Opportunity or necessity… what’s fuelling the growth in self-employment?

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With unemployment reaching its lowest level since 1975, it may seem like the state of the labour market has improved in recent years. However, a closer look at the statistics suggests that this is not necessarily the case.

The strong performance in the labour market in part reflects the growth in self-employment, which has been a distinguishing feature of the labour market’s recovery since the last recession.

Growth in self-employment

There were almost 750,000 more self-employed in the UK workforce at the end of 2014 than at the start of the global financial crisis in 2008, representing a high proportion of the total net growth in jobs over this period. Self-employment accounts for over 15% of those in work in the UK – 4.8 million of a workforce of around 32 million. Between March 2008 and March 2017, self-employment accounted for almost a third of total employment growth.

The significance of the contribution of self-employment is highlighted in a recent article published in Regional Studies, which notes that of the 920,000 net new jobs created between quarter 1 of 2008 and quarter 2 of 2014, 693,000 were in self-employment.

There has also been a rise in the share of female self-employed and those that work part-time, in addition to growth in a broader range of industries and occupations among the self-employed.

Recent ONS figures also show that the growth in self-employment between 2001 and 2016 has been driven mainly by those who have a degree (or equivalent), leading to the share of the self-employed with a degree or equivalent increasing from 19.3% in 2001 to 32.6% in 2016 as a share of total self-employed. As a share of total employment (self-employed and employed), the figures show that relatively highly-qualified individuals are becoming more concentrated in the self-employed.

Earnings growth?

The reasons for this growth has been the subject of much debate, particularly as research suggests many fail to earn a decent living. This recent analysis by the New Economics Foundation found that 54% of all self-employed people are not earning a decent living. It also found that the percentage of the labour force in ‘good jobs’ had decreased from 63% in 2011 to 61% in 2016, suggesting that the quality of jobs is perhaps declining.

Similarly, the ONS figures suggest that the self-employment labour market remains financially insecure for its workers. They show that the distribution of self-employed income appears centred around £240 a week, much lower than that for employees, which is centred around £400 a week.

And, according to a recent report from CIPD, their real incomes have fallen more since 2008 than those of employees.

Perhaps, then, the self-employment growth has been driven by necessity rather than choice due to a lack of opportunity in the full-time labour market.

However, the evidence suggests it is not this simple.

Despite the widening gap in earnings between the self-employed and employed, the self-employed continue to have higher levels of job satisfaction than employees. The ONS figures also indicate that self-employed workers were more likely to supplement their income from elsewhere.

This would suggest that choice probably plays a large part in self-employment.

‘Push’ or ‘pull’ effect

There has been much discussion over whether the growth in self-employment is predominantly a result of choice or necessity.

It is often seen as a sign of labour market weakness, with self-employment perceived as a ‘last resort’ where a regular job can’t be found. The evidence suggests that this motivation accounts for just a small proportion of the change, however, with most of the rise in self-employment appearing to be out of choice rather than necessity.

Indeed, the recent analysis in the Regional Studies article, which examined the extent to which self-employment was associated with local ‘push’ or ‘pull’ effects, found little or no suggestion of any net ‘recession-push’ effect on self-employment. It suggests that:

  • ‘pull’ factors are more significant in driving transitions into self-employment;
  • self-employed business ownership appears not to function as a significant alternative to unemployment where paid employment demand is weak; and
  • entrepreneurial activity prospers where local wages are higher and unemployment lower.

The uncertainty surrounding Brexit could also be having an effect as declining employer confidence has contributed to a growing number of short-term contracts – potentially making self-employment appear the better choice.

Final thoughts

As the CIPD report highlights, there are probably more opportunities for self-employment now than there were a decade ago. And the self-employed are more likely to value highly aspects of the work, such as its variety, and choice over their working hours and pay.

Across the range of job-related characteristics, it is shown that the self-employed are as satisfied or more satisfied with their working life than employees, resulting in higher levels of overall job satisfaction – a finding that is consistent both over time and from different data sources.

