Tuesday, 20 January 2009

Self-employment, a way to recovery

Predictions of likely job losses in the UK during the present year paint a pretty nasty picture. None of them is more than educated guesswork and various figures have been bandied about recently. The number counted as unemployed by the government's own fiddled figures reached 1.86 million as at last October and some are predicting as much as a doubling of that figure by the end of 2009.

At the same time as unemployment is rising fast so is the anticipated downfall in economic activity during the current recession. Most estimates are that the economy will shrink by more than 2% in 2009 and even more in 2010 before there is any hope of a levelling-out let alone a recovery. Obviously the depth and length of the recession will be a major factor in how many jobs are lost. There is also a hidden aspect to the contraction in the numbers unemployed as migrant workers return to their home countries because most of them simply drop out of the picture rather than being transferred from the "numbers in work" column to the "unemployed" column. The total number of jobs lost will be greater than the increase in the numbers recorded as unemployed. Could it really be that 2 million or more jobs will be lost from the UK economy in 2009 alone? Time will tell, but as businesses fail and others have to cut costs to stand any chance of survival it is inevitable that a huge number will find themselves without gainful employ.

A question that has troubled me for some time is where new jobs might come from as and when things start to pick up. One obvious answer is that an increase in retail demand will increase employment in shops and distribution companies, but it will not involve replacing like-with-like. An experienced and knowledgeable former employee of a specialist furniture shop might well find a position as a new furniture store opens for business but the £30,000 salary he commanded before is unlikely to be offered, he might have to start on half that and trust his experience, knowledge and hard work to gain him promotion. In addition a lot of people who had earned increases above the minimum wage by loyal service will be back at the starting rate again when they find a new equivalent job.

Perhaps more worrying is the loss of skilled jobs from manufacturing industries. While draftsmen and toolmakers are being made redundant in the UK competitor industries in many countries overseas will be able to stay in business because they are not saddled with the massive expense caused by British labour laws and health and safety bureaucracy. To re-start such a business here is a vastly expensive exercise and can only happen against a background of lost world market share as developing nations undercut on price and establish their reputation. Some new skilled jobs will be created but it is hard to see that it will be as many as the number lost.

Something that happened during and after the last two recessions might give a clue about where jobs can be created without the need for massive capital investment. What was seen was an increase in self-employment. The plumber laid-off by a building firm got a small van and put an advert in the local paper. The assistant no longer required at the garden centre set himself up as a freelance gardener cutting hedges and tending lawns, perhaps occasionally getting a commission for a complete garden make-over. Over the last twenty years we have seen a massive increase in the number of self-employed single person businesses offering their skills in all areas of building work as well as pet care, hairdressing, ironing and a thousand other activities people are prepared to pay for because they either lack the skills or the interest to do them themselves. Naturally, some of these businesses don't remain single-person enterprises for long and grow to something quite substantial. More power to their collective elbows say I.

Being self-employed is not a bed of roses. You are not guaranteed an income, no one makes a contribution to your pension or National Insurance, you have to keep accounts (a wonderful two-edged sword for those paid in cash as they try to keep their declared income down for the tax man and up for the bank manager), there is no sick pay unless you take out insurance, you have overheads you would not have as an employee and so on and so forth. Having said that, a lot of people have found it a far more rewarding way to earn a living than selling their skills for a fixed price to an employer. It doesn't suit everyone but it does suit an awful lot who never thought it would.

The days when little Johnny would leave school and be guaranteed a job in the factory his father and grandfather worked in have long gone. Employed job for life are a dying breed in the private sector. More people than ever are changing jobs and changing employees. I wonder how long it will be before the norm is for everyone to be self-employed and hire-out their services either for individual jobs or for fixed periods. I am heavily biased on this subject because I was self-employed all my working life and relished the freedom it gave me to take a break when I needed it rather than when it was convenient for a boss. Being utterly hopeless at administration I paid countless penalties to the tax man for not filling in pieces of paper or sending a cheque a day or two late, but that was a small price to pay for not being (as I perceived it) at someone else's beck and call.

I hope the current recession will cause many of those losing their jobs to set up on their own account, selling their skills directly. One thing of which I can be fairly sure is that a great many will be waiting a long time for a new job if they do not take their fate into their own hands.


Rob Farrington said...

I currently work part-time at Manchester University, but in my spare time I've been teaching myself PC technician skills.

Part of the reason I've been doing it is because I have an American fiance and if I have an A+ certification it'll be easier to get a Green Card and a sponsor even before we're married.

As time has gone on though, I've been becoming increasingly attracted to the idea of working for myself. OK, it'd take some self-discipline, but then so did my OU degree, and so do the qualifications that I'm training for now.

"that was a small price to pay for not being (as I perceived it) at someone else's beck and call".

That's the way I feel right now. A little uncertainty and an irregular income every month is a price I'd gladly pay, in exchange for more freedom and some financial independence.

No uniform, no set work hours, no spreading my trips to the US throughout the year because I only have twenty eight days holiday per annum...sounds great to me.

TheFatBigot said...

More power to your elbow Mr Farrington. It is something of a leap into the unknown, but then so is marriage yet that still seems popular.

I know someone who does computery things who started offering repairs and sorting out glitches at weekends and evenings to test the waters. On seeing a steady demand he then left his full-time job and hasn't regretted it for a minute.