Trends in self-employment Nick Palmer, Labour Market Statistics ONS Economic Forum 10 July

Economic Forum 10 July 2014: self-employment Contents 1.Summary of the recent growth in self-employment – based on headline statistics as published 2.Address some questions and perceptions - using supplementary data from the Labour Force Survey 2

Economic Forum 10 July 2014: self-employment Questions related to recent growth in self-employment : Post-recession effects or longer-term structural effects ? Is it in jobs that drive economic growth ? How much of it is part-time/limited hours, (and so low income) ? Are people just taking up self-employment in the absence of other opportunities, or is this a new generation of young entrepreneurs ? To what extent is it more people taking up self-employment and to what extent is it people staying self-employed longer (inflows vs outflows) ? 3

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Economic Forum 10 July 2014: self-employment Summary/Conclusions Recent strong growth in self-employment: reflects a mixture of post-recession effects and longer-term structural changes broadly based in terms of industries/occupations and working patterns partly reflects ageing workforce generally and older profile when compared with employees mostly among the longer established / little evidence of increase in “stop- gaps” dominated by long-term self-employed – implying lower outflows “entrepreneurship“/business growth: continues to be just a small factor 18

Self-employment income Mixed income = National Accounts measure of the income of unincorporated enterprises owned by members of households – part of GDP(I). Work by the owner or members of their family cannot be distinguished from the owner's profits as entrepreneur. Mixed income for the household sector is calculated as profits + rental income – holding gains. 19

Mixed income - compilation Profits and rental Rental = income earned through ownership of buildings Annual data source is HMRC data based on self- assessment form – data for 2012/13 will be in BB14 Series extended for later periods using growth in labour market indicators - LFS self employment, average weekly earnings (AWE) Holding gains Gains and losses accrued to owners of assets and liabilities purely as a result of holding them over time. Data supplied as part of estimation of gross capital formation 20

Output of the self-employed ONS Interdepartmental Business Register (IDBR) used as sampling frame for the Annual Business Survey Register includes all UK businesses registered for either value added tax (VAT) or pay as you earn (PAYE) But missing units include self-employed, businesses not registered for VAT/PAYE, businesses without employees, etc. To overcome this issue, IDBR under-coverage adjustments are made as part of annual Supply and Use balancing process An adjustment factor is applied to estimates of market sector output and intermediate consumption at the UK SIC (2007) class level Adjustment factors vary by industry; based on periodic analysis using additional data from HMRC – last formally updated for Blue Book

Experimental estimates of productivity of self- employed No direct information is collected on the output of employees or the self-employed Income approach is used to apportion output, utilising development work from the sectional unit labour costs system. Income weights are defined as (COE+GOS)/GDP(Y) for employees, and one minus this (= mixed income/GDP(Y)) for the self-employed These income weights are consistent with those implied in the national accounts, and are applied to indices of GVA to derive synthetic GVA indices for employees and the self-employed separately System utilises new hours estimates developed to meet ESA requirements, with split between employees and the self-employed Estimates are non-seasonally adjusted, and presented as four- quarter moving averages, based on 2010=100 22

Economic Forum 10 July 2014: self-employment 23 Productivity of Employees and Self-Employed 4 Quarter Moving Average

Economic Forum 10 July 2014: self-employment 24 Productivity of Employees and Self-Employed 4 Quarter Moving Average

Economic Forum 10 July 2014: self-employment 25 Productivity of Employees and Self-Employed - Construction 4 Quarter Moving Average

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