I think I can speak for most of my colleagues when I say that the RSA is cautiously optimistic about the rise in self-employment across the UK. However, we also realise there is a great deal of puff and hyperbole surrounding this phenomenon. I was reminded of this just a few weeks ago when Nectar Card published some North Korean-style survey results suggesting that over 80 per cent of young people want to work for themselves when they become older – a figure that is difficult to square with findings from more comprehensive surveys.
Yet just as the pro-small business camp engage in exaggeration and over-simplification, so too does the anti-small business brigade. Indeed, headlines such as “Young jobless fuel growth in UK start-ups” and “Self-employment hits 20-year high as people try to avoid unemployment” are indicative of how the debate about the causes of self-employment is often one-sided (and negative at that).
Here I highlight three myths in particular about the growth in self-employment that deserve closer scrutiny:
#1 – Most of the newly self-employed have been forced into it
One of the main drivers behind the surge in self-employment is thought to be a lack of jobs – or at least a lack of decent and worthwhile ones. The argument is simple: in the absence of conventional jobs people are forced to create their own in the form of a business. While there is certainly some truth in this, measurements of entrepreneurial motivations show that the number of people starting up reluctantly and out of no choice of their own continue to be in the minority.
The latest results from the Global Entrepreneurship Monitor, for instance, indicate that the level of ‘opportunity’ entrepreneurship – where people start up for positive reasons (e.g. to make the most of a good idea) is close to 5 times higher than levels of ‘necessity’ entrepreneurship – where people start up for negative reasons (e.g. because they had no other options for work). Importantly, both types of entrepreneurship grew during the economic downturn. What is more, our own RSA/Populus survey found that only 15 per cent of microbusiness owners said escaping unemployment was a key reason for starting up. A much more common answer was to have greater freedom or earn more money (click on the graph below to see a bigger version).
Personally, I also think there is something of a ‘trigger phenomenon’ going on here, whereby the recession is nudging people into starting the venture they had always been meaning to.
#2 – Most of the newly self-employed are odd jobbers
As well as examining the motivations of the newly self-employed, some have questioned whether the types of businesses they run are of a ‘serious’ nature. The suggestion is that a large number of the newly self-employed are odd-jobbers who are grabbing onto any and all kinds of work they can lay their hands on. Claims such as these are partly corroborated by the big rise in part-time self-employment, which accounts for half the overall increase in self-employment since the turn of the century.
Yet once again, this isn’t the full story. The government’s Labour Force Survey actually shows that the biggest increase in self-employment since 2008 has been in professional occupations – one of the highest skilled labour groups. And while the number of self-employed people in the other highly skilled groups has remained static or decreased marginally, so too have the number of typical employees in these groups. Moreover, if the growth in self-employment really was largely down to more odd jobbers, I would have expected the increase in the number of self-employed in ‘elementary’ occupations to be much larger than what we see in the graph below.
#3 – The growth in self-employment is a cyclical blip
The number of microbusinesses grew by over half a million since the Great Recession began, and the proportion of the workforce who are self-employed is at highest ever level. Myths 1 and 2 have led many to believe that these changes are likely to be short-lived, and that when the economy gets back on its feet things will return to normal. However, this ignores the fact that self-employment and the number of microbusinesses had been increasing at a steady rate long before the recession began (see the graph below).
The number of microbusinesses in the UK has grown by an average of 3 per cent a year since the start of this century. Indeed, they are now very much a ‘normal’ feature of our economic system. Studies also suggest that at an individual level, the likelihood of a business owner returning to a typical job is low. Our own Populus survey found that only 7 per cent of microbusiness owners plan to close their business in the next 3-5 years and do something else.
The RSA and Etsy are exploring similar themes in a new project, The Power of Small. Click here to find out more.
This is a guest blog by Joel Dullroy. Joel is editor of the e-book Independents Unite! Inside the Freelancers’ Rights Movement, available for free download from www.freelancersmovement.org. A freelance journalist and organizer, he is also campaign manager of Freelancers Europe: www.freelancers-europe.org.
Of all the trends sweeping the world of work – start-up culture, flexible workspace, millennial angst – the growth in freelancing has the greatest potential for impact and reaction. That’s because while other workplace trends affect how we work, freelancing also affects how we live.
Problems that stop at the office door for traditional workers follow freelancers home. Matters which are remotely resolved for workers – benefits, securities, pensions – independents must care for alone, if at all.
