Self-employment not a stepping stone to being an employer

Many countries offer public funding to help people their own businesses or stay self-employed, because self-employment is seen as a driver of innovation, job growth, and economic development – but research using Understanding Society suggests public spending on self-employment policies could be better targeted.

Author Lixin Cai at the Future of Employment and Skills Research Centre at the University of Adelaide used Waves 1-10 of Understanding Society to look at people’s labour market status over time. He wanted to see how many people moved from being self-employed to employing others, which has not been widely studied up to now.

Most self-employed people begin as sole traders, and the research asked: “Is solo self-employment a pathway to becoming an employer? If it is, then public investment in self-employment is justifiable because it can lead to more job opportunities in the future. Otherwise, the policy’s effectiveness is in doubt.”

The results showed:

• Compared with those who were not employed in the previous year, people in solo self-employment have a probability of employing someone which is only 1.4 percentage points higher for men and 0.8pp for women.
• Compared to employees, the differences are even smaller: 0.3 and 0 percentage points, respectively.

The research concludes that “there is no evidence to support that solo self-employment acts as a steppingstone to employership for UK workers”, and adds: “These findings suggest that public spending on self-employment policies could be of better value for money if it is targeted at workers who are more likely to grow into an employer.”

Read the original paper

EmploymentPolitics and social attitudes