In a time where work-life balance is of increasing importance, it is perhaps no surprise that self-employment is the path of choice.


If you enjoyed reading this, you may also be interested in our previous blogs on the gig economy, ‘the self-employment boom’ and ‘olderpreneurs‘.

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‘Think globally, act locally’ – local job creation

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By Heather Cameron

The Local Government Association (LGA) last week called for greater devolution of employment and skills funding to councils and a ‘radical rethink’ of the way Jobcentre Plus works. Chairman of the LGA’s People and Places Board said:

“Job centres need to engage with more unemployed people for a start and then help more claimants move into sustainable employment. This is crucial to boosting local growth. Councils know best how to do this. We know our local economies, we know our local employers and we know our residents and we can bring local services together in a way central government will never be able to.”

Local solutions

Of course, local solutions for job creation and economic growth is not a new idea. Local development and job creation initiatives first emerged in the 1980s, in response to a ‘new phenomenon of high, persistent and concentrated unemployment that national policies seemed powerless to reverse on their own. Since then they have continued to spread and develop.

Although unemployment is at an 11-year low in the UK, according to recent research many countries, including the UK, are seeing widening gaps in the geographic distribution of skills and jobs. And the importance of local solutions has again been highlighted.

The OECD’s most recent edition of Job Creation and Local Economic Development argues that local development is a key tool for addressing the problem of such unequal distribution. Similarly, in its submission to last year’s Autumn Statement, the LGA argued that local government is central to the delivery of locally tailored solutions to national public policy challenges.

Boosting productivity growth, while ensuring growth delivers improved living standards and distributes the benefits of increased prosperity equally, are highlighted by the OECD as the twin challenges facing all policymakers. Underlined as a crucial but difficult task, it is argued that ‘actions originating at any single governance level or policy area will not be sufficient’.

Whole-of-government approach

The OECD report, therefore, examines how national and local actors can better work together to support economic development and job creation at the local level. In particular, it outlines what both national and local actors can do to improve the local implementation of vocational education and training (VET) and SME and entrepreneurship policies.

Among the recommendations for national actors include:

  • Design VET frameworks that allow local stakeholders to tailor training to local labour market needs while still maintaining a certain level of national consistency
  • Build the capacities needed to make VET systems more agile locally
  • Develop a strong national apprenticeship framework that builds a high quality system, includes strategically-designed incentives for employer participation, and allows for flexible delivery frameworks
  • Maximise the efficiency of SME and entrepreneurship policy delivery by allowing for local tailoring, co-locating services, using intermediary organisations to deliver programmes, and/or developing formal agreements for the division of competences and financing between governance levels
  • Develop national frameworks and strategies to support disadvantaged young people in entrepreneurship, and clearly assign responsibility for this policy portfolio to a single agency or ministry
  • Embed entrepreneurship into national education frameworks, while also providing integrated packages of entrepreneurship support in other settings to reach young people outside of the education system

Among the recommendations for local actors include:

  • Balance the need to meet pressing local labour market demands with ensuring that VET helps to move local economies to higher skilled and value-added products and services
  • Encourage VET teachers and trainers to maintain contact with local employers and industries to keep their skills and knowledge up-to-date
  • Boost employer engagement in apprenticeships
  • Tailor the delivery of apprenticeship programmes so that they work better for a broader range of employers, including SMEs, and disadvantaged populations
  • Forge connections across administrative borders in developing and co-ordinating entrepreneurship and SME policies
  • Work with organisations that have already established relationships with disadvantaged youth to maximise the reach of entrepreneurship programmes
  • To better reach disadvantaged youth, provide integrated packages of support, use hands-on learning methods, and involve entrepreneurs in programme delivery

Decentralisation?

The report concludes that local actors need both flexibility to tailor delivery of national policies to local conditions and the capacity to use this flexibility to ensure informed decision-making.