Until recently, this has been a manageable trade-off for increased personal flexibility. Like roaming medieval knights, freelancers were scarce, highly skilled, well paid and self-selecting. But in recent years the ranks of independent workers have swelled. Freelancing has become part of the everyday vernacular, along with start-up, online, recession and cutbacks.
The rapid growth in freelancing has implications for both individuals and society. As Steven Toft highlighted in his recent post for the RSA, while the number of Britain’s self-employed has grown by almost half a million since 2008, more than half of them earn 12,000 GBP a year or less, which is almost the minimum wage. Exactly what will happen to this mass of lowly paid and unprotected freelancers in ill fortune and old age remains a social experiment waiting to run.
At the same time, as the RSA’s Benedict Dellot observed, the growing number of freelancers gives this demographic a potential political opportunity. He calculated that Britain’s self-employed will overtake the number of public sector employees by 2017/18. Though it has not yet been noticed by the governing class, this rising opportunity for political agency has not gone unnoticed by freelancers.
The reaction begins: freelancers form a movement
This year may be remembered as the start of a new chapter in employment politics. Across Europe, freelancers are getting organized into a cohesive movement, and are making demands of governments and employers.
At the fore of this movement is the Freelancers Europe campaign, which is rallying independent workers to sign a five-point manifesto ahead of the European Parliament elections. The campaign – operated mostly online, with events and outreach in coworking spaces – aims to collect a modest 10,000 supporters in its initial outing. There are plans for future larger actions that will demonstrate the size and strength of Europe’s freelancing class, which is estimated to be almost 9 million strong.
The Freelancers Europe campaign is the result of cooperation between a coalition of national organizations representing independents in EU countries. These national freelancers associations have been working quietly for years to recruit members and create political lobbying skills. Some – such as the PCG in the UK, and the PZO in the Netherlands – have existed for more than a decade, but have gained new impetus with the growth of the demographic.
Freelance organizing took a step forward in 2010, when several national organizations joined together to create the European Forum of Independent Professionals (EFIP), a regional meet-up. EFIP has since commissioned some of the only available research into the size and needs of the freelancing demographic, and it instigated the Freelancers Europe campaign, with its manifesto of actionable demands.
The freelancers manifesto: five demands from independent workers
The freelancers manifesto has five simple points. It asks EU authorities to recognise freelancers as a legitimate employment and business category – a simple ask, but something overlooked by many bureaucrats. Once recognised, freelancers are seeking access to government services and funding, from which they are often excluded.
Better statistics are a key demand; the 9 million figure is based on estimates, as official data about the demographic are patchy at best. Freelancers’ organizations are requesting to be consulted by governments when drafting policy. And finally, businesses are targeted with a demand to treat freelancers fairly, with better contracts and condition.
The manifesto makes no mention of hard policies, such as regulation, taxation and social security. That’s because most such daily concerns are set at a national level, with limited EU influence. Nevertheless, the campaign and its manifesto marks the first time independent workers have coordinated to advance a set of collective demands. Across Europe, the freelancers’ movement has begun.
A union of independents?
The lead actor of the freelancers’ movement globally is the Freelancers Union, which launched in New York in 2003. Not an official union, it is a non-profit organization with over 225,000 members who sign up online, attracted by sharp graphic design styled on retro propaganda art.
In just over a decade, the Freelancers Union has set up its own health insurance company and retirement savings plan, and opened a health care centre and a coworking space for its members. This focus on services has attracted some criticism from the more politically minded, to which the organization’s founder, the entrepreneurial Sara Horowitz, responds that she is meeting the most immediate concerns of her members.
Horowitz expresses a vision for “new mutualism”, meaning a revival of member-run support organizations such as mutual societies and cooperative businesses. Rather than wait for governments to respond, she calls on freelancers to go ahead and build their own solutions.
Traditional trade unions slow off the mark
This flurry of freelancer activism has caught off guard the traditional guardians of the working class, the trade unions. At a conference in Berlin in March, union representatives from around the world discussed how to address independent workers. Most expressed a desire to simply subsume freelancers back into the ranks of the traditional workforce.
As long as unions continue to misread freelancers as wayward workers, they will fail to have any relevance for this demographic. Although they may have deep concerns about their finances, their social safety net and their prospects in old age, survey after survey finds the majority of freelancers have no desire to return to a company job.
An independent freelancers’ movement that can articulate a balanced vision of personal freedoms, political agency, government support and mutually-created social protections is more likely to appeal to today’s independent worker.
