,
11 tweets,
4 min read
Read on Twitter
We’ve been using tax records to learn about the self-employed - an interesting group because they've been fastest growing part of workforce since early 2000s. Here’s what we now know 1/n (tons more here: ifs.org.uk/publications/1…) 
More people try self-employment than aggregate numbers suggest – annual growth in sole traders results from huge entry & exit. Between 2011-2015, ~2.4 million sole traders operated each year but ~6m people tried self-employed at some point. Self employed are not a fixed group 2/n
Huge ‘churn’ in the self-employed population reflects fact that most sole trader businesses close quickly: 20% within a year; 60% by year 5. 25% of self-employed combine business & employment activity but this share has not changed over time 3/n
Sole-traders have low incomes (median profits £8k!) that have fallen a lot since recession. Biggest falls are for high earners; share of sole traders with profits >£40,000 halved between 2007-15 & mean profits remain 21% below 2007 level (compared to 8% for employee earnings) 4/n
(The stat I’m most shocked by:) Sole traders’ real mean incomes have fallen by so much that, despite there being 25% (800,000) more sole traders since 2007, AGGREGATE turnover for the group as a whole is LOWER than before the recession - many more people but less output 5/n
You might have expected falls in average profits during & after recession to be driven by all the new entrants - but they're not. Aggregate patterns are driven by established businesses who stayed in business ("stayers") - average annual profits fell by 16% for those firms 6/n
Inequality in taxable incomes is significantly higher for the self employed than for employees. 60% of sole traders have <£10,000 in profit from their business (36% have <£10,000 in total taxable income, including employment income). This compares to only 15% of employees. 7/n
Not all self-employed are poor. 7% of partners are in top 1% of income taxpayers; rises to 37% of partners in financial services where mean income is £308,000! Company owner-managers have more income than their annual payments suggest because they keep a lot in their company 8/n
The self-employed are a varied bunch operating across many industries (it's not all builders or gig economy workers). While some are ‘entrepreneurial’, most don’t employ anyone or make any significant investments 9/n
I think all the data we now have should lead us to question 2 things. 1. Why do we tend to celebrate the rapid growth in people starting a business? It will be great for some, but not all. The self-employed are a much more varied group than usually acknowledged 10/n
2. why is there still widespread support for tax breaks that promote business ownership (i.e. penalise employment)? Our ‘one size fits all’ approach to tax breaks fails to provide the support that some need while giving unjustifiable tax breaks & incentives to others. /end.
