Economists love a good mystery. Before the pandemic, one thing they puzzled over was the steady rise in the number of self-employed people in Britain’s labour market — a stronger trend than in most other developed countries. Now there is a new mystery: where on earth they’ve all gone. When the pandemic hit, the ranks of the self-employed fell sharply and they show no sign yet of bouncing back.
This abrupt change of direction matters because the rise in self-employment has been for decades one of the UK labour market’s defining features. The share of workers who were self-employed rose from about 8 per cent in 1975 to about 14 per cent in 2019. What exactly it means to be self-employed in Britain has also changed over that time. By 2019, it was much more common to be “solo self-employed” — a one-man band rather than someone who employs others. Nearly half of the UK’s self-employed had employees in 1975 but by 2019 the figure was just 15 per cent.
The growing army of one-man bands was an important contributor to the UK’s so-called “jobs miracle” that unfolded in the decade after the 2009 crash and pushed employment rates to record levels. According to the Institute for Fiscal Studies, solo self-employment accounted for a third of all employment growth over that decade. On the eve of the pandemic, the level and growth of solo self-employment in the UK were among the highest in OECD countries.