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The UK has experienced a "self-employment led recovery" like no other European country, according to a new report from IPPR published today. The report shows that since 2010, 40 per cent of the rise in UK jobs has been in self-employment. The report says this is unlikely be a temporary phenomenon and that the rise in self-employment in the UK is the start of a permanent shift in the way UK workers are employed.

The report is the second in a series of work supported by the global JPMorgan Chase New Skills at Work initiative. The European component of the programme was announced in April alongside IPPR as lead research partner.

The new report shows that there are now over 4 million self-employed workers in the UK. Across Europe, their earnings are falling relative to employee earnings and the percentage looking for another job or for more hours has almost doubled. But the report argues that self-employment can provide a route into work for many disadvantaged groups, like unemployed people, women and mothers as well as migrants.

The report argues that government policies must adjust to this new labour market reality by boosting the support available to self-employed workers to access training and develop their skills. The report says that the self-employed cannot ordinarily benefit from apprenticeships or other company-based training, and their skill levels and productivity are likely to remain lower than those of the overall workforce.

In the UK a lower proportion of self-employed workers are highly qualified (levels 5 and 6) compared to the overall workforce. UK self-employed workers are more likely to have low-level qualifications than employees. The report shows that the opposite is true in Germany, where a greater proportion of highly qualified workers are self-employed than employees. The report also shows that self-employed workers are less likely to have paid into a private pension and work can be irregular and insecure.

In the UK just 17 per cent of self-employed workers employ any staff of their own. The report shows that this is the lowest rate in Europe. In Germany, where less than ten per cent per cent of workers are self-employed, 44 per cent of self-employed workers have one or more employee.

Izzy Hatfield, IPPR Researcher, said:

"The 'job for life' is long gone but we may be witnessing the dawn of a new era in UK where fewer people are traditionally employed and more and more are self-employed. The UK's self-employment-led recovery looks like it is the start of the 'new normal' for the British economy, with more people working not as employees but as self-employed sole traders. This could have big implications for how these workers save for their pensions, access training to boost their productivity and ensure that their earnings keep pace with inflation.

"Considering that employee earnings growth has been poor anyway, the fact that self-employed earnings have fallen relative to employee earnings is significant. While self-employed earnings are usually poorer than employee earnings, this may represent a significant fall in living standards for the self-employed. This may have serious implications in the future."

Notes to Editors

IPPR's new report – Self employment in Europe- will be available from Sunday 4 January from: http://www.ippr.org/publications/self-employment-in-europe

The JPMorgan Chase New Skills at Work programme in Europe is a three-year, $30 million initiative which aims to identify strategies and support solutions that help improve labour market infrastructure and develop the skilled workforce globally. The initiative brings together leading policymakers, academics, business leaders, educators, training providers and nonprofits with the goal of connecting labour market policy with practice, supply with demand and employers with the workforce – all to strengthen the global economy. The overall programme is a five-year, $250million initiative, the largest-ever private-sector effort aimed at addressing the "skills gap" that exists across many industries globally.

Other European countries that have experienced an increase in jobs have not seen growth in self-employment on a similar scale to the UK, according to the report. In Germany, employment has risen by over 1.6 million people, but the report shows that this has been entirely driven by the creation of employee-jobs.

In the UK, the Office for National Statistics [ONS] notes the impact which the lowest self-employment outflow rate in 20 years has had on the rise in British self-employment, pointing both to people who are choosing to work for longer and to a reduction in employee jobs during the recession as underlying factors (ONS 2014). D'Arcy and Gardiner (2014) compare the trends of self-employment inflows and outflows between the pre-and post-recession periods, attributing 72 per cent of the rise in self-employment to growth in the inflow rate, and 28 per cent of the rise in self-employment to the decline in the outflow rates.

The Resolution Foundation present a slightly different case whereby self-employment in the UK has risen only in part due to a decline in the number of people leaving self-employment, but mainly as a result of a rise in people becoming self-employed. Their analysis suggests that 72 per cent of the rise in UK self-employment can be attributed to the growth in people becoming self-employed, compared to 28 per cent which is attributed to the decline in the outflow rate.

Self-employed workers are more likely to be over the age of 50 than their employee counterparts, they are also far more likely to be over the age of 65. More men are self-employed than women in every Europe-24 country, but in many countries the female self-employment rate is growing faster than the male.

Contacts

24-26 Dec: Richard Darlington, 07525 481 602, r.darlington@ippr.org

27-29 Dec: Sofie Jenkinson, 07981 023 031, s.jenkinson@ippr.org

30 Dec–1 Jan: Tessa Evans, 07875 727 298, t.evans@ippr.org

2-4 Jan: Tim Finch, 07595 920899, t.finch@ippr.org