Read more about the Freelancers Europe campaign and manifesto here.
The RSA and Etsy are exploring similar themes in a new project, The Power of Small. Click here to find out more.
This is a guest post from Steven Toft. Steven writes a popular blog, Flipchart Fairytales, in which he attempts to bust myths surrounding welfare and the world of work. You can find Steven’s blog here, and follow him on Twitter here.
Government ministers like to talk about the jobs created on their watch, but over the last few years lots of people have been creating their own jobs. Three quarters of the increase in employment since 2008 has come from self-employment.
Source: ONS employment statistics
Some have hailed this as the sign of a new entrepreneurial spirit in Britain. It is these new businesses, they say, that will provide the economic growth for the coming decade.
But is this sharp rise in self-employment really a sign of dynamism in the economy?
Let’s look at the facts…
#1 Self-employed incomes are low
Many of the newly self-employed are not earning very much. A report by the Resolution Foundation found that the median annual earnings of the self-employed fell by 20 percent between 2006 and 2010, from £15,000 to an annual salary of £12,000. In other words, half the self-employed earn £12,000 a year or less, which is barely above the minimum wage.
Source: The State of Living Standards, Resolution Foundation
Research by the Institute for Fiscal Studies found that 40 percent of self-employed people are in the bottom 20 percent of earners and don’t even make the full-time minimum wage.
Source: Institute for Fiscal Studies
These figures show that the self-employed have earned less than the employed for the last three decades. The recession has just made the disparity that bit worse. Far from creating new wealth, the newly self-employed have simply been competing for a shrinking supply of work.
#2 Most of the new businesses are very small
According to the Department for Business, Innovation and Skills, businesses without employees account for most of the increase in the number of companies over the last decade or so.
This bears out the findings of a New Policy Institute study, which reviewed Labour Market Survey figures. It concluded that most of the increase in self-employment was due to people working for themselves.
Of course, some one-man bands grow into larger firms. However, the increase in the number of people setting up companies has been among those doing very small amounts of business. Most are below the £79,000 turnover threshold for VAT. While the total number of businesses has increased by over 40 percent, the number of employers and VAT registered businesses increased roughly in line with the size of the workforce. Whatever else is happening, the number of startups is not leading to an increase in the number of SMEs.
The increase in the number of low-turnover and low-paying businesses suggests that much of the rise in self-employment is due to the weak economy. People have started their own businesses as a way of avoiding unemployment. As CIPD economist John Philpott said, it is these Odd Jobbers who have been keeping the unemployment figures low. The rise in self-employment, then, is a symptom of a weakening economy.
#3 Countries with high self-employment rates tend to be poorer.
A high rate of self-employment is rarely the sign of a dynamic economy. High self-employment is generally a feature of poor countries. As the OECD commented:
In general, self-employment rates are highest in countries with low per capita income although Italy, with a self-employment rate of around 25.5%, is an exception.
Self-employment rates as a percentage of total employment
Source: OECD Factbook
The wealthier countries in the OECD have lower levels of self-employment. The USA, despite its image as the home of entrepreneurialism has one of the lowest. On just about any measure, America is not a small business country. Worldwide, there is a negative correlation between self-employment rates and per capita GDP.
Britain’s rapid rise in the rate of self-employment, the highest increase in the OECD, is making us look more like the low-productivity, low per-capita GDP countries of southern Europe.
Self-employment, then, is a feature of poorer countries. In general, it pays less than employment and half of the self-employed are close to the minimum wage. There is also nothing to suggest that lots of business start-ups will lead to the development of more viable businesses in the future.
Sure, most of the self-employed say they are happier than when they worked and, even allowing for some self-affirming bias, this is probably true. For the economy as a whole, though, there is little to celebrate about the rise in self-employment. It means lots of people on low pay, on in-work benefits and not paying very much in tax. Like zero-hours contracts and the rise in part-time work, increased self-employment is another symptom of an economy that can’t create enough well paid full-time jobs.
Having said that, the data also suggests that at least some of this increase is long-term. The number of small, non-employing businesses was increasing before the financial crisis. The economic downturn just gave the trend a boost.
As the economy and the labour market improve, it is likely that the number of self-employed workers will fall. The longer-term trend, though, indicates that the rate of self-employment will not go back to where it was before the recession. Having got into the habit of using freelance and contract labour, it looks likely that employers will continue do so, to a greater extent than they did in the past. Some of what the Resolution Foundation described as a “historic migration of employees into self-employment” may therefore turn out to be permanent.
