Self-employment and in-work poverty

Self-employed cycle couriers in London have been active in Employment Tribunals recently, trying to gain access to the sorts of basic rights enjoyed by workers across the country. Our recent report – launched in the Scottish Parliament in March – showed how the reality for many Scottish entrepreneurs are all too similar to the conditions faced by these workers. Being self-employed, they are not entitled to the national minimum wage, never mind a ‘living wage’. Without an employer, they are not entitled to statutory sick pay, maternity or paternity pay, paid holidays, training support, and they are reliant on the state and their own savings in retirement with no employer contributions to pensions. Is this important for unions and the left?

The earliest forms of unions in Scotland were the clandestine cooperatives of weavers and others, self-employed and at the mercy of monopoly and cartel buyers of their work. Today, one-sixth of the Scottish workforce is self-employed, mostly unorganised with many undertaking work that was until recently the responsibility of unionised local authorities and other public bodies. From being directly employed with secure jobs, rights and pensions, they are now suffering from ‘contractualization’ and, thus, casualization. Many others have been forced into ‘being their own boss’ by a flexible labour market and the DWP or are self-employed as a way to avoid sanctions.

Successive British Governments have claimed that work is the best route out of poverty, and that enterprise is to be encouraged. Popular rhetoric about private business enterprise is that it is positive and contributory to lives and to economies yet, using HMRC statistics on the self-employed, Richard Murphy suggests between 77% and 84% of the self-employed are in poverty. There is further evidence of a very different reality for many entrepreneurs than the media likes to portray, with insurance to pay, expenses to meet and uncertainty to address.

As well as analysis of official statistics, our research is based upon testimony from specialist key informants in Scotland as they relate their perceptions of enterprise as a poverty context. We support this with profiles of self-employed people and business-owners which are living in poverty. The purpose of the research was to determine if and how poverty and enterprise intersect. This research does not dispute the macro-level view that private enterprise is a net economic contributor.

It does, however, highlight a hidden form of enterprise; one where self-employment is used as an alternative to unemployment, to mitigate or avoid benefits sanctions, and to address financial need as a crisis response. This type of entrepreneurship is related in the testimonies of our key informants and the experiences of our case studies as cynical and at times exploitative. There is clear evidence of work at rates of pay well below ‘minimum’ or ‘living’ wages. The firms created under these circumstances are low value and, in fact, are likely to have a net negative value in socio-economic terms and cause harm to health and wellbeing for individuals.

More broadly, informants confirm an increase in contractualisation of what were formerly ‘regular’ forms of employment. This is described as exploitative of individuals and workforces as organisations shift financial responsibilities and duties of care to individuals on low rates of pay and without contractual employee rights. This trend is bad for individuals, for organisations, for national innovation and competitiveness, and for national economies. Tax and National Insurance receipts have fallen, while employers have been further avoiding paying their fair share of taxation, increasing poverty and inequality and impacting on public sector budgets.
Key recommendations include the need for more reliable statistical information on the scale of the enterprise-poverty interaction so that who is benefitting and who suffering from these structural changes in the economy and labour market is transparent. Unions need to consider how they can organise these poor, reluctant entrepreneurs. And, the arguments for a citizens’ basic income are strengthened.

Professor Mike Danson and Laura Galloway work at Heriot Watt University. ‘In-Work Poverty and Enterprise: Self-Employment and Business Ownership as Contexts of Poverty” by Laura, Mike Danson and others is available at