The self-employment trap?

The seventh LSE-CEP survey of the self-employed was undertaken between May and July 2023, following the six previous surveys of May 2020, September 2020, February 2021, September 2021, May 2022 and November 2022. The income of the self-employed remains in the doldrums, not showing post-pandemic improvement. This is also reflected in the high probability of respondents experiencing trouble in meeting basic expenses (34%), which has shown no change since August 2020. The high cost of energy remains the main issue facing the self-employed, but increases in interest rates have now exacerbated their challenging financial situation, particularly for those in debt, and added to personal stress. The impact of Covid-19 is now diminishing relative to the more recent challenges. Effects of the current challenges to self-employment were explored in terms of a hypothetical experiment evaluating willingness to switch to a salaried employee job. Four out of 10 individuals currently in self-employment state a preference of moving to a position of regular employment, if they could secure the same income level. The situation is so marked for some groups, in particular the solo self-employed, that they would be prepared to move to regular employment even if this involved a wage cut. Even though there is widespread willingness of the self-employed to move to employee jobs, most of them reported that in practice they would find it hard switching. This is particularly the case for the older self-employed. For the solo self-employed, the main reported obstacles to switching concern a lack of appropriate skills and old age. This suggests some of the solo self-employed may be stuck in their current positions, with no feasible alternative to earn their living. The challenges faced by the self-employed are having an impact on their wellbeing. Using a public health questionnaire, PHQ-4, more than a quarter of those surveyed are experiencing “moderate” to “severe” mental health issues. The main source of distress is financial insecurity. Within the sample, younger people reported a higher rate of mental health problems reflecting the severity of the challenges faced. While traditionally supporters of the Conservatives, for the second time in our series of surveys, Labour is the most popular single party of the self-employed (36% say they would vote Labour in a general election). But a significant share remain sceptical or undecided. These findings suggest it is a structural shift in the voting behaviour of the self-employed rather than a blip. This may be a result of the changing composition of the self-employed as well as their recent tough experiences