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In 1942, the architect of the welfare state, Sir William Beveridge, characterised the self-employed as “small shopkeepers, crofters, fishermen, hawkers, outworkers”. Suffice to say that times change and with the number of people self-employed burgeoning – up to 4.62 million and 15% of the UK’s workforce – understanding the characteristics of this group vital.

Earlier this week, Bright Blue published its report Standing alone? which focuses on self-employed individuals who are in low income households – households with income below 60% of the median. We felt that focusing specifically on those on low income was important as earnings from self-employment have fallen dramatically in recent years, and now lie well below average employee earnings.

In fact, we found that 20% of self-employed people now reside in a low income household, compared to only 10% of employees. Approximately 900,000 individuals are self-employed in a low income household.

So who are these people? Our report identifies a wide range of characteristics and experiences, including:

 

Educational attainment

Thirty eight percent of self-employed individuals in a low income households have a degree or a higher qualification and a further 21% have at least one ‘A level’. By contrast, only 24% of employees in low income households have a degree or a higher qualification. This demonstrates that self-employed individuals exhibit on average higher levels of educational attainment than employees with similar household means.

Furthermore, we found that while there is an association between educational attainment and household income for employees, this is markedly weaker for self-employed individuals. Low household income does not indicate lower educational attainment in the case of the self-employed in the way that it does for employees.


Type of self-employment:

In surveys, the ONS asks self-employed people to characterise the kind of self-employment they are engaged in, offering a number of possible options. Drawing on these descriptions, we found that self-employed individuals in low income households are more likely to say that they work for themselves (47%), compared to 39% of self-employed individuals in higher income households. On the other hand, they are marginally less likely to describe themselves as running a business or professional practice – 21% compared to 25% of self-employed individuals in higher income households.

 

Average hours worked

Self-employed individuals in low income households work markedly more hours on average than employees in low income households – 38 hours per week compared to 26 hours per week. Indeed, overall, the self-employed in low income households work on average more hours in a week than any other worker.

 

Motivations

Amongst those in low income households, more flexibility was the most common motivation for entering self-employment (46%), followed by wanting to run one’s own business (39%) and more fulfilment (34%). These are all positive motivations, with individuals being attracted to a particular aspect of self-employment. Overall, self-employed individuals in low income households are more likely to be motivated by positive rather than negative reasons.

While the headline motivations are positive, negative motivations are also significant. Self-employed individuals in low income households are more likely to have been motivated to enter self-employment to escape unemployment (28%) to (13%) and by not being able to find other work (23%) to (10%). While those in low income households are broadly positive about their reasons for entering self-employment, there is a significant minority who are, at least in part, pushed rather than pulled into self-employment and this is associated with being in a low income household.


Job satisfaction

Not only are the motivations of self-employed individuals in low income households broadly positive, they also exhibit high rates of job satisfaction. Eighty percent are satisfied with their job. While this is a slightly lower rate than those in higher income households (85%) it exceeds satisfaction rates both for employees with low household income and also higher household income.

Of course, being self-employed in a low income household does bring considerable challenges. In our report, we explore in depth common challenges relating to financial resilience and accessing advice and training (Chapters Five and Six). Nevertheless, the existence of challenges should not be taken as indicative of a lack of satisfaction with employment status more generally on the part of self-employed individuals in low income households.


Ambitions and aspirations

From our depth interviews we identified four main kinds of ambitions held by self-employed individuals in low income households. We found that our interviewees fell into one of four distinct groups: ‘builders’, ‘sustainers’, ‘opportunists’ and ‘drifters’. This typology captures the main ambitions which self-employed individuals in low income households have for self-employment.

Seventy five percent of self-employed individuals in low income households say that their ambition for self-employment is being able to sustain a good standard of living (‘sustainers’). By contrast, 13% say that it is to grow their business to be as large as possible (‘builders’); 10% are not sure (‘drifters’) and 6% say that it is to gain experience (‘opportunists’).

Thus, for most self-employed individuals in low income households, the aspiration is not first and foremost to become entrepreneurs or to emulate high-profile business people. Of course, they aspire to be successful, but for many, success means being able to sustain a reasonable standard of living rather than building up a business. Essentially, their aspirations are personal in character, rather than business orientated.

David Kirby was the head of research for Bright Blue.