Mental distress and financial insecurity has pushed 40% of self-employed workers to say they would switch to a salaried job if they could secure the same income, according to an academic study that has tracked self-employment trends during the Covid-19 pandemic.
About one in eight would accept a 20% pay cut to get out of self-employment, such is the damage done to their mental health and the expectation that government support will not be forthcoming should another crisis wreck their business.
According to the authors of The Self-employment Trap, published by the Centre for Economic Performance (CEP) at the London School of Economics and Political Science (LSE), stagnant incomes and rising costs are also having an impact on the wellbeing of the self-employed.
The report – the seventh since 2020 – reveals that more than a quarter of those surveyed are experiencing “moderate” or “severe” mental health issues, compared with 16% of the general population.
Self-employment increased steadily from the turn of the century until 2020, when the decision to shut down the economy and put millions of PAYE workers on furlough sparked an exodus of self-employed into full-time permanent jobs.
There were just over 3 million self-employed workers in 2000, a figure that rose to a peak of 5 million in 2019 before falling to 4.2 million in 2022, largely as a result of “business directors and partners, and those in high-skilled occupations” changing their status to employed, according to the Office for National Statistics.
Those that have remained self-employed have tended to have lower incomes and worked in more precarious industries, leaving them with only low levels of savings to cope with periods when work dries up.
A report by the Fabian Society in July found that self-employed workers have been among the worst-hit by years of economic turmoil, and their earnings have remained stagnant over the last decade. Average take-home pay for the full-time self-employed increased by only £500 a year in real terms between 2012 and 2022 – compared with £2,300 a year for employees, the society said.
According to the CEP study, many of those self-employed workers who would swap their independence for full- or part-time employed roles say they lack the skills or training to make the switch, and there are few job openings. Many said they felt too old to apply for a job or were limited by lingering health problems.
The urge to find more secure employment is also shown by 34% of respondents saying they have trouble paying for basic expenses – “a proportion that has shown no change since August 2020”, says the report.
Stephen Machin, director of CEP and co-author of the report, said: “The self-employed, especially the solo self-employed working by themselves, are experiencing on-going challenging financial conditions. And more appear to be questioning whether the rewards involved in being self-employed are worth the risks.”
Robert Blackburn, co-author of the report and professor of entrepreneurship at the Brett Centre for Entrepreneurship, University of Liverpool, said the sense of feeling trapped in self-employment was growing.“We have previously found that there is a flight from self-employment but these latest results show that there are many who feel trapped. With persistent low incomes, and rising costs, these pressures are clearly affecting their wellbeing,” he said.
The research, which draws on a representative sample of 1,500 individuals in the self-employed population, also looked at the voting intentions of self-employed workers. Although the self-employed have historically been identified as Conservative voters, the survey found that Labour is now the most popular single party among respondents.
Maria Ventura, co-author and PhD candidate at LSE, said the evolution of voting habits away from the Conservatives was a trend the government should not overlook.
“This willingness to shift political allegiance implies that the self-employed cannot be ignored in the manifestos of the political parties,” she said.