It is noted that this doesn’t necessarily mean political decentralisation, but rather ensuring the right tools are used to add local flexibility while maintaining national coherence.


If you found this article interesting, you may also like to read our previous blog on Local Enterprise Partnerships

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They are driving economic change in cities, but what are ‘knowledge-focused industries’?

knowledge workersA Century of Cities, a reflection on urban economic change since 1911, was recently published by Centre for Cities. An informative read, which does something many economic development reports do not do, it looks at the history of a place to see how it arrived where it is today. I am a great fan of this approach, and carried out similar research in the past, it’s vital to our understanding of cities, their landscape, assets, structure and culture.  The report did however, make me reflect on the term ‘knowledge industries’, and the time period chosen.

What is a knowledge industry?

The report defines this in a traditional way, related to knowledge intensive business services. From a historical perspective, all growth and change has happened through innovation, change and the application of the technology available at the time, whatever that may be. Structurally these changes often lead to jobless growth, where the technology replaces the human labour cost. In pre-industrial society, big changes related to agricultural technology such as crop rotation or the plough. New technology which revolutionised jobs and industries. During the industrial revolution, cotton was the knowledge industry, driving innovation in the northern towns, with ready labour pools, the right climate and access to energy from fast running water. The growth of empire fuelled demand for the technology and knowledge Britain had. Machinery and weavers with the knowledge to use it, became the knowledge workers. On the back of industrialisation, and the need for new, quicker production methods, many northern universities were established, grew and flourished. It is easy to view previous periods through modern eyes and view old established industries, as exactly that, old, low skilled and low knowledge because of our own new perspectives on what constitutes ‘knowledge’. Ask any 20 year old about a typewriter and you can witness this same derision about ‘technology’ and ‘knowledge’ worker.

Work by Jeremy Howells on economic geography highlights that knowledge “involves applying reason to experience” and knowledge exists within individuals, and that body of individuals is what drives industry growth. He goes on to say “knowledge is constantly evolving, constructed and deconstructed”, this process is highly localised, both in time and geography.

The roles of cities

Cities therefore facilitate this knowledge growth, the density of population, endless possibility of interaction, and transfer of people across businesses, personal contacts and networks drive this knowledge interchange. This tacit knowledge drives innovation, resilience to change, ability to respond to risk and shocks. Knowledge exchange has always been a key driver for businesses locating in proximity to one another, sharing workers and knowing your customers.

The question is, is any industry completely devoid of knowledge, and why have places failed to utilise knowledge to their advantage across all industries? It is easy to group all manufacturing into low skilled, low knowledge base, but the reality is much more complex, how do BAE or Astra Zenica fit into this classification?

The term knowledge worker implies that all other workers are ‘non-knowledge workers’ when in reality every industry has a rich, diverse business and people base which organically prepares them for shocks and change. You can only change the path of places by ensuring they retain their knowledge base, both professionally and personally, investing in their attractiveness and the quality of opportunity for the knowledge workers, whatever the industry.

The Idox Information Service can give you access to a wealth of further information on cities and economic development, to find out more on how to become a member, please contact us.

Industrial revolutions: capturing the growth potential

Technology and Innovation Futures: UK growth opportunities for the 2020s

Knowledge-based hierarchies: using organizations to understand the economy (CEP occasional paper 43)

Residential location of knowledge-workers: the role of amenities, workplace and lifestyle

The creative knowledge city in Europe: structural conditions and urban policy strategies for competitive cities

Scenarios for the knowledge economy: strategic information skills

The geography of knowledge: never so close but never so far apart

Careering into the future

The New Year typically provokes reflection in people, particularly in areas of their lives such as relationships (lawyers report seeing a significant increase in enquiries about divorce at the start of January) and employment. On the 5th of January, the day that most of the country returned to work after the festive break, Scottish recruitment website s1jobs.com went down for a period due to the volume of traffic they were receiving, as people considered their options for change on what was dubbed ‘the most depressing day of the year’.

