Young people expect high pay and leisure time from self-employment
Students and school-leavers see self-employment as a route to a high income and family time, according to the Office for National Statistics (ONS).
One in five (22 per cent) 16 to 21-year-olds say it is likely they will be self-employed at some point in the future.
Those in their late teens and early 20s rate an interesting job and job security as most important for their future career. However, family time and a high income emerge as motivating factors for those who wish to be self-employed, compared with those who do not.
ONS data shows that one in 10 (9 per cent) 22 to 30-year-olds are self-employed after leaving education. They earn less than employees on average, sometimes having worked longer hours.
What do we mean by self-employment?
The ONS analysis is based on people who report themselves as self-employed in their main job. This includes entrepreneurs, freelancers and contractors. However, zero-hour contract workers do not count as self-employed, as they are employees without a guaranteed number of hours.
There were more than 500,000 self-employed 22 to 30-year-olds across the UK in 2018, a third more than there were in 2008. The young self-employed are also increasingly likely to be part-time (19 per cent compared with 14 per cent in 2008).
Income from self-employment has fluctuated since the recession. After adjusting for price changes, it remains below pre-downturn levels at an estimated average of £16,700 per year.
Less than average earnings
While many 16 to 21-year-olds associate self-employment with a high income, the reality is that self-employed workers earn around £3,800 less per year, on average, than employees. This is despite many of them working longer hours.
Regardless of age, men are more likely than women to be self-employed, but the disparity is greatest among young people. Men aged 22 to 30 are twice as likely as women to work for themselves (12 per cent compared with 6 per cent).
This is largely explained by the male-dominated industries in which self-employment is most common, such as construction. The number of young men working for themselves in construction alone is almost equal to the total number of young women in self-employment.
However, the gap between men and women in self-employment is closing, with the number of self-employed women increasing at more than twice the rate of men since 2008.
The ONS found women place a greater premium on flexible working than men, and they are more likely to become self-employed on that basis. According to the ONS’ recent analysis of families in the labour market, more than half of mothers (56 per cent) said they had made a change to their employment for childcare reasons in 2018, compared with 22 per cent of fathers.
Ian Browne, pensions expert at Quilter, said: “Financial security in this uncertain time should always be considered and the average income from self-employment is just £16,700 a year. The ONS stats show that one in five 16 to 21-year-olds say it is likely they will be self-employed at some point in the future and one in ten 22 to 30-year-olds are self-employed after leaving education.
“And it’s not just the salary that is impacted by self-employment. They do not receive benefits, such as a pension, that their employed peers will. Many of this cohort’s peers will already be successfully auto-enrolled into a pension receiving generous top-ups not just from the government but from their employer too. And while saving into a pension at such a young age seems unnecessary, this is one of the most important times to be contributing as that money will get the most bang for its buck thanks to compound interest.
“Not only that, but it can also be much harder to get a mortgage as banks become wary of lending to someone who does not necessarily have secure employment. There is also the pain of having to file regular tax returns, which would more often than not put many people off going down this route due to the complexity it incurs.”