TECHNOLOGY AT WORK

66
Citi GPS: Global Perspectives & Solutions February 2015
Self-employment is on the rise since the turn
of the century, but the reason for the rise is
unclear
Disentangling the reasons behind the surge in self-employment is difficult due to the
limitations of the data. For example, some people do not report income from selfemployment,
while others just do it on the side in addition to having a full-time job.
Nevertheless, some evidence on the underlying drivers of self-employment exists.
To be sure, unemployment is a part of the story. A recent study found a close link
between the unemployment rate in a given American locality and the rate of new
business startups. 96 Similarly, according to a recent survey of Britain by the Royal
Society of Arts and Populus, 27% of those who started up in the recessionary period
of the last five years did so to escape unemployment. Yet, the largest increase in
self-employment since 2008 has been in professional occupations, consisting
mainly of relatively skilled workers.
The growing skills gap may thus be another reason, causing employers to rely
increasingly on contractors. Indeed, as digital technology becomes more heavily
integrated in the daily operations of firms across a wide range of industries, digital
literacy will become crucial for the vast majority of workers. Yet, according to the
European Commission, some 47% of European workers have insufficient digital
skills; 23% have none at all. 97
Self-employed workers are happier with their
working lives
At the same time, self-employment is becoming more socially acceptable and thus
increasingly a preference. In Britain, 84% reported that self-employment made them
more content with their work. In another survey by the Resolution Foundation, 73%
of respondents said their move into self-employment partially or largely reflected
personal preference, although a growing minority indicated they had gone selfemployed
because of a lack of alternative options. 98
The idea that workers should expect to stay with the same employer until retirement
seems somewhat dated. While the recent surge in self-employment is clearly
associated with unemployment, this is only one side of the story. The digital
economy is making self-employment more attractive for skilled entrepreneurs, but
also provides opportunities for less skilled workers in deprived areas:
Freelancer.com and Elance-oDesk already connect 3.7 million businesses with 9.3
million workers. As the economy is becoming increasingly digitised, selfemployment
may even become the new normal.
96 Fairlie (2013)
97 European Commission (2013).
98 Resolution Foundation (2014).
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