The RSA and Etsy are exploring similar themes in a new project, The Power of Small. Click here to find out more.
The RSA and Etsy will shortly publish a report highlighting the dramatic growth in the number of microbusinesses in the UK. Here we trail some of the findings from a Populus survey we conducted as part of the research.
Readers of this blog will know that the RSA has been paying a great deal of attention to microbusinesses of late. Why so?
The simple reason is because they are growing at such an astonishing rate. According to our analysis of the data, the number of microbusinesses (defined as firms with 0-9 employees) has grown by around 620,000 since 2008 to reach 4.7 million firms. Likewise, the proportion of people in self-employment has reached a record level.
A number of commentators have asked what the growth of the microbusiness community will mean for the economy and wider society – for living standards, jobs growth, innovation and productivity. But few have questioned what it could mean for political and social attitudes. This is surprising, since the self-employed are becoming a powerful electoral force to be reckoned with. In a previous blog, I laid out our (somewhat crude) prediction that the number of people who work for themselves will soon outnumber those employed in the public sector.
The question is, what do the self-employed really think about the way society is heading? And what do they want from politicians and policymakers? Despite cautious optimism about the future of the economy, the Populus poll we commissioned reveals that the political class may be out of touch with the views of microbusiness owners, many of whom feel they continue to lack enough support from government.
Here are some of the top-line findings:
Business confidence is finally returning – 41 per cent of microbusiness owners slightly agree that the economy is getting better and that the country is heading in the right direction, but a fifth still disagree.
Support for small business is lacking – Close to half (43 per cent) of microbusiness owners completely or strongly disagree that the government adequately supports the self-employed and small business owners. Only 14 per cent agree.
Welfare is unfair – 40 per cent of microbusiness owners completely or strongly disagree that the welfare system is fair to them. Only 4 per cent completely or strongly agree.
Labour has yet to connect – An overwhelming number of microbusiness owners feel that the Conservatives have the best policies for their business (at 46 per cent). Only 10 per cent say Labour. Many say none of the political parties.
Politicians are not fully trusted – 60 per cent of microbusiness owners completely or strongly disagree that they trust politicians to put the interests of the country above the interests of their party. Only 4 per cent completely or strongly agree.
An immigration cap is supported by microbusinesses – Nearly half (43 per cent) of microbusiness owners completely or strongly agree that they would favour a significant cap on immigration. Less than a fifth (19 per cent) disagree.
Views on Europe are mixed – Around a third (37 per cent) of microbusiness owners would vote yes to exit the EU in a future referendum. 40 per cent say they would vote no.
Keep your eyes peeled for the full findings of our research, which will be revealed in a report to be published later in the Spring. Our other data goes beyond political attitudes to cover microbusiness owners’ motivations, hopes for work, attitudes to growth, business styles, use of new technologies, and a whole host of other topics.
You can find out more about the RSA/Etsy Power of Small project here.
Populus interviewed a random sample of 1006 business owners/leaders with 0-9 employees. Surveys were conducted online across the UK between 26th February – 12th March. Populus is a founder member of the British Polling Council and abides by its rules. Further information at www.populus.co.uk.
Manufacturing in the UK is a touchy subject. The very word can conjure up bleak images of factory closures, dole queues, strikes and desolated towns outside of the South East. I know this only too well having grown up in Corby, which was once home to one of the biggest steel producers in the UK. But those days are long gone. In the late 1970s, manufacturing made up close to a third of British GDP, yet now it is barely a tenth. Over the same period, employment in this sector fell from around 6.8 million to 2.5 million today.
So what does the future hold for this industry? There are some, like the RSA, who are cautiously optimistic. Last year we published a report that predicted many mid-sized manufacturers would soon move production back to home turf, in part due to rising resource costs, new production technologies and changing consumer demand. Indeed, findings released this month from the manufacturing group EEF indicate that 1 in 6 firms have reshored in the past 3 years.
Yet it’s not all about the big firms. In fact, new data from the Business Population Estimates highlights a remarkable amount of growth in the number of one-man makers. The graph below shows that the population of manufacturing firms with zero employees (i.e. just the owners) has increased by nearly 40 percent over the past 3 years alone, mostly in the last 12 months. By 2013 there were 50,000 more one-man makers than there were in 2010. This stands in stark contrast with the other manufacturing firm sizes, which have all shrunk in number.
