United Kingdom

Research shows self-employed earn a third less but have greater wellbeing 

Self-employed workers earn less than their counterparts on company payrolls but are healthier and happier, a new study has found. 

For those who move into solo self-employment directly from employee jobs, earnings remain lower and poverty rates higher for at least two years after entry, according to analysis by the Institute for Fiscal Studies (IFS). 

But despite the lower incomes, running a business without employees has been found to improve well-being across a number of areas, including job satisfaction.

Self-employed workers earn less than their counterparts on company payrolls but are healthier and happier, a new study has found (file photo)

Despite the lower incomes, running a business without employees has been found to improve well-being across a number of areas, including job satisfaction. This graphic shows the difference in earnings between those who are solo self-employed and those on a company payroll 

The IFS study looked at incomes and well-being for those who go into 'solo self-employment' - or, running a business without employees

The IFS study looked at incomes and well-being for those who go into 'solo self-employment' - running a business without employees. 

It found many use solo self-employment as a back-up plan after being dismissed or made redundant from their previous job. 

While their earnings take a dip for up to three years, the study found a sustained rise in job satisfaction.   

Some 87% of self-employed workers at the end of 2019 were in solo self-employment, up from 74% two decades ago. 

Rising solo self-employment accounts for over a quarter (26%) of the total increase in employment since the financial crash of 20081. The rise in owner-managers without employees (who are classed as employees for tax purposes and in many surveys) accounts for a further 11% of the increase. 

While those who are solo self-employed find their earnings may take a dip for up to three years, the study found a sustained rise in job and life satisfaction

This graph shows which industry are most likely to see people go into solo self-employment between 2009 and 2019

This comes as official figures show UK workers on company payrolls have fallen 649,000 during lockdown as the coronavirus crisis claimed another 74,000 jobs last month.

The Office for National Statistics (ONS) said early estimates showed the number of paid employees fell by 1.9% year on year in June to 28.4 million, and by 0.3% compared with the previous month.

It said the pace of job losses appeared to have slowed in June, while claims under Universal Credit by the unemployed and those on low incomes also fell by 28,100 between May and June to 2.6 million. 

The ONS said unemployment fell 17,000 between March and May to 1.35 million, with the rate unexpectedly unchanged at 3.9%.

Experts said this masked a sharp fall in employment, down 126,000 in the quarter to 32.95 million, with the rate dropping to 76.4%. 

The figures show that vacancies fell 463,000 between March and May to a record low of 333,000 as companies froze hiring in the face of the pandemic. 

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