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Decrease in self-employed people due to cost of living crisis
Various studies have highlighted that self-employed people tend to fare worse than salaried workers during the COVID-19 pandemic. research A PhD from the London School of Economics suggests that things are not much different now that we are out of the pandemic and struggling with the cost of living crisis.
Conducted in November 2022, the study is part of a six-part series that began in May 2020 and has been conducted throughout the pandemic. This survey was designed to understand the living conditions of the self-employed during the period. It was a time when the number of self-employed people dropped by about 16%, largely due to the economic hardships caused by the pandemic.
“One of the hallmarks of the self-employed in recent years has been their ability to remain active in difficult economic times. ,” explains the researcher. “Recently, the self-employed outflow has already happened. Our new analysis explores some of the reasons for this and addresses concerns about continued financial hardship for some of the self-employed, especially sole proprietors. , given the scale of the challenge.”
difficult times
Although the economic impact of the pandemic has largely passed, the situation shows no signs of improving, with people leaving the self-employed business growing faster than those starting their own businesses. Researchers believe this is primarily due to the poor economic prospects offered by the route.
In fact, research shows that the proportion of people earning less than £1,000 a month is 12% higher than before the pandemic and 4% higher than in 2021. This puts a considerable strain on people’s finances and is much more difficult to achieve. In fact, about a third of respondents said financial hardship was a major concern.
Current difficulties are largely caused by rising energy costs and rising inflation, with about 25% saying they are worried that their business will not be viable in the coming months. Nearly half of the respondents said energy costs were their main concern, with other costs to a lesser extent.
long term impact
These financial difficulties promise to have long-term consequences, especially in terms of adequate retirement savings. This is a particular concern for the self-employed, whose employees lack many of the pension-related benefits they are entitled to. For example, the self-employed cannot receive premiums from their employer. In other words, many people receive about 50% lower pensions than salaried workers.
This situation has worsened over the past decade as the number of self-employed people contributing to pensions has declined. In fact, the survey found that 73% of his respondents are not currently enrolled in a private pension due to lack of income.
Researchers explored different alternatives to extract more savings among the self-employed. One of the most effective ways was when the government matched each individual’s contribution. About a third of minimum wage self-employed people said they would pay a pension under these circumstances. This is more than half of high-income earners.
political change
The survey also found that the self-employed are changing politically. Traditionally Conservative parties have been a natural home for businesses, but increasingly less so for the self-employed who have been disenfranchised by the UK Conservative government.
Researchers found that while Tory support has dropped by about 50% among the general public since the pandemic began, this is true even among the self-employed and neglected by the government. He explains that he feels more and more that he is Political representation elsewhere.
It is unclear what impact this will have on upcoming elections, but what is clear is that deteriorating economic conditions are discouraging people from embarking on self-employment. This is especially true given that there is more access to paid employment than is usually the case because of the Either way, it’s not a great prognosis for self-employment and entrepreneurship.
“In the future, the attractiveness of this type of employment as a path to an entrepreneurial career and financial independence is being seriously questioned. From growing businesses that employ others to independent solo workers and part-time workers,” the authors conclude. “But we are now seeing a decline in the number of full-time self-employed people and self-employed people who employ others, and a rising share of workers on the margins of the economy. time self-employed.”