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Examining the true state of self-employed earnings

Recent headlines haven’t been hugely encouraging for aspiring freelancers or contractors, revealing that nearly half of the UK’s self-employed workers are now paid below the minimum wage of £7.20 an hour, compared with a fifth of employees.


As part of our research project with them, the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) has posted a responsive analysis of these figures. Outlined below are several of the observations as to why the negative trend reported by some might be rather overstated, and unrepresentative of true life as a self-employed worker.


Increase in part-timers


Full-time self-employment has grown by 30% since 2000, and the number of people working less than 30 hours a week has grown by 80% – also taking into account a big jump in the number of over-65s in self-employment.


Part-time workers obviously earn less than their full-time counterparts, which drags down the average earning figures in the reports.


Existing wealth isn’t being considered


Households with only self-employed workers are more likely than employee-only households to own their home outright and to have a higher level of savings. So while the direct earnings might be lower, for those with little or no housing costs, going it alone doesn’t necessarily mean going broke.


Earnings tend to grow over time


Those who remain in self-employment for longer periods tend to see their income increase as they build their reputation and client base. Prior RSA suveys have revealed that people who have worked for themselves for three or more years earn nearly four times as much on average as those who have worked for themselves for less than a year.


Job satisfaction is still high


Some self-employed workers may be content with a relatively low income if their outgoings are similarly low. They also may have made a conscious decision to forgo a stressful but well-paid job in favour of a fulfilling but less lucrative life of being their own boss.


The stats may look damning on face value, but despite the pay gap, the self-employed are just as likely as employees to say they are satisfied with their income.


This of course, isn’t to say that going self-employed isn’t a risky move, or that there isn’t work to be done to help small businesses thrive. Join our Crunch Chorus community to get updates on our work with the RSA.

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