But what’s causing the boom? One explanation is that the proliferation of 3D printers is finally taking hold. The research firm Gartner estimates that global shipments of 3D printers shot up by nearly 50 per cent last year, and predicts a further rise of 75 per cent this year. Not only are these technologies becoming cheaper, they are also improving in technical proficiency. A few years ago 3D printers were limited to making prototypes, yet today around 20 per cent of printer output comes in the form of a final product (and this figure is expected to rise to 50 per cent by 2020).
Of course, such additive technologies are still in the early stages of development. And many have understandably criticised the hype, saying that the products they generate are rarely of good quality and that the raw materials they use are prohibitively expensive. But clearly this hasn’t deterred people from recognising the potential of these new machines. The notion that you could physically print off objects in your own home would have amazed most people 20 or 30 years ago. Indeed, some of the stories that emerge from the maker community are startling. Only a few months ago I interviewed someone living in Orkney who uses 3D printers to design and make model railway parts, which are then shipped around the world.
Yet the technology to make goods is only one part of the story. Also important are the new platforms that allow these one-man makers to sell their goods. The best-known example is Etsy, which last year hit a billion dollars in annual revenues (and i’m not just saying this because they are supporting our work). Etsy has enabled hundreds of thousands of people to set up a shop from their living room and earn money from the crafts they make, from ceramics, to jewellery, to furniture. And in many cases they will have a job on the side. According to a survey of their US sellers, close to 60 per cent are working elsewhere (half of whom are in full-time roles).
So while it’s right to lament the decline of our old manufacturing industries in the UK, and to revive them where possible, we should also recognise (and support) the tinkerers, inventors and makers who are bringing manufacturing back to life from the grassroots.
Follow Ben Dellot on Twitter: www.twitter.com/BenedictDel
This is a guest blog from Lauren Pennycook. Lauren is a Policy Officer at the Carnegie UK Trust. The Carnegie UK Trust was established by Scots-American philanthropist Andrew Carnegie in 1913 and works to improve the lives of people throughout the UK and Ireland, by influencing policy, and by changing lives through innovative practice and partnership work.
At last, youth unemployment is starting to fall. Latest figures confirm that the unemployment rate for 16 to 24 year olds is down one percentage point compared to the previous quarter, and 0.8 percentage points from 2013. But the issue of youth unemployment remains significant and complex and for some, the new figures are not automatically a reason to celebrate.
Youth unemployment is a multi-layered debate with many ‘ifs’ and ‘buts’ quickly following the data. For some it is not the number of jobs being filled by young people that is important, but if these are decent jobs. For others, it is about if young people themselves are prepared for the world of work and fully able and willing to take advantage of these opportunities, compared to more experienced workers .
Research conducted by YouGov at the end of last year found that just 19% of business leaders believed that all or most graduate recruits were ready for the 21st century workplace. More than half said that in their experience, all or almost all graduates started work without skills such as the ability to work in a team, communicate effectively, and to work under pressure. Meanwhile, the British Chambers of Commerce have recently raised concerns about college leavers’ attitudes and expectations of the world of work.
So what can governments across the UK and Ireland do to help address some of these challenges and perceptions? More and more, governments in the UK and Ireland are investing in enterprise education in our schools, colleges and universities – a strategic decision that goes beyond creating the businesses of the future. It is about instilling students with skills which will benefit them in whichever career path they pursue, from business to banking, from teaching to a trade.
And government support for opportunities to develop entrepreneurial skills is increasingly available outside the classroom. For example, last month the Scottish Government announced the creation of the Youth Scottish EDGE Fund to support the next generation of entrepreneurs aged 18 – 25 to turn their ideas into new businesses. Two weeks later, the Irish Minister for Small Business, John Perry T.D launched the Enterprise Ireland Student Entrepreneur Awards competition with a prize fund of cash and consultancy on offer.
But there is always more that can be done. While these efforts are to be commended, we need to be better at sharing our experiences about what works in this space with our fellow policymakers and practitioners across the UK and Ireland. Our own research found that there is a demand for more sharing of evidence across the jurisdictions, and the Carnegie UK Trust is now encouraging enterprise policymakers and practitioners to learn from the success of Wales in equipping young people with entrepreneurial skills.
Why are we urging policymakers and practitioners to learn from Wales? Interviews with practitioners of enterprise education in Wales found that having consistent opportunities to learn about and experience enterprise through the Welsh Youth Entrepreneurship Strategy is raising students’ aspirations, improving their skills such as sales, networking and marketing, and supporting more graduate start-ups than anywhere else in the UK and Ireland.
