Self-Employed Face Strong “Cost of Living” Headwinds

Posted on September 11, 2014by Philip Ross - From the LFIG website

We need a government minister with direct responsibility for freelancers

Almost every week I seem to come across a story in the press about some super executives and their mega salaries which are meekly justified by their board members who insist that they are worth the money.

The myth is that the recovery is being driven by some sort of battalion of super star executives. The reality I feel is somewhat different. This isn’t a recovery led by the genius of these superstars but by working people from the ground, the vanguard of which are the self-employed.

According to the ONS monthly Labour force survey, self-employment accounts for almost two-fifths (38%) of new jobs created since 2010 and the self employed make up almost one in six of those in work. Indeed, the RSA recently reported that the number of people working as self employed is set to out strip those working in the public sector by 2016.

Unfortunately unlike our battalion of super hero executives the self-employed have not fared well in the cost of living crisis since 2010. According to analysis done by Labour their incomes have fallen on average by £2,000 a year. None of us in regular employment have done that well, with incomes falling by 9% but for the self-employed it is a fall of 14%.

Labour has had to do its own analysis because the ONS figures don’t include it, so Rachel Reeves and Chuka Umunna have written to Sir Andrew Dilnot, Chairman of the UK Statistics Authority, to ask him to examine whether new measures are needed to fully take into account the earnings of self-employed people.

The world of work is changing with this growth in self-employment which includes those setting up traditional businesses as well as those working freelance. Springing up all over the country are a large number of workspaces or hubs where the self-employed can come and work in a collective workspace.

Some, I know, bury their heads in the sand and insist there should only be permanent full time jobs for everyone. Though people can support that sentiment, the reality is that people have lost faith in many of our institutions and the ability of business to provide them work and so are moving towards self employment for both economic and personal reasons.

I met people at one of these hubs who said they would like permanent employment, but there aren’t any jobs so they are working for themselves. Yet, they noted, they feel ignored by policy makers who only pay attention to the margins of what they do by just focusing on those abusing self employment for tax avoidance or those being exploited by being forced into self employment.

They want recognition, as they feel like the forgotten middle who are marginalised and outside the system. They are not employees so the unions tend to see past them or even see them as a threat. They are not all super rich, as the statistic show quite the opposite and many need to interface with the benefits system.

This policy agenda and constituency hasn’t gone unnoticed. The report published by Labour’s Small Business Task Force in March 2013 (An Enterprising Nation) identified that more work needed to be done on the freelancing agenda. As a result LFIG commissioned myself, Philip Ross, as a former freelancer and Prof Andrew Burke from Cranfield University to develop the report.

The report was able to build on both our personal experience and professional knowledge of the freelancing industry and has been supplemented by meetings with freelancer groups, trade associations and trade unions.

The key message from the report is for policy makers to take freelancing seriously, and we have named the report ‘The Freelancer Agenda’ because it is about starting that debate and discussion around freelancing issues and what needs to be done.

The report and recommendations are centred around a radical and innovative ‘Freelancers’ Charter’. The objective of the Charter is to provide a platform or operating model upon which future policy can be developed for freelancers. Such that one could consider individual polices to be the Apps that would operate on the platform. I did this because I felt that we should learn the lessons from business where Apple and others realised that success can come from developing the platform upon which others can develop the Apps. So it should be for policies.

We have made a start too and issued the report with a few of our own policies or Apps and these include the creation of a Freelancing Limited Company and the appointment of a Minister with direct responsibility for freelancers. We’d encourage other organisations and groups to develop their apps or policies to work from the platform.

We have adopted this approach because we acknowledge that freelancing has a wide constituency with independent professionals at one end and precariat workers at the other. We wanted to create a platform to enable others to innovate on.

There is a shared agenda for freelancers and a lot common purpose between all groups. I hope that this report can help all groups come together and build an agenda for the common good.

Philip Ross is a member of the Labour Finance and Industry Group.

Note: The report will be formally launched at the LFIG fringe meeting at the Labour conference on Tuesday 23rd September at 5:30pm, though the report is available from the LFIG website as from 16th September.