A recent academic study conducted during the Covid-19 pandemic has revealed that 40% of self-employed workers would consider switching to a salaried job if they could maintain the same level of income. This shift in sentiment is largely attributed to the mental distress and financial insecurity experienced by self-employed individuals. In fact, one in eight respondents stated that they would be willing to accept a 20% pay cut in order to escape self-employment due to the detrimental impact on their mental health and the lack of government support during times of crisis.
The report, titled “The Self-employment Trap,” published by the Centre for Economic Performance at the London School of Economics and Political Science, highlights the negative effects of stagnant incomes and rising costs on the overall wellbeing of the self-employed. The study found that over 25% of self-employed workers surveyed reported experiencing moderate to severe mental health issues, compared to 16% of the general population.
Self-employment had been on the rise since the early 2000s until 2020, when the pandemic-induced economic shutdown led to a significant number of self-employed individuals transitioning into permanent full-time jobs. The number of self-employed workers reached its peak at 5 million in 2019 but dropped to 4.2 million in 2022, primarily due to high-skilled individuals shifting their employment status to become employees, as reported by the Office for National Statistics.
The remaining self-employed individuals tend to have lower incomes and work in industries with higher levels of precarity, resulting in limited savings to fall back on during periods of reduced work opportunities. This has led more people to question whether the benefits of self-employment outweigh the associated risks, according to Stephen Machin, director of the Centre for Economic Performance.
A report by the Fabian Society conducted in July also highlighted the challenges faced by self-employed workers, who have seen limited earning growth over the past decade compared to employees. The study found that average take-home pay for full-time self-employed individuals only increased by £500 per year in real terms between 2012 and 2022, compared to £2,300 per year for employees.
The study conducted by the Centre for Economic Performance further revealed that many self-employed individuals considering a switch to traditional employment felt that they lacked the necessary skills or training and that there were limited job opportunities available. Some also cited age or lingering health problems as limiting factors for seeking alternative employment.
Furthermore, the report highlighted that 34% of respondents struggle to cover basic expenses, a figure that has remained unchanged since August 2020. This indicates a strong desire among self-employed workers to find more secure employment options.
Robert Blackburn, co-author of the report and professor of entrepreneurship at the Brett Centre for Entrepreneurship, University of Liverpool, emphasized the growing feeling of being trapped in self-employment. He explained that persistent low incomes and rising costs significantly impact the wellbeing of self-employed individuals.
In addition to assessing the state of self-employment, the study also examined the voting preferences of self-employed workers. Traditionally, self-employed individuals have been associated with conservative voting tendencies, but the survey found that Labour is now the most popular political party among respondents. Maria Ventura, co-author and PhD candidate at LSE, urged the government to take note of this shift in political allegiance and consider the needs of self-employed individuals in their policy agendas.
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