Financial independence starts at 50

People aged 50 and over account for more than four-fifths of the sharp rise in the number of self-employed people seen since 2008, a report by the Office for National Statistics has found.

The number of workers who are self-employed in their main job soared by 367,000 to 4.2 million in the four years to April-June 2012, with the bulk of the rise happening since 2011.

The self-employed represented 14 per cent of the 29.4 million people in employment, the ONS said. By contrast, the number of employees fell by 434,000 between 2008 and 2012.

The increase took place across all parts of the UK except Northern Ireland. London had the highest proportion of self-employed workers (18 per cent), followed by southwest England (16 per cent), while the northeast had the lowest (11 per cent).

The ONS said self-employed workers tended to be older than employees and were more likely to be male. In 2012 the average age of the self-employed was 47 and 70 per cent were men, while the average age of employees was 40 and only 51 per cent were men.

The four most common occupations for self-employment were taxi or cab drivers (166,000), “other construction trades” (161,000), carpenters and joiners (140,000) and farmers (123,000) - a pattern little changed over the past 20 years, the ONS said.

Some economists believe the rise in self-employment could be one the reasons behind the UK’s productivity puzzle, whereby employment has been growing while output is flat.

These workers may be producing goods and services worth less than those they produced as employees of companies, it is said, though the ONS study offers little evidence either way.

Nor does it examine the reasons behind the rise. Many analysts believe it is the result of people scraping together whatever freelance work they can in tough economic times, rather than a surge in entrepreneurial zeal.

The ONS found that self-employed people work longer hours - on average 38 hours a week compared with 36 for employees. About 58 per cent of self-employed people used their home for work purposes to some extent, either working there or using it as a base.

The ONS found that workers aged 50 and above accounted for 84 per cent of the increase in self-employment since 2008

Self-employment was most prevalent among those aged 35-49, who accounted for 38 per cent of the total, with those aged 50-64 accounting for a further 34 per cent.

As people get older they are far more likely, if in work, to be self-employed. Just 5 per cent of workers aged 16-24 are self-employed compared with 37 per cent of those aged 65 and older.

The ONS said this may be due to older workers finding it easier to set up as self-employed after gaining experience, skills and contacts working for someone else. It may also be easier for them to find start-up costs, through redundancy payments or savings.

Also, older workers may be more likely to carry on working if they are self-employed than if they were working for someone else as they become more attached to the business and do not have a pension set up by an employer.

Between 2008 and 2011, the increase of 147,000 was driven by people 65 and over, women (accounting for 80 per cent of the rise) and people working less than 30 hours a week.

But in 2011 and 2012, the increase of 219,000 was concentrated on people aged 50-64, men (64 per cent of the rise) and people working more than 30 hours.

Frances O’Grady, general secretary of the Trades Union Congress, said: “Self-employment is normally a very small part of the workforce so the fact that it’s been outstripping employee job growth shows that the UK labour market is far weaker than headlines suggest.”

The recent rise in job levels is being driven by self-employed, part-time and temporary jobs, rather than the full-time, permanent work that many people want and need, she said. “There may be perfectly good reasons for being self-employed but it would be naive to think that all these workers are really budding entrepreneurs.”

— Financial Times