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Just under 14 per cent of European workers are self-employed. They are a varied group, ranging from freelance professionals to household cleaners, and play a multitude of roles in economies across Europe. In southern and eastern Europe, the self-employment rate tends to be high, while northern and western European economies tend to have a far lower rate of self-employment in their workforce.

Summary

Global trends, including globalisation and technological change, have had a disruptive effect on worldwide labour markets. In Europe, this impact has eliminated the need for some jobs, and the private sector has struggled to create new ones. This pattern, combined with the effects of the ‘great recession’, has brought high levels of unemployment, but a labour market recovery is now beginning to set in.

This paper examines the state of self-employment in Europe today – have global forces shaped the role of self-employment within European labour markets? In the UK, for one, the jobs recovery has been underpinned by a well-documented growth in self-employment. Since 2010, 40 per cent of the rise in jobs here has been in self-employment, prompting a complex debate about the extent to which this should be celebrated. Some commentators have heralded it as a sign of entrepreneurial spirit, innovation and future economic growth, while others fear it is primarily indicative of a rise in precarious, insecure work.

Within Europe, however, the UK’s self-employment-led recovery has been singular. In southern and eastern Europe, self-employment remains relatively high, but these countries are yet to see a growth in total employment. In northern and western Europe, Germany, Sweden and Norway are beginning to see rising employment, but these jobs have been for employees, while the number of self-employed workers has fallen.

Analysis of the characteristics of self-employed workers provides some insight into the uneven pattern of self-employment in Europe.1 Key findings from our research include:

Age, gender, occupations and industries

  • The likelihood of an individual in employment being self-employed increases dramatically with age. In the UK one in five older workers (aged 55–65) is self-employed, compared to one in seven of the total workforce and one in 20 young workers (15–24).
  • The youth self-employment rate has seen a lot of fluctuation, with 170,000 young people currently being self-employed in the UK. Youth self-employment in Spain and the Netherlands has risen sharply, but overall the youth self-employment rate has been volatile across Europe.
  • Across Europe, working men are 90 per cent more likely to be self-employed than working women, although in the UK the number of women entering self-employment in the UK is growing faster than the number of men. The number of self-employed workers educated to degree level or higher has been rising steadily since 2007, reflecting general changes in the population in the UK. The concentration of self-employed workers with degree-level or higher qualifications is actually lower than it is in the total workforce.
  • Over 60 per cent of the German self-employed work in high-skill occupations, while southern and eastern economies tend to have higher proportions of self-employed workers engaged in low- and mid-skill occupations, largely due to the prevalence of agriculture and retail work. Just under half of the British self-employed work in a high-skilled occupation, including 24 per cent in professional occupations.
  • A higher proportion of self-employed workers than employees are in managerial, skilled agricultural, forestry and fishery, and craft and related trades occupations. Spain has a particularly high concentration of service and sales workers in self-employment.
  • Self-employed workers are more likely than the economy-wide average to work in the following industries: agriculture, forestry and fishing; construction; and professional, scientific, technical, administration and support service activities. More than one-fifth of the British self-employed work in the construction industry (830,000), nearly three times the proportion of employees.

Pay and structure

  • In the UK, in 2011, the median self-employed worker earned over 40 per cent less than the median employee. Across Europe, the median self-employed worker’s earnings have been falling at a faster rate than the median employee’s earnings.
  • Twice as many self-employed workers in the UK were looking for another job in 2012 as in 2007. The main reason cited for this was to try to secure more hours’ work.
  • Only 17 per cent of the UK self-employed have any employees – this is the lowest proportion in Europe. This partly reflects the different occupational and industrial structures of the self-employed in the UK.

While self-employment is more common in older, male workers, in many countries the female self-employment rate is rising faster than the male self-employment rate. There is evidence to suggest that individuals facing labour market disadvantage are more likely to become self-employed as they struggle to find an employee job. As such, self-employment can provide a route into work for many disadvantaged unemployed groups, including women and mothers as well as migrants. Institutional factors play an important part in determining how strong this effect will be. Spain, for example, has much higher rates of female self-employment than Denmark, which has higher social security payments and greater female attachment to the labour market.

In a survey, 45 per cent of EU citizens expressed a preference for self-employment over being an employee, and there is a lot of supporting evidence to suggest that job satisfaction is very high among the self-employed. However, the rise in self-employment in the UK has caused widespread concern about the living standards of self-employed workers. Our data analysis suggests that the earnings of the self-employed across Europe are falling relative to employee earnings, while more and more workers are looking for more hours or another job.

Self-employment, while offering greater freedom and flexibility, can also present significant challenges, particularly within economies where it is becoming a more significant part of the labour market, like the UK. Self-employed workers often don’t have basic employment rights, and are subject to greater financial instability, particularly when starting out or when businesses are not performing well. They are also less likely to have paid into a private pension, and work can be irregular and insecure.

Entrepreneurship is a key driver of economic growth, and self-employment is an integral part of the European labour market, but if low pay and financial insecurity abound, it may be driving both a rise in in-work poverty and the jobs recovery. In countries like the UK where the share of self-employment is rising, managing the quality of the jobs recovery could prove to be as important as the quantity.

1 Unless otherwise noted, ‘Europe’ refers to the Europe-24 nations, that is, European countries which are also members of the OECD. Specifically, this includes: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland.