By Denis Pennel

Self-employment is becoming increasingly popular and diverse. Far from being one, homogenous group, independent workers actually comprise an array of employment situations: some employ other people; others work on their own; some are full-time; some part time; some derive all of their incomes from autonomous work while others combine it with another professional activity; and some have independent status but effectively work for just one customer.

Levels of self-employment differ greatly around the world. The latest OECD figures show Columbia, Greece, Mexico and Turkey have the highest number of self-employed people – representing over 30% of the workforce (OECD 2016) – while Canada, Denmark, Norway, Russia and the US have the lowest at less than 5% of the labour force. The majority of countries fall somewhere between the two and average self-employment levels in the EU average for example have been 14-15% for the past 15 years.

For most people the decision to become self-employed is deliberate. It is driven by a number of factors including a desire for more autonomy and self-direction and the ability to choose when and how they work. Not everyone wants full-time employment, and a recent Eurobarometer survey found that 37% of Europeans would like to be self-employed.

Policymakers acknowledge that self-employment boosts innovation and job creation. The increase in self-employment since the year 2000 was an important dynamic in the economic recovery following the recession and in Europe the CEDEFOP Skills Forecast 2015 data shows the greatest increase in self-employment since 2008 has been in professional occupations which are one of the highest skilled labour groups.

Governments encourage people to take the plunge and set up their own business, and for many this works out well – they enjoy a thriving business, good working conditions, job quality and a steady income.

However, this is not always the case.  Self-employment presents a mixed picture and is most strongly represented in the highest and lowest income brackets.  It tends to rise during difficult economic times and fall during periods of growth.  For a significant minority self-employment is not a choice and they do not enjoy being their own boss. They have little control over their work and are economically dependent on one customer. Additionally, their self-employed status usually means they have lower levels of social protection than they would enjoy if they were employees.

A 2017 report by Eurofound, the EU Foundation for the improvement of living and working conditions, sheds light on some of the new realities of self-employment and draws conclusions that can serve to inform labour markets around the world. “Exploring self-employment in the EU”  identifies five different clusters within self-employment. Two of them – ‘Employers’ and ‘Stable own account workers’ – account for nearly one half of all self-employed in Europe. These people generally became self-employed out of opportunity and enjoy working for themselves. They are economically independent and have autonomy in their work. They also have high levels of job quality and self-reported health and well-being.

‘Employers’ as their name suggests, employ other staff while the others do not and indeed the number of own-account independent worker who do not employ anyone else is on the rise with some two-thirds of all self-employed people in Europe now working as one-man bands.

Eurofound also finds that one-quarter of Europe’s self-employed did not choose their status. It calls these clusters ‘vulnerable’ – often relying on a very small number of clients, and ‘concealed – who experience low work autonomy. Their situation is characterised by economic dependence and financial vulnerability and is a cause for concern. Workers in these groups experience low job quality and lower levels of health and well-being.

The fifth cluster, ‘small traders and farmers’, is more mixed and while they mostly become self-employed out of opportunity not necessity they dislike the responsibility associated with running their own business and this can take its toll on their health and well-being.

In short, self-employment today comes in various forms and with digitalisation this diversity is likely to increase. Governments need to build a policy framework that encourages people to go it alone, removes barriers and fosters entrepreneurship across all age groups. At the same time, they also need to realise that some forms of self-employment can bring insecurity and ensure that appropriate safety-nets are in place to support workers during periods of unemployment, sickness and accidents at work.

In particular, separating social benefits from employment status would be an important initiative in providing people with protections throughout their working lives. The World Employment Confederation Manifesto makes several recommendations in this area.

As boundaries between paid employment and self-employment blur so we will need to take a different approach to how these workers are classified and regulated. Countries should review criteria for determining work status to ensure that economic sustainability is upheld, regardless of the types of worker contract.

The bottom line is that in the fast-changing world of work, many of us will make numerous transitions between different employment statuses during our working lives – including employees, temporary agency workers, contractors and self-employed. We may even join the emerging ‘Slasher generation’ combining several professional activities at the same time under different statuses.

Greater flexibility and autonomy in our working lives brings many benefits. However, we need to ensure that alongside promoting entrepreneurship and job creation, governments and social partners also ensure that workers are not abused or disadvantaged by their employment status and that they are able to accrue rights and protections throughout their working lives and into old age, regardless of their work relationship.

About Denis Pennel

Managing Director of the World Employment Confederation and of the World Employment Confederation Europe, Denis Pennel is a labour market expert with deep knowledge and years of experience relating to employment at global and EU levels. He recently published “Travailler pour soi”, a book about the new realities of work.

Follow Denis on Twitter @PennelDenis

About WEC

The World Employment Confederation is the voice of the employment industry at global level, representing labour market enablers in 50 countries and 7 of the largest international workforce solutions companies. The World Employment Confederation brings unique access to and engagement with international policymakers (ILO, OECD, World Bank, IMF, IOM, EU) and stakeholders (trade unions, academic world, think tanks, NGOs). Its main objectives are twofold: to help its members conduct their businesses in a legal and regulatory environment that is positive and supportive; to gain recognition for the positive contribution the industry brings to better functioning labour markets.

Follow WEC on Twitter @WECglobal