Could your perception of self-employment be all wrong?

While self-employment may not be the labour market remedy some want to believe, new research is revealing its global prevalence and intergenerational roots.

There is a recurring political reverie familiar to many nations: that the right policies can conjure an entrepreneurial class of the self-employed who will pull the economy up by the bootstraps of their start-ups.

When he was UK Prime Minister, David Cameron described admiring the “bravery of those who turn their back on the security of a regular wage” more than almost anything else. This was swiftly followed by the obligatory reference to creating the “next Google or Facebook”.

Of course, the overwhelming majority of self-employed people do not “wind up a billionaire” as Cameron put it. They are the window cleaners and web designers. The hairdressers and home-school tutors. And in the UK their number has grown in recent years to almost five million people – over 15% of the workforce.

Dr Brendan Burchell, an expert on work and wellbeing from the University’s Department of Sociology, and a Fellow of Magdalene College, talks of a disjunction between the perceived desirability of self-employment and the lived reality for millions.

“There’s long been this idea that policy mechanisms promoting self-employment have the potential to significantly reduce youth unemployment,” says Burchell, who has conducted research on everything from gender pay gaps to zero-hours contracts.

“However, while we’ve got quite good at turning unemployed people into employees, schemes to encourage self-employment – often couched in glamorous language of entrepreneurship and fronted by self-made millionaires – rarely seem to actually work.”

Burchell points out that self-employment is often politically convenient: it shifts the onus from governments to individuals, and can help with the ‘statistical impression’ of unemployment. Plus, there are always a tiny number of stellar success stories.

“Media and politicians cherry-pick aspirational accounts of self-employed people building businesses and making fortunes. Yet the available evidence from a number of economic contexts suggests that, particularly for young people, self-employment is often a highly vulnerable labour market status in terms of the levels of pay and job security it offers.”

In 2015, Burchell was commissioned by the International Labour Organization (ILO) to conduct research into patterns of self-employment in young people. Together with his Cambridge colleague Dr Adam Coutts, Burchell dug into huge datasets on the labour market experiences of 15–24-year-olds the world over – from Asia to developing nations in sub-Saharan Africa.

They found that rates of self-employment ebb and flow over the decades. In the EU, rates have been hovering around 10–15% of the workforce in most countries in the past couple of decades. But, in some of the least developed nations, up to 70% of the labour market consists of self-employed people. In many rural areas, “pretty much everyone” is self-employed says Burchell.

“Self-employment in the developing world isn’t the bold decision it’s framed as in Western economies – for many people there simply isn’t any other choice. Formal sector jobs are scarce and almost all are located in cities, so everyone else sells tasks or finite stock as individuals, with limited success.

“These are not scalable businesses that will, for example, help get Africa on the digital economy bandwagon. But many governments continue to take cues from the West, and push the idea of self-employment as a route to economic success.”

Big data approaches to analysing self-employment can be problematic, says Burchell. Wages are irregular and not always declared, and many individuals flit between the reported and ‘shadow’ economies in both high- and low-income countries.

He describes the project as having “the advantages but also frustrations of someone else’s datasets”, and a lot of time spent staring at spreadsheets. “I began itching to get out there and do my own, more ethnographic, data collection – to get people’s stories about their own businesses. So I began travelling around asking questions.”

As well as interviewing and observing in the UK, Burchell has spent time in South Africa, the US state of Nevada, and has just come back from Ghana, where his former PhD student is now researching informal employment and work–life balance.

One of the more intriguing patterns he has begun to notice in both the observational research and the big data analyses is that self-employment often tends to be a family affair.

While the traditional approach of passing a small business between generations (“Smith and son butchers, etc.”) may be in decline, Burchell is finding that self-employment still has a significant yet underreported dynastic dimension.

“The majority of self-employed people have parents or siblings who are also self-employed – they are rooted in families where self-employment is the default, and getting a qualification to become a professional worker is quite a foreign notion.

“People from such families are perhaps more likely to grow up around discussion of profit margins and self-reliance, and feel more confident with these ideas as a result,” suggests Burchell.

“For those with a family background in it, self-employment does appear to be less risky. In fact, many self-employed people describe receiving regular help, both on and off the books, from family members.”

Burchell found many examples of this during recent research trips to South Africa – particularly for self-employed women. The sisters who operate a hair-braiding business with help from their mother. Or Joy, who runs a childcare centre developed by her aunt in premises built by her father, a self-employed construction worker.

Sometimes family members support each other’s businesses, such as Patience (pictured right) and her mother, who work separately as self-employed seamstresses but have pitches three metres apart and swap offcuts. “The more I look, the more I think family is fundamental to understanding why some people are successfully self-employed,” says Burchell.

For many of those lucky enough to have the choice, the insecurities of self-employment are the stuff of nightmares. People tend to crave stability when making big life decisions such as having children, says Burchell.

Other benefits to being an employee include access to training and apprenticeships, meaning that – for all the entrepreneurial talk – the risks of stagnating are perhaps even greater for the self-employed.

Nevertheless, the ILO data and Burchell’s own interviews show that self-employed people are either as satisfied or, in many parts of the world (including the UK), even more satisfied with working life than their formally employed counterparts.

“The perception of autonomy, perhaps of freedom from the tyranny of a micromanaging boss, comes up when talking to self-employed people. Also, while often working longer hours than employees, many self-employed people value the flexibility they feel their work affords them.”

Burchell argues that, up until relatively recently in the broad sweep of history, people were rewarded per task, instead of an allotted amount of hours now familiar through nine-to-five work. “There is a pride that comes with the interaction, task completion and immediate feedback that is inherent in many classic forms of self-employed work.

“Taxi drivers like chatting to passengers and dropping them off safely. Hairdressers like making customers feel better than they did when they walked in. Maintaining a sense of achievement is vital for people’s wellbeing.”

Burchell is now embarking on a large research project to explore how labour markets might change if machine learning and robots take over many of the jobs being done by people.

“As automation starts taking effect, we need to make sure that human labour is valued for the benefits it provides each of us in terms of structure and goals. What is the minimum amount of work people need to feel valued? We may see a wider return to the more task-oriented work currently familiar to many self-employed people.”