Incomes for the Self-employed are plunging

26 Aug 2014, by Geoff Tily in Labour market

The ONS analysis of self-employment has unsurprisingly generated a good deal of media commentary, even in spite of the hardly enticing strapline (‘Self-employment rises as fewer people leave’). There has however been less emphasis on the earnings figures, which tell a very worrying story of decline.

As a point of fact, this is the first time that weekly self-employment incomes have been published by the ONS. The figures show not only that incomes are very low, but that they are falling year after year.

Peculiarly the ONS have chosen to present the figures only in (CPI) inflation-adjusted form, in 2012/13 prices. This means that their estimate of £207 per week in 2012/13 is a cash figure. It would seem reasonable to look at this against ASHE figures. According to Table 5 of the 2013 provisional results release, median gross weekly earnings in 2013 were £518 following £506 in 2012. So self-employment earnings are running at around 40 per cent of employee earnings.

The ONS have now helpfully provided me with a time series of cash figures, which I have set against the ASHE employee figures (crudely put onto a financial year basis), which I’ve plotted below.

Source: DWP, Family Resource Survey. 1 Self-employed and employees are aged 16 and over. 2 Income figures are in 2013 prices

The ratio of self-employed incomes to employees earnings has fallen from 57 per cent to 41 per cent over ten years. (NB While ONS caution about the difficulty in estimating self-employment income, there is no obvious reason to think that the trend in this ratio over time should be distorted.)

Not only has there been an unprecedented shift to self-employed work, this work is increasingly lower paid relative to employment. Given the severity of the earnings crisis on the basis of the more familiar measures, these are very bad figures indeed.