Last week I attended the Global Entrepreneurship Challenge Cymru (GEC) national heat, just one of many enterprise challenges and competitions available for students in Wales to take part in from primary to higher education. At the GEC, college teams were tasked with launching a sustainable social enterprise within their college which both addressed a local need and could be scaled up and delivered across Wales. Nineteen teams worked over 24 hours to develop a business idea, work out a cash flow plan and marketing strategy, and then pitch these to a panel of judges. All of the participants demonstrated excellent teamwork and communication skills, and most visibly, enthusiasm, a positive attitude and maturity beyond their years.
While only the winning team took home the trophy, all of the participants took home skills which made them more employable and ready for the workplace of the future. Whether these young people pursue a career as an entrepreneur, or are enterprising in an existing workplace, the Welsh Government’s commitment to enterprise education and the provision of opportunities for experiential learning is creating highly skilled workers for the future economy. In order to prepare our young people for the global race in sectors and industries that we may not even know about yet, there is much we can learn from this entrepreneurial Welsh Dragon.
See here for more information about the RSA’s work on youth enterprise.
Last month saw the release of the latest data from the Global Entrepreneurship Monitor, a major annual international survey of entrepreneurial behaviours and attitudes. What makes this dataset so powerful is the size of the sample (2,000+ people respond in the UK alone) and the fact that the data goes back over 10 years. It also has an extensive set of questions that touch on feelings and attitudes not covered elsewhere. So it’s worth a gander if you’re interested in enterprise, small business and other things of that ilk.
Here are three of the biggest insights from the 2013 results to be aware of:
#1 The overall level of entrepreneurial activity has dipped (for now)
The graph below shows the numbers of adults engaged in what is called ‘early-stage entrepreneurial activity’ (in other words, the number of start-ups). As you can see, the proportion of people in the process of starting a business fell quite sharply between 2012 and 2013, from around 10 per cent to just over 7 per cent.
Similar falls also occurred in other measures of entrepreneurial activity. For instance, the number of people who say they intend to start a business in the next three years fell by around a third. Yet one swallow doesn’t make a summer, and the 2013 figure remains above that seen in the early 2000s. Indeed, statistics from the Labour Force Survey (LFS) suggest that self-employment has continued to increase in the last year (and that the growth has even sped up).
It’s also worth noting that measures of ‘opportunity’ entrepreneurship (entrepreneurs who want to be in business) fell just as much as ‘necessity’ entrepreneurship (entrepreneurs who do not want to be in business). If the fall in entrepreneurial activity was mainly down to reluctant entrepreneurs returning to a typical job, we would have expected necessity entrepreneurship to have taken most of the hit.
#2 But new types of entrepreneurs are emerging
The average self-employed person is male and between the ages of 35-49. But that stereotype is being chipped away as several other demographic groups become more prominent. We know there has been a dip in entrepreneurial activity all round (see above), but three groups in particular appear to be better at weathering the storm.
The first is women. The graph below shows that while both male and female start-up rates have fallen since 2012, the latter has proven much more resilient. This is also borne out in data from the Labour Force Survey, which shows that the number of women in self-employment has increased by over 40 per cent since 2000, compared to 20 percent for men.
The second is older people. The graph below shows the proportion of 50-64 year olds who are engaged in any kind of entrepreneurial activity (the black arrow shows TEA i.e. those in the early stage of starting a business). As you can see, there has been a substantial increase in the last few years alone. I’m afraid I don’t have data for the over 65s, but the LFS statistics show a huge increase in self-employment among those in their retirement age.
The third group is young people. According to GEM, the number of young people in the early stages of starting a business has nearly doubled, moving from around 5 per cent in 2010 to 9.5 per cent last year.
#3 The number of high-growth businesses is atrophying
Ask any expert who knows something about entrepreneurship and they will say that the UK doesn’t have a shortage of start-ups. Rather, it has a shortage of scale-ups. The below table shows the number of firms in comparable countries that expect to create a large amount of jobs over the next 3 years. What is striking is that the UK has gone from the country with the highest proportion of high job expectation-firms to the country with the lowest. Whereas a quarter of our firms were once major job creators, now it is close to 15 per cent.
I hope that’s some food for thought. You should be able to find the full results of the Global Entrepreneurship Monitor survey on their website in the coming weeks. Thanks to Mark Hart of Aston University and his team for allowing us prior access to the data.
