Enterprise and Small Business Principles

Aggregate data

In Great Britain the total number of self-employed persons (calculated using the grossing-up procedures adopted for the Labour Force Survey) was some 3,633,000 in

2005. This represents an increase of 1,855,000 (104%) since 1979. The figure rose steadily throughout the 1980s and only declined as the recession of 1990 took effect. Since 1991 the rate has climbed and then remained relatively stable. The remarkable rise and then plateau is illustrated in Figure 3.1 below.

A more detailed analysis of the rise during the last decade is shown in Table 3.1, which also provides a breakdown by gender. The figures are for Great Britain.

The share of the self-employed in total employment increased from under 9% in 1981 to over 12% in 1991, where it remained at the Census date in 2001. However, whilst the increase in absolute numbers of self-employed continued in the second half of the 1980s, during this period they increased their share of the total labour force at a slightly lower rate than at the start of the decade. This was matched by a correspond­ing increase in the rate of growth in the number of employees.

A prominent concern recently has been the growth in part-time employment (self­employment). In 1987, 2,464,000 (83%) were full-time self-employed and 503,000 (17%) were part-time self-employed. In 2005, 2,820,000 (78%) were full-time and

813,0 (22%) were part-time. There is no discernible pattern or split between the pro­portions of male or female self-employed moving to part-time work over the period.

This is not the case for employees in employment where there has been a noticeable shift towards female part-time as the main job.

Hakim (1988b) noted that the statistics generally do not support the popular view that unemployment pushes people into self-employment. Only around 20% of the inflow to self-employment each year comes from the ranks of the unemployed. Some govern­ment schemes, such as the Enterprise Allowance Scheme (EAS), have clearly accounted for some of the new entrepreneurial activity, but by no means all of it. However, the flow of unemployed into self-employment is proportionately higher than the representa­tion of the unemployed within the workforce as a whole would suggest.

Research that has tried to measure the impact of the EAS has shown that many par­ticipants were not unemployed for over a year. They may not, therefore, have been included within the unemployment totals for the year prior to the survey dates and so the LFS, from which Meager (1991) takes his data, could be a poor indicator of the impact of this particular policy.

Daly (1991a) also considered the aggregate flows into and out of self-employment. He noted that changes in self-employment rates are likely to follow changes in total employment. Between 1981 and 1987 the rise in self-employment was primarily caused by increases in the proportion of people who were self-employed. After that date, total employment increases rapidly, which accounted for most of the increases in self­employment rates. Additional research by Abell, Khalif and Smeaton (1995) using LFS data for 1975-91 studies flows into and out of self-employment from other states of the labour market. The LFS devoted part of its questionnaire to employment state one year prior to the interview and from this it is possible to analyse transitions between alternative states. The conclusion reached is that much of the apparent increase in self­employment between 1979 and 1989 (with entries greater than exits during this time) can be explained by wage employees becoming self-employed.