Policy leaders and business support networks need to employ a behavioural-based approach in order to stimulate recruitment and growth among the self-employed, the latest report by the Royal Society of Arts (RSA) has found.
The Everyday Employers study, released on Wednesday, found that an impressive one in seven of the British workforce are now self-employed, forming one of the “most notable and enduring economic stories” of present times, yet very few of these will ever take on employees.
The number of one-man firms has grown by around 70% since the turn of the century. However, around 95% of all growth in the micro business sector over the last decade is attributed to non-employing firms. This is due to a widespread reluctance among the self employed to take on recruits, with only 3% taking on staff (and keeping them) between 2007 and 2012.
Benedict Dellot, senior research at the RSA and author of the report, said:
“This is most likely to impact job seekers on the economic margins, since micro businesses have historically been a source of employment for people with poor English skills, migrants and people outside of the ‘prime’ working age (25-29 year olds).”
Governments, past and present, have recognised and attempted to combat this issue, devising methods to try to stimulate recruitment and growth among the self-employed. Unfortunately, the report acknowledges, these attempts have been largely unsuccessful.
This is attributed to a failure to recognise the importance of cognitive and behavioural patterns in business owners and how this impacts decision making. Through using behavioural science and psychology to better understand people’s actions, the RSA has been able to identify three types of barrier to recruitment and growth among the self employed: practical obstacles, such as cost, capacity and risk; negative mindsets and unfounded fears, such as a blind belief that it is too expensive to take on an employee; and cognitive biases, which are our tendencies to think in a particular way that counter our best interests.
In order to break down these barriers, business owners, and those supporting them, must focus more on tackling issues relating to mindset and irrational beliefs, rather than focussing solely on practical obstacles, such as funding, tax, etc.
The report calls for the introduction of experimental methods, which turn their back on “common sense interventions”. Examples include encouraging housing associations, FE colleges and other institutions to legally “host” employees on behalf of business owners; the development of ‘qualified venture’ apps, and cognitive therapy to help the self-employed reinterpret their business narrative.
Benedict told us:
“With so few self-employed people taking on staff, we need to ask ourselves where the jobs of the future will come from. Whilst the government has sought to address low recruitment rates with several new initiatives, few have had any meaningful impact – despite costing millions,”
“This is because they don’t speak to the psychological barriers that prevent people from taking on staff. Business owners need to be treated as humans – with all the quirks and frailties this entails – rather than as calculating individuals. We recommend the government reassesses its current approach, and begins to design a support system based on how business owners actually behave, rather than how we think they should behave.”