Wages, or fees charged, by the self-employed are now lower than in 1994/95, finds new research.
It’s a case of two opposing forces. The number of self-employed is rising, their pay is falling. According to the Resolution Foundation, between 2001/2002 and today, the great army of the UK’s self-employed rose by 45%, but average weekly earnings fell by £60 a week.
As for the comparison with the mid 1990s. In the year 1994/95, average wages in this sector were £300 a week, they are now down to £240 a week.
Adam Corlett, an economic analyst at the Resolution Foundation, said: “Almost five million workers across Britain are now self-employed. But while the self-employed workforce is getting bigger, typical earnings are actually lower than they were 20 years ago.”
It is tempting to conclude that this is down to the changing make-up of the self-employed work-force. There was a time when being self-employed was something that people who were quite well paid did. Whereas these days a higher proportion of lower paid jobs are carried out by the self-employed.
It is also called the gig economy. Recent research by McKinsey found that there are 162 million workers in the US and Europe engaged in some kind of independent work. It divided the gig economy into four categories: gig economy workers by choice, who make up 30 per cent of the whole. Then there are casual workers who have full time jobs or have PAYE jobs, but top up their income with self-employed work; they make up 40% of the total. The rest is made up of what McKinsey calls the reductants, self-employed out of necessity – and the financially strapped (16%) who top up their income from PAYE work out of necessity.
The Resolution Foundation did not break down its research into looking at different sectors of the self-employed workforce.
The question is, why have pay rates for this sector been falling?
Clearly, the rise of the likes of Uber or Deliveroo has been a factor.
Maybe, we have seen a handful of employers exploit their monopoly position in the labour market.
Maybe we are seeing the tyranny of the algorithm, as pay awards are subjected to market forces at their most extreme.
Maybe we are returning to Victorian type work practices, an era in which piece work was the norm – a bricklayer might be paid on how many bricks he/she laid.
Maybe we are witnessing what happens when the power of unions is curtailed.
Or maybe this is all down to technology. And perhaps we just need to give the market time to settle before a fairer form of pay evolves.
The government is looking at the gig economy, and Matthew Taylor, the former head of the policy unit under Tony Blair and now the chief executive of the RSA is conducting a review into modern employment.
But should workers who form part of this gig economy be entitled to sick pay, holiday pay, or be subjected to longer notice periods?
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