P.s. Keep an eye on this blog for the results of our own RSA/Etsy survey on microbusinesses, conducted in partnership with Populus.
Follow Ben Dellot on Twitter: www.twitter.com/BenedictDel
Filed under: Enterprise, Social Economy, Uncategorized
This week the RSA launched a new report exploring the potential for Post Offices to transform themselves into Community Enterprise Hubs. You can view the report here. And you can view the Twitter coverage here.
The Post Office is an organisation like no other. Local branches contribute enormously to the life and soul of their communities, are an essential vehicle for delivering public services, and provide the vital infrastructure that our businesses need to prosper. Yet we have only scratched the surface when it comes to realising their potential.
In the RSA’s new report, Making the Connection, we argue that Post Offices could do more to support local residents and businesses. They have a presence in nearly every community, are widely trusted and have a resilience and continuity that few other organisations can match. Close to 93 per cent of people live within a mile of their nearest branch, and it is estimated that a third of residents and a half of SMEs visit one at least once a week – the kind of footfall that other organisations would give their right arm for.
A number of Subpostmasters up and down the country are already capitalising on these opportunities and showing what can be achieved with limited resources. Win Morgan from Llangadog Post Office in South West Wales provides packaging and technical support for home-based businesses, while Tanya Vasileva (pictured) from Belzise Park Post Office in London provides shelf space for local businesses to sell their wares. Danielle Barnes from Port Clarence Post Office in Stockton has gone as far as to host a health centre, crèche, training rooms and café next to her branch.
Yet these are the exception rather than the rule. Most Subpostmasters are some way away from running the type of Community Enterprise Hubs called for in our report. This is a loss not only to the community but also to the bottom line of Subpostmasters. By doing more to support local residents and businesses Post Offices could tap into valuable new revenue streams and drive up all important footfall. Indeed, it is important not to lose sight of the fact that Post Offices are first and foremost commercial businesses, and as such need to stand on their own two feet.
Tomorrow’s world also presents more opportunities for Post Offices than many would currently believe. The growth of microbusinesses, self-employment and homeworking presents Subpostmasters with an opportunity to make themselves indispensable hubs for local business communities. Likewise, their ability to understand community dynamics is an attractive trait for potential public service partners seeking to support an ageing society, implement demand management (see another report we published this week) and create bottom-up responses to social problems. Whether it is in smoothing the transition to Universal Credit or improving access to affordable finance, there is nearly always something the Post Office could bring to the table.
With this in mind, the RSA has set out several new proposals designed to encourage and enable more Subpostmasters to make the transition to a Community Enterprise Hub. This includes nurturing a more entrepreneurial culture across the network, rewriting the underlying narrative of the Post Office, and attracting new talent into the cohort of Subpostmasters. In practical terms, this might mean creating a new Subpostmasters Apprenticeship Scheme to bring in fresh faces; or fast-tracking the serial Subpostmasters who want to run multiple branches. The RSA has also suggested inviting social entrepreneurs to become the next generation of Subpostmasters.
In 2014, the RSA and Post Office Ltd will work together to realise some of these proposals.
It may not feel like it but the next general election is getting very close. Each party will already be poring over the stats thinking about which demographics they most need to appeal to. Thatcher supposedly depended on winning over the Essex Man, while Blair is said to have courted the vote of Mondeo Man.
But what about this time round in 2015? Will it be the growing BME demographic as some have claimed, or the so-called ‘purple vote’ of people with disabilities? No doubt each of these will have a big impact on which way the political barometer swings in 15 months time. But there is one group in particular that will prove an electoral force to be reckoned with: the self-employed.
Why? Because the number of people working for themselves has skyrocketed in recent years. Since 2008 more than half a million people have moved into self-employment, and as a result they now make up 16 per cent of the workforce. Nor does this trend appear to be slowing. The latest figures from the Labour Force Survey show that the numbers running their own business increased by over 140,000 in the last quarter – one of the biggest jumps seen for years.
Putting this into context, it means that the growing community of self-employed will soon outnumber the once sizeable public sector workforce (hat tip to Hamish McRae for first pointing this out). The graph below projects the future size of both these groups based on average growth rates since 2010. On the RSA’s own measures, the crossover will take place sometime in late 2017 or early 2018.
By 2015, at least, we can already expect there to be around 4.4 million self-employed people – a huge number of potential voters to be courted. True, this is around half the clout of the grey vote (10 million people are over the age of 65), two thirds of the purple vote (6.9 million working-age people are disabled) and a third of the married couple vote (12.2 million couples are wedded). Yet it is a formidable and growing electorate nonetheless.
