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Half of London's self-employed low-paid

New research, released today by the Social Market Foundation (SMF) think-tank, reveals that almost half (49%) of UK self-employed are in low pay on an hourly basis, compared with just 22% of UK employees. When pay is looked at on a monthly basis, the proportion of low paid self-employed workers increases to 55% compared to 29% of employees.

The research also reveals that low paid self-employed workers are more likely (28% or around 600,000 people) to live in low income households than their low paid employee counterparts (19%). Moreover, 64% of low paid self-employed workers in the UK have no income from savings, investments or pensions, compared to only 36% of low paid employees.

Self-employment is a growing part of the employment landscape. It now accounts for over 1 in 7 of workers in the UK, a proportion that has grown by a quarter since 2000. However, they will miss out on the new National Living Wage, which comes into force next week.

London's self-employed

London has the highest rate of self-employment of all UK regions, with the self-employed accounting for 18% of all workers. Growth in self-employment in London was responsible for much of the jobs recovery after the last recession

However, the SMF research shows that just over half of London's self-employed are in low monthly pay (52% or 319,000 people in 2010-11*) - a similar proportion to the rest of the UK. If London has followed the UK-level trend in more recent years it is likely this figure will have now increased to around 55%.

Men account for 72% of London's self-employed and 67% of the low paid self-employed. Despite this, women are disproportionately likely to be in low pay. The SMF find this is a picture which also plays out on the national level.

The research suggests that the higher cost of living in London presents a particular problem for the self-employed. The SMF show that two-thirds (67%) of self-employed Londoners earned less than the equivalent of a full-time employee on the London Living Wage - which stood at just over £15,000 in 2011*.

Moreover, 77% of the low paid self-employed Londoners have no other sources of income aside from employment earnings.

Low paid self-employment by sector

Five sectors account for three-quarters (73%) of London's low paid self-employed. The same five sectors account for 64% of the UK's low paid self-employed. The five sectors are: Construction, which includes building site work, electricals and plumbing, decoration and roofing; Administrative and support activities, which includes a range of different types of activities, but our analysis shows that that the most common sub-component for the low-paid self-employed is services to buildings & landscape activities, such as cleaning and gardening; Transport & storage, of which the most important for the low-paid self-employed are "land transport", most likely taxi, lorry or coach drivers; Professional, scientific and technical, where much of the low-paid self-employed are concentrated in design, photography and translation services; and, Wholesale and retail trade, with the majority of low-paid self-employed in retail trade.

(*)Data used in the research:
National-level data is based on the Family Resources Survey (FRS), which is one of the few national-level surveys that asks respondents about income from self-employment. The FRS is also used by Government to produce official statistics on households below average income. The FRS (2013/14) covers 35,134 individuals and 20,137 households. However, sample sizes in the FRS are too small to examine the extent of low-paid self-employment in London specifically. For these estimates, we use HMRC's Survey of Personal Incomes (SPI), which contains data on 677,442 individuals, of which 99,850 are in London (2010/11). Both datasets are the latest possible versions.

Posted on 21 March 2016