Self-employment has surged in the 21st Century. Some 4.2million people now work for themselves, 14% of all those in employment, up from under 12% at the start of the century. An additional 304,000 people are self-employed in a second job, outside their main employment. Taking the chance to be their own boss, and often embracing the new technology that enables it, record numbers of people are working for themselves. This is good news.
Self-help and personal responsibility should be applauded. As Professor Peter Urwin puts it, "self-employment is one of few routes to the economy for entrepreneurial skills." Much as they may wish to deny it, established companies tend to value and expect the ability to adhere to existing processes and systems over and above creativity, dynamism and individual flair. And entrepreneurialism is a culture that spreads. Once you're in it, you live it. You 'go native' as they say and embrace risk taking. Significantly, then, entrepreneurs are more likely than established companies to take on workers from the ranks of the unemployed or non-active who often find the formalised application processes, let alone the working practices, of large firms restricting.
Despite siren warnings from the unions and others that self-employed jobs are not 'proper jobs', there is evidence that the self-employed, and those employed by the self-employed in the smallest companies, enjoy better industrial relations. Data from the last complete Workplace Employment Relations Survey (WERS) suggest that 67% of employees in the SME sector "strongly agree" that managers treat them fairly, compared to just 53% of those in large firms.
Furthermore, a survey by the TUC (no less!) and YouGov has found that a greater proportion of employees in small firms report the highest levels of job satisfaction compared to employees in larger firms. And yet there is a tendency in Whitehall to prefer dealing with large companies or underestimating the burdens on the smallest businesses when introducing uniform regulations.
What a boost it would be for more of the growing army of self-employed to become small employers. While the number of self-employed with no employees has increased, the number of self-employed with a small number of employees has not kept pace. In the past, the focus has been more on encouraging people to become self-employed and less on taking the next step to being micro-employers. There is an opportunity to further liberate the self-employed from barriers to growth and nudge everyday entrepreneurs into being everyday employers. The prize is stronger, more sustainable economic growth.
Surveys and statistics abound to show that small businesses can be - and often are - job-creation machines. They also show that small businesses are the most likely to employ the longer-term unemployed and those who may struggle to enter the jobs market by lack of formal qualifications or ethnic background. This is what the Federation of Small Businesses calls the "entrepreneurial pipeline" to what Professor Mark Hart terms "growth gazelles". But essentially it is everyday entrepreneurs, street-level small businesses and office-share operators giving people a chance to work. Analysis by the Federation of Small Businesses suggests that 74% of those becoming self-employed with employees come from the self-employed who previously had no employees - a further 13% comes from employees who had previously been working in micro-businesses.
In response, the government are introducing a new employment allowance which will help encourage the self-employed to become employers by slashing the cost of National Insurance. Meanwhile, the New Enterprise Allowance (with Levi Roots as an ambassador) seeks to encourage the longer-term unemployed into self-employment. Furthermore, the government is taking deregulation seriously. The three-year moratorium on new regulations for small businesses is most welcome. But as Lord Young has rightly argued, there are wider issues of culture and communication still to address.
Schools are great places to foster entrepreneurial ambition. Careers advice should at least be informative about the option of self-employment. Studies suggest that the most likely to enter self-employment are those who have parents in self-employment and those who have worked in small businesses. Familiarity with what self-employment entails needs to be encouraged from an early age. There is certainly no absence of ambition. The Prince's Trust has found that up to 30% of young people expect to be self-employed; a YouGov poll has found that 43% of young people have already made money from entrepreneurial activity, such as selling their own product or working on a freelance basis. We should continue to help them achieve their ambitions.
Those who would seek to regulate existing businesses should always think about the consequences on those businesses yet to exist. Whitehall communication with the self-employed should make every effort to emphasize the assistance available to businesses, not act as a psychological closed door to exploring the options for taking on employees. Lord Young powerfully states, "psychological barriers stifle ambition." Creating an aspiration nation means ensuring that the road to running your own business is a clearly signposted fast lane, not Labour's minefield of forms, box ticking and regulations.
In small firms there is often less formality, more fluidity and greater flexibility in the employment relationship. The support and advice on offer should mirror this. It should not be forgotten that entrepreneurs often set up on their own to escape regulation and formalisation - only to find it re-imposed by governments or unions that do not understand the nature of the entrepreneurial spirit. It is vital to keep retargeting existing schemes on smaller businesses, and communicate better to entrepreneurs.
Society needs to embrace entrepreneurs. But entrepreneurs also need to embrace society. The 1980s gave the impression that entrepreneurs needed sharp suits, red braces, shoulder pads and so on. The Apprentice can be a bit shouty. The image is bad. But most businesspeople are not really dragons. Yes, often extraordinary people, but not other-worldly. Let's champion our everyday entrepreneurs and encourage them as everyday employers.Suggest a correction