Budget 2015: Why it hits the working poor harder than you think

One thing often overlooked is that most of the jobs “created” since 2008 are due to a rise in the self-employed.  Here are some key labour market statistics from the ONS from Self Employed Workers in the UK August 2014:

  • Self-employment higher than at any point during the last 40 years
  • Rise in total employment since 2008 predominantly among the self-employed
  • Average income from self-employment fallen by 22% since 2008/9
  • Across the European Union, the UK has had the third largest percentage rise in self-employment since 2009

self-employment

Statistics for the same period from the ONS show that the number of people claiming working age unemployment benefits such as Job Seeker Allowance, Disability benefits like ESA and lone parent benefits like Income Support has fallen sharply.  The chart above uses data from the ONS for the period Q3 2008 – Q1 2015:

It would seem reasonable to conclude that, having taken a 22% drop in earnings, many of these self-employed have retained their status to some extent because being unemployed is no longer possible.  It’s likely that a significant number have been encouraged off JSA to move into self-employment with the help of tax credits as in my case.

Osborne knows this very well and has seen the trend.  Having chased everyone off benefits and onto tax credits he now begins the assault on the tax credits while trying to silence the voice of dissent with an impressive looking hike in the minimum wage from £6.50 to £7.20 knowing full well that for many it will be no help whatsoever.

It’s worth noting also that there is another way, often overlooked, that the labour market responds to minimum wage legislation: it can ignore it. I live in London and personally know many people who currently work for £5/hour. This is widespread and considered normal for small businesses especially within ethnic communities running restaurants and nail salons for example. They simply under-report the hours worked. A minimum wage of even £9/ hour, as is the target for 2020, will make no difference for these workers – and there are many.

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