentation of late capitalist development is not proceeding at the required speed to our final disintegration.

E-TRADING BOOM

Now it’s certainly true that many who have opted into self-employment have done so because of the shake-out in across many firms with the 2008-2009 recession and its aftermath. Self-employment will always have been a temporary posting until formal employment recovered. And that it has certainly done. Indeed, on this view, we might have expected a greater contraction in the self-employed sector. As Benedict Dellot points out, not everyone wants to spend the rest of their lives in self-employment.

But equally, the dramatic changes in communications technology, the spread of Wi-Fi and the explosive growth in website marketing and e-trading – have enabled tens of thousands of people not only to launch but to build a business far more easily – and far less expensively – than was the case ten years ago. There are many who value being in greater control of their own lives and the freedom to pursue their dream.

We will watch the figures in the coming months. And we will continue to track the Bank of Scotland’s Job Survey. Its latest report suggests that January saw the slowest rise in permanent appointments for 22 months. Recruitment consultancies also reported a slight fall in temp staff billings.

But it adds that overall the jobs market continued to improve, with the Labour Market Barometer at 60.0 in January still well above 50 – indicating an improvement in market conditions. Adverse weather over the month will almost certainly have been a factor.

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