After six months of the Covid crisis, researchers from the London School of Economics explored how self-employed people were doing. The research reveals that the early months of the pandemic were defined by a significant fall in both hours of work and income for the self-employed, with this fall greater than for any kind of worker.
While this recovered somewhat over the summer months, both hours and earnings remain significantly below pre-pandemic levels. Indeed, half of the self-employed people spoken to for the survey revealed that their earnings remained under £1,000 per month by August. While this figure was marginally lower than in April, it was significantly higher than the 33% who reported likewise before the pandemic.
One year on
The researchers have returned with a follow-up study one year on to examine if the situation has changed. The latest analysis reveals a gradual recovery, as 40% of respondents said that they still had less work than usual during August 2021, with the majority attributing this to the pandemic.
This reduction in work is reflected in the nature of self-employed workers’ income, with nearly half having income less than £1,000. This shows precious little change from figures in January 2021, when the UK was in the midst of a second national lockdown. It’s no real surprise, therefore, that by September 2021, nearly a third of self-employed people were saying they were struggling to deal with even basic expenses.
As with the rest of the economy, much of the pain has been centered on younger self-employed people as well as women and parents. The authors cite data from the OECD that highlights how much of the economic pain has affected those self-employed groups that were already disadvantaged prior to the pandemic.
Lackluster support
The situation has been exacerbated by the lackluster support available for the self-employed, and the poor take-up of the support that is available. In the UK, people have access to the Self-Employed Income Support Scheme (SEISS), but the scheme has been criticized for not being targeted sufficiently and often excluding vulnerable groups, such as the newly self-employed.
The fifth, and final, payment from this scheme was available in September 2021, and official data suggests that there has been a decline in take-up since the launch, with claimants in the latest tranche down by around 50% compared to the first wave. The LSE research suggests a lack of awareness contributes to this, both in terms of the support that is available and one’s eligibility for it.
This decline can also be attributed to a fall in media coverage of the scheme and additional information required around turnover to calculate both eligibility and the level of support received. As such, the researchers say around 20% of respondents said they found applying difficult, with a further 38% saying they remained unsure just how much support they would get even after applying.
Dwindling resilience
The study shows that while there has been a steady decline in self-employed numbers over several months, there has recently been a surge in workers into the sector, with the biggest jump in 10 years seen at the end of 2020. These new entrants into the sector appear to view the transition as a temporary one, with the survey suggesting they were less likely to see themselves as still self-employed in five years’ time.
These new entrants were also more likely to be considering leaving self-employment in recent months and place more emphasis on the importance of stable employment. This differs from those more experienced self-employed individuals, whose primary source of departure from the sector was retirement.
Perhaps unsurprisingly, the more experienced self-employed individuals also had greater awareness of the government support available, and were more inclined to have taken advantage of it during the pandemic. Of course, the poor take-up of support among the newly self-employed might also reflect a lack of commitment to the form of employment.
A new deal
There have long been calls for the welfare system to modernize to better reflect the changing nature of the workplace, and shocks such as the pandemic often act as a reset point that allows such changes to emerge. Society has form for using groundbreaking events to remodel itself, with the Depression and World War 2 prompting governments across the world to remodel the relationship between the state and citizens, with a greatly enhanced social safety net commonplace.
The pandemic has already seen many of the normal fiscal rules torn up, with governments across the world writing huge stimulus checks and paying the wages of workers whose livelihoods have been disrupted by the pandemic. While this largesse isn’t going to last indefinitely and governments are already beginning to show signs of tightening the purse strings, it is nonetheless likely that new social-welfare policies will emerge to help workers deal with the various disruptions facing them in the modern world.
There have been around 1,600 new social-protection programs launched around the world during the pandemic, with a clear shift in public attitude towards greater state support for those who have fallen on hard times. Indeed, there is growing support for policies such as a universal basic income across Europe, with around two-thirds of Europeans now backing such a policy.
This shift has been driven in part by the growing awareness many have of the working conditions of those people who are so important to the functioning of our society, even if they aren’t traditionally heralded as such. Food delivery drivers, supermarket workers, and care workers have seldom had a higher profile, while the difficulties experienced by working mothers who have often had to drop out of the workforce to care for children or elderly relatives have also received renewed exposure.
Welfare policies that were forged in an industrial age have increasingly been out of place in a modern world where a growing number of people have unconventional employment practices that so often fall outside of the full-time employment that welfare systems have been based upon. There is also precious little support afforded to people whose livelihoods have been disrupted to help them reskill and find new hope in fresh directions.
Large change often requires a “burning platform” to provide a sufficient jolt to shock us out of the status quo. The Covid-19 pandemic has certainly provided that, and so hopefully it will force governments to remodel the welfare system so that it’s fit for the 21st century.
