Self-employed feel trapped as incomes stagnate

more appear to be questioning whether the rewards involved in being self-employed are worth the risks
- Professor Stephen Machin, director of the Centre for Economic Performance at LSE
a simple workstation set up Andrew Neel

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, a new analysis reveals.

Stagnant incomes and rising costs are also having an impact on the wellbeing of the self-employed, say the authors of “The self-employment trap”, published today by the Centre for Economic Performance (CEP) at LSE.

The report reveals 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.

The research, which draws on a representative sample of 1,500 individuals in the self-employed population, also looks at the voting intentions of self-employed workers. Although the self-employed have historically been identified as Conservative voters, the survey finds that Labour is now the most popular single party among respondents.

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 LSE, commented: “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.”

Behind the article

1. 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. The full report is available here: “The self-employment trap”.

2. The CEP Covid-19 analysis series provides evidence-based briefings on the economic and social policy issues arising from the Covid-19 pandemic. The previous reports are:

From Covid-19 to collapse? The self-employed and the cost of living crisis

Covid-19 and the self-employed: a two-year update

Covid-19 and the self-employed: 18 months into the crisis

Covid-19 and the self-employed: ten months into the crisis.

Covid-19 and the self-employed: six months into the crisis 

Self-employment in the Covid-19 crisis

3. The Centre for Economic Performance (CEP) is an independent research centre based at the London School of Economics and Political Science. Its members are from the LSE and a wide range of universities within the UK and around the world. The Centre for Economic Performance is part-funded by the Economic and Social Research Council, part of UK Research and Innovation (UKRI).