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Could the gig economy be behind falling self-employment wages?

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The Resolution Foundation found self-employment wages are lower now than in 1994-5

Average wages for self-employed people have fallen lower than in 1994-5, according to the Resolution Foundation’s Earning Outlook report.

It found that while the number of self-employed people has grown by 45% since 2001-2, their average earnings have fallen by around £60 a week over the same period.

The research suggests that the changing nature of self-employment could account for some of the difference. The proportion of business owners who have staff has fallen from 23% to 11% between 2001-2 and 2014-15, as has the share of those working more than 40 hours a week (from 51% to 35% over the same period), suggesting the rise of the 'gig economy' could be a factor.

Typical weekly earnings for self-employed workers grew steadily in the late 1990s and early 2000s, stagnated in the run-up to the recession of 2007, and then fell by a quarter in the wake of the financial crisis. There has been a recovery in earnings over the last year, with wages back to levels last seen in the late 1990s – at around £240 a week. However, this is still 15% down on 1994-5 returns.

Adam Corlett, economic analyst at the Resolution Foundation, explained that the reduction in typical earnings is due to both a change in how people work and the legacy left by the financial crisis.

“Prior to the financial crisis this stagnation was as much about the changing nature of self-employed work, rather than individual rewards,” he said. “But since the crisis the returns of self-employment have fallen sharply, even when measured on a like-for-like basis.

“Modern self-employment is less likely to involve very long working weeks, and today’s workers are far less likely to be business owners with staff of their own. And while returns may have increased recently, many people are still feeling the painful effects of the financial crisis.”

He warned that not everybody working ‘gig style’ feels positively about this. “For many people self-employment brings a freedom that no employer can provide,” he said. “But the growth of low pay and short hours, along with a summer of protest about conditions, means that it's no surprise some workers in the ‘gig economy’ feel self-employment is just a positive spin on precarious work.”