First published in the Financial Times on 1st April 2014.
This evolution will lead to more solvent economies and more resilient populations
In recent years a pronounced structural shift has taken place in the employment market in Britain. The numbers who work for themselves are growing, while the ranks of those who work for the government are declining. The RSA, a think-tank I used to chair, reckons that within the next three years, the total number of self-employed will outnumber those who are employed by the state. This has important implications for our politics, culture and economy.
Public sector workers by definition toil away within a giant organisation. They are frequently union members, and enjoy defined benefit pensions underwritten by the poor old taxpayer. The self-employed are the opposite: often they are freelancers, possessing an independence and freedoms that civil servants can only dream about; but they don’t enjoy the very expensive safety net that comes with working for the state.
These trends are likely to continue: in the west we live in an age of state austerity – a general realisation that we have lived beyond our means, often by borrowing to fund public expenditure. In most developed nations the government workforce is being downsized. In the long term this evolution is healthy and will lead to more solvent economies and more resilient populations.
Some commentators say the rise of flexible labour is not to be confused with a rise in entrepreneurialism. This is a counsel of perfection. Society needs the self-sufficient. An over-large welfare state breeds dependence and a deadly sense of entitlement, which only impoverishes us all. In any event such systems are unaffordable in the 21st century, as countries such as Greece, Italy and even France are discovering.
It is always better to be self-employed than on the dole. There are elements of work that are good for the soul even if the wages are miserable – no matter how unfashionable it might seem to say so. Skills become dull unless honed, so staying in the workforce is more important than ever for the freelance and salaried alike: the price of dropping out is only going to go up.
For decades, debate about public services such as education and healthcare has dominated the media and been the overwhelming focus of UK legislators. This should change. The new labour market means micro businesses are becoming ever more important while large employers shrink, thanks to automation and globalisation, and fragmentation of industries. Lawmakers should make it their business to understand how these phenomena are altering the electorate’s priorities, and adjust their policies accordingly. Currently the self-employed are a highly dispersed community, but as their numbers grow, they will use technology to become more assertive, to ensure their voice is heard in parliament the same way truculent union bosses represent state workers such as teachers or Tube drivers.
This transformation should have a big impact on what we teach young people entering the workforce. Those who freelance need to be all-rounders. Typically they need to learn about technology, selling, collecting debts, cash flow, accounting and dealing with suppliers among the myriad other tasks running a business might involve. Meanwhile, paying tax by writing a cheque rather than having it deducted at source from pay sobers someone up. Surveys show that the self-employed are the least likely to support rising taxes and the burden of ever growing government spending. They believe strongly in the private sector. Every self-employed citizen becomes a capitalist by default – which means a more economically literate population.
In many respects it is cheaper and quicker to run a business than ever before. This creates new opportunities for those with an enterprising attitude. Of course life for a freelancer is never as certain as it is for the salaried worker: it takes courage to break out on your own. Most freelancers never end up hiring staff, and only a few develop large undertakings. But almost every entrepreneur of any description, including Steve Jobs and Bill Gates, started out as freelancers, normally working from a bedroom or a garage. The more there are in general, then more will make it big. Their growing numbers stimulate free enterprise, innovation and wealth creation, and create a more adaptable country, better equipped to deal with the challenges of the modern global economy.