Self-employed feel trapped as incomes stagnate

Around two-in-five self-employed workers would switch to a salaried job if they could secure the same income, and around one-in-eight would accept a 20% pay cut to switch, according to new analysis by the Centre for Economic Performance (CEP) at the London School of Economics and Political Science (LSE).

The report found stagnant incomes and rising costs are also having an impact on the well-being of the self-employed. The report found that more than a quarter of those surveyed are experiencing ‘moderate or ‘severe’ mental health issues compared with 16% of the general population. While not being able to find a salaried job at similar pay is the main reason given for being unable to switch, the self-employed also cite concerns about having a lack of skills or training, few job openings and feeling too old.

The study comes after previous research showing an exodus from self-employment, as incomes failed to recover after the pandemic. This latest report, the seventh in the series showing how self-employed workers are faring, reveals that 34% are having trouble paying for basic expenses – a proportion that has shown no change since August 2020. As in the sixth report, energy bills are cited as the most challenging issue. 

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. We found a significant number would be prepared to move to a salaried job for the same income – with, in particular, the solo self-employed and younger individuals expressing a desire to move to a salaried job, even in some cases when this entails a wage-cut.”

Robert Blackburn, co-author of the report and professor of entrepreneurship at the Brett Centre for Entrepreneurship, University of Liverpool, said “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.”

Maria Ventura, co-author and PhD candidate at the LSE said “Our analysis of voting intentions shows that, unusually, it is the older self-employed who are switching from Conservatives to Labour. This willingness to shift political allegiance implies that the self-employed cannot be ignored in the manifestos of the political parties.” *The seventh LSE-CEP Survey of self-employment was carried out from 30 May to 4 July 2023. The results are based on 1,500 responses. The responses are weighted to represent the population of self-employed workers.”