Public policy should be ‘rethought’ to reflect rise in self-employed

The UK employment rate was estimated at a record high of 76.3% between September and November 2019, reflecting a 0.6% rise against a year earlier and 0.5% up on the previous quarter, according to new data published by the Office for National Statistics (ONS).

There were a joint record 27.71 million paid employees – 84.2% of all people in employment – which was 179,000 more than a year earlier, while the ONS added there were also a record 5.00 million self-employed people – a figure 15.2% of all people in employment, and 145,000 more than a year earlier.

The ONS added that since the latter half of 2012, the annual increases for employees had generally been greater for the self-employed – in recent periods this had reversed – although between September and November 2019 the increase for employees went back to being greater than the increase for the self-employed.

Personal finance specialist at Royal London, Becky O’Connor, suggested public policies should be changed based on the trend that the ONS figures have revealed.

“Self-employed people can be more vulnerable to financial shocks,” O’Connor commented. “It can be harder to budget or plan a big purchase, such as a house, when you are self-employed. It can also be harder to save enough for retirement without employer contributions to a workplace pension, and this is an area where many self-employed people are vulnerable.

“So many areas of public policy are based around the assumption that people have an employer and a steady income and need to be rethought in a country where millions of people work for themselves.”

Elsewhere, the latest ONS data also revealed that average weekly earnings growth was 3.2% in the period between September and November 2019 – or 3.4% excluding bonuses. After adjusting for inflation, earnings only grew by 1.6% including bonuses, and by 1.8% excluding them.

Hargreaves Lansdown personal finance analyst, Sarah Coles, suggested ‘the good times to continue to roll’ at first glance, but that when it comes to pay ‘we’re still making up the ground we lost’ during the financial crash.

“After you take inflation into account, average pay is still lower than it was in March 2008,” Coles said.

“This has an impact on us all, but particularly those who have started their careers in the past 12 years. The income you start out on has a profound impact on your earning potential throughout your career, and because that’s linked to long term saving and investing – and directly to pensions – it can keep biting well into retirement.

“If you’re set for a pay rise in the coming months, consider the difference you can make with it. It’s easy to mentally spend it before it arrives, or watch it dwindle away as prices rise, but each pay review is an opportunity to think about what you’re doing for your long-term savings. If we choose to put more away each year, we can make sure that a decade of lower wages doesn’t follow us into retirement.”

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