This quest for change looks set to continue throughout the year, rather than fall by the wayside at the end of the month along with the rest of people’s New Year resolutions. As reported by the Chartered Institute of Personal Development (CIPD), a survey by the Institute of Leadership and Management (ILM) found that over a third (37%) of respondents are planning to leave their current job this year, a significant increase on the 19% who expressed the same intention a year earlier.

For those looking to make a complete career change, research published by the UK Commission for Employment and Skills (UKCES) at the end of 2014 may make interesting reading.

Careers of the Future presents a list of jobs which, it is suggested, will be crucial for the UK job market over the next decade. The 40 roles were identified through an analysis of the UK jobs market, and based on the following indicators:

  • Pay: how much do people earn on average in the job?
  • Job opportunities: how much is the job expected to grow in terms of the number of people employed, and which jobs have the greatest recruitment demand?
  • Business need: which jobs do employers say are difficult to fill because of lack of candidates with the right skills and experience?

The report groups the identified ‘key’ roles for the future according to the following sectors: agriculture; business and finance; construction; education; health and care; information technology; manufacturing, installation and maintenance; protective services; science, engineering and technology; and transport and logistics. From these, 12 jobs are identified are as being those that present people, particularly young people, with a good mix of opportunity, reward and long-term potential:

  • Care worker
  • Construction project manager
  • Electrician
  • Farmer
  • IT business analyst
  • Mechanical engineer
  • Nurse
  • Police officer
  • Programme and software development professional
  • Sales account manager/business development manager
  • Secondary school teacher
  • Train and tram driver.

There are no real surprises on this list; more care workers and nurses are needed to reduce the demand placed on current staff by an increasingly ageing population, while the advent of ‘big data’ and apps has made software development “one of the top five most in demand jobs globally”.

The importance of STEM (science, technology, engineering and maths) skills, something we have looked at on the blog previously, is also in evidence on the list. Engineers and electricians are part of a STEM workforce that, while identified as being ‘critical’ to the future of the UK economy, is currently facing a shortfall of around 400,000 graduates annually.

One surprising omission from the list may be identified: lawyer. While shortfalls of new students have been reported in the news for a number of the roles included on the list, concerns over the number of students undertaking law degrees haven’t been raised since 2011. Although the majority of its predictions for what 2015 would look like were wrong (the world is, sadly, still waiting for hoverboards and food rehydrators), Back to the Future Part II did predict the abolition of lawyers by this year. While this is obviously also wide of the mark, it’s certainly interesting to see that law isn’t deemed a key future profession – especially as it is one of the professions (alongside medicine – another omission from the list) that parents would traditionally encourage their children to aspire to join.

Despite the absence of lawyers and doctors on the list, the inclusion of nurses, farmers and secondary school teachers on this forward-looking list suggests that the future may be somewhat more traditional and less radical than the predictions of film-makers 30 years ago!


Further reading

The Idox Information Service has a wealth of research reports, articles and case studies on careers, employment and skills needs. Some further recent reading on the topic includes:

Engineering and technology: skills and demand in industry – annual survey 2014

The extent and cyclicality of career changes: evidence for the UK

Remember the young ones: improving career opportunities for Britain’s young people

The impact of economic perceptions on work-related decisions, IN Journal of Career Assessment, Vol 22 No 2 May 2014

Better quality jobs (The CLES 10)

N.B. Abstracts and access to journal articles are only available to members.

Does tourism pay? Assessing the evidence

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by Brelda Baum

It is estimated that tourism has the potential to generate $2 trillion globally by 2020 – as the economic situation improves and the ‘Great Recession’ is deemed all but over, let’s take a look at the evidence of the economic value of tourism to the UK and its regions.

The Deloitte and Oxford Economics report ‘Tourism: jobs and growth – the economic contribution of the tourism economy in the UK’ provides an analysis of the performance of the tourism industry Continue reading