How this group will affect the political and policy landscape over the coming years remains to be seen. They will no doubt insist on greater support from the state to protect their own livelihoods – and rightly so. In practice this may mean demanding support to secure fairer mortgage rates (currently very difficult for the self-employed), to find help in contributing to private pensions, or to access better terms on the Universal Credit, which as it stands will require business owners to go through several onerous hoops before they receive assistance.
The voice of the self-employed will also become louder on wider political issues affecting the health of their business. They could add greater weight to arguments for looser immigration rules, given that many will rely on outside talent. Likewise, they may boost the numbers on the pro-Europe camp if they happen to export abroad.
They might also add to calls for a stricter welfare state and the sharp cuts to out-of-work benefits – the rationale being that if they were able to pull themselves up by their bootstraps then why can’t anyone else? The last British Social Attitudes survey in 2012 showed that the self-employed were the least likely to support an increase in taxation and spending than any other labour market group – and by some margin.
Of course, these predictions are based on stereotypes and conjecture. Moreover, many of the people who started their business reluctantly – including those made redundant from the public sector – may be less concerned with securing better rights and terms for business owners then getting themselves back into a typical job. Yet these caveats notwithstanding, it is clear that the self-employed will soon be a political force to be reckoned with.
As mentioned in my last blog post, both Labour and the Conservatives are already vying to become the party of small business. Indeed, David Cameron recently described them as the “lifeblood of our economy”. But let’s be serious: it’s going to take more than the backing of Small Business Saturday (Labour) or a video message of support on YouTube (Conservatives) to win the votes of this energetic, driven – and most importantly – growing electorate.
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Yes, high growth firms create the most jobs. But it’s the everyday businesses that provide work for those who need it most
Every politician wants to ally themselves with the small business community.
Take David Cameron, who last month described this crowd as “the lifeblood of our economy”. Or on the other side of the political spectrum, Ed Miliband, who promised to “go into the next election as the party of small business and enterprise.” Little wonder, given that the growing number of self-employed will soon have more electoral clout than the shrinking public sector workforce.
But are their tributes justified? Not so, according to the team at Nesta. In a blog last week, they persuasively argued that the praise given to small businesses for their role in job creation is largely misguided. According to their data analysis, it’s the tiny number of high growth firms – the famous 7 per cent – that generate the majority of new jobs. Their calculations show that such firms, defined as averaging over 20 per cent employment growth over 3 years – were responsible for creating over half of all new jobs in the period between 2007 and 2010.
Moreover, these firms are distributed fairly evenly across the UK (something I was surprised to hear). As expected, London and the South East have the highest number, but even the regions at the lower end of the scale like Wales and the West Midlands have a high proportion of high growth firms (close to 5 per cent each). They also have a decent presence in every sector – from construction, to retail, to business services.
So far, so rosy. But gauging the impact of different firm types on employment is not as simple as totting up the quantity of jobs created. We also have to think about the quality of those jobs, as well as who is taking them. And therein lies the rub. While high-growth firms may create the most jobs, it’s the everyday small businesses that provide work for those who need it most. Recent research by the Federation of Small Businesses, for example, found that the unemployed who enter the private sector are now more likely to find work in your run-of-the-mill small business than anywhere else.
The same is true of others on the economic and social margins. Data analysis by the Institute of Economic Affairs highlighted that women, individuals from certain ethnic groups, those with young dependents, those with low or no qualifications, and those with language difficulties make up a far greater proportion of the workforce in small firms than they do in large ones. For instance, 10.7 percent of employees in microbusinesses have no qualifications, compared with 3.8 percent in the largest firms.
An obvious rebuttal here is that typical small businesses have a high level of job churn. That is, they destroy as many jobs as they create. Moreover, such businesses are unlikely to be able to offer training opportunities or high levels of pay. Yet despite these drawbacks, the employees of small establishments report greater satisfaction and lower levels of work-related illness.
Of course, all of this gets a little confusing when you consider that most high-growth businesses are technically ‘small’. But for all intents and purposes they are geared towards becoming larger entities, and are therefore likely to share the same characteristics. Indeed, it’s hard to picture them sacrificing their productive edge to accommodate a workforce with a lower skill base or English language difficulties.
So while yes, we should acknowledge and seek to support the fastest growing firms, let’s not forget the everyday businesses that provide opportunities to those who most need them.
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