Self-employment and ethnicity: an escape from poverty? Nida Broughton Chief Economist, Social Market Foundation 4in10 Good Practice Seminar on Poverty and Ethnicity 30 th September | smf.co.uk

Self-employment is on the rise, but patterns differ across ethnic groups Self-employment is rising: 15% of those in employment, compared to 12% in % of those in employment, compared to 12% in 2000 In London self-employment is at 17% and has seen biggest jump of all regions since crisisIn London self-employment is at 17% Varying patterns across men and women from different ethnic groups. Historically SE has tended to be high in ethnic minority | smf.co.uk Self-employment in 2011, split by men and women (proportion of ethnic group active in labour market, 16-49) Catney & Sabater (2015)

Differences across groups have been | smf.co.uk Source: Catney & Sabater (2015)

What are we to make of these | smf.co.uk Poverty rates higher among ethnic minority groups Self-employment has often been seen as a way out of poverty for ethnic minority groups Scarman report (1981)Scarman report (1981) in response to Brixton riots: encourage more self- employment among Black Caribbean and Black African groups as a way of reducing unemployment So how should we view the trends in self-employment among ethnic minority groups? And can history tell us whether self-employment works as a way out of poverty?

Self-employment can be a good option for some individuals: pull | smf.co.uk Want flexibility and control Seen as aspirational Willingness to take risks Partly cultural? Preferences Specialist businesses Taking advantage of strong networks Good opportunities In London, may be particularly good opportunities – highest rate of business start- ups… Some evidence of unmet aspirations among Black Caribbean and Black African groups (BTEG 2011)BTEG 2011

Reasons to worry about high rates of self-employment: push | smf.co.uk Push factors - fits with experience of many ethnic minority groups in self- employment Lack of (recognisable) skills/quals Type of work/sector Lack of useful networks Lack of lab mkt knowledge Poor opportunities to work as employees

Groups that have very high SE rates are often | smf.co.uk Source: Catney & Sabater (2015)

A way out of poverty | smf.co.uk Problem No.1: A lot of self-employment is low paid o Reasons why getting a job is hard make SE hard too o 40% of London’s self-employed earned less than £15,000 and are more likely to be low pay than London’s employees (GLA, 2013)GLA, 2013 o Top job roles in SE: construction, taxi-driving, carpentry (ONS, 2014)ONS, 2014 o London has highest rate of start-ups but also highest rate of business deaths (ONS, 2014)ONS, 2014 Problem No.2: It doesn’t necessarily stop disadvantage perpetuating down the generations o Indian, Chinese group improvement is not a general trend.

So what should we | smf.co.uk GroupPolicy response Unemployed Those facing difficulty finding work Take into account the likelihood of wage progression in helping people to find work. SE an option, but may not be a way out of poverty “Unmet aspirations” Those that wish go into self- employment or start their own business, but face barriers Progress has already been made in this area, e.g. support programmes like NEA But need longer term evaluation Self-employed stuck in low pay Support needs to be wider than simply advice on business growth. Alternative employment opportunities, as well as training and support to access higher paying jobs. Encourage those who employ contractors to think about pay/progression Can consumers play a role?

Future SMF | smf.co.uk Full paper on poverty, ethnicity and self-employment published with JRF, available here.here Plans to undertake further work on tackling low income self- employment, with focus on London