While unemployment continues to grow in the European Union countries, the seemingly contradictory employment figures recently released in the UK shows an increase in employment, in the midst of the worst recession since the 1930s.

According to government figures, an estimated 1.3 million jobs have been created since the coalition came to power in 2010. This is despite a collapse in UK manufacturing jobs by 325,000 since then.

What the figures reveal is that a significant change is taking place in the UK labour force, with the rise of self-employment, part-time working and zero-hour contracts.

Although the number of employees, i.e., those working for an employer and paying pay-as-you-earn tax (PAYE), has declined by 201,000 between 2008 and 2013, the number of self-employed jobs has increased by 330,000. The Trades Union Congress (TUC) also notes that self-employed incomes have declined by 20pc since 2006 and by 40pc since 2000, with around 40pc of those self-employed working part time.

Self-employment is defined as a person supplying labour and/or materials as a sole trader or business to make a profit rather than earning wages.

Self-employment was regarded as a step towards reaching a certain turnover (currently set at £79,000) at which they would begin to pay Value Added Tax (VAT), becoming fully-fledged businesses. The number of self-employed making this transition is in decline with only 100,000 achieving it since 2000, of which the overwhelming majority were in the property sector.

The rise in self-employment is not driven by an ‘entrepreneurial spirit’ but rather its opposite: the lack of full-time employment offering adequate income and pensions.

Self-employment has been a large part of the construction industry since the 1970s — renowned for unregulated working and varying pay rates. Suffering previous booms and slumps, the collapse of the housing bubble in the course of 2008-09 saw 350,000 construction workers’ jobs go. Unable to find other forms of employment, building workers returned to the industry as self-employed, sole traders, often on less pay, and with the loss of holiday and other entitlements but with acquired overheads.

Self-employment was given an enormous fillip in 1999 with the introduction of outsourcing by the then Labour government.

This allowed the public sector, particularly in health and social care, to farm work out to the private market. Umbrella companies and labour agencies took off around this time in response to the creation of a large pool of self-employed and part-time workers. Public-sector workers were encouraged by Labour to become small businesses and take advantage of privatisation.

Barry Mellor, on the Accounting Web web site, describes an umbrella company as “a solution used by contractors, temps, locums and freelancers as a fully compliant method of getting paid for temporary assignments. The umbrella company employs you the contractor on a full-time permanent basis and supplies you for short-term assignments to different end clients.”

The coalition government has outsourced 457,000 public-sector jobs, including low or unskilled work in health and social care, providing a continuous source of labour for the umbrella companies.

Self-employment is growing at an annual rate of nearly 10pc with 4.58 million self-employed currently representing about 15pc of the workforce. —Courtesy: WSWS

Published in Dawn, Economic & Business, September 1st, 2014