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Earnings of self-employed 'worse than 1996'

Average weekly earnings for self-employed are worse now than 20 years ago, according to new research.

Think tank the Resolution Foundation said a dramatic shift over the last two decades has seen a decline in full-time work and a drop in the share of self-employed business owners who have their own staff has been a critical factor in the stagnation of typical earnings.

The UK's self-employed workforce has grown by 45 per cent since 2001-02 to 4.8m - or one in seven workers - but their earnings have fallen by around £60 a week over the same period.

The foundation said the figures fuel the debate about whether the growth in self-employment represents a new wave of entrepreneurship and a desire for flexible working, or a tool for businesses to hold down pay and restrict workers' rights.

The report shows that typical weekly earnings grew steadily in the late-1990s, stagnated in the run-up to the 2008 crash and then fell by a quarter in the wake of the financial crisis.

Earnings have recovered over the last year, taking them back to levels seen at the end of the 1990s at £240 a week - although this is still 15 per cent lower compared with 1994-95.

The foundation said earnings figures over the past 20 years related to a very different population of self-employed workers, with the change in the make-up of the group partly explaining why their returns have fallen.

The proportion of business owners who employ staff has fell from 23 per cent to 11 per cent between 2001-02 and 2014-15, as did the share of those working more than 40 hours a week, which dropped from 51 per cent to 35 per cent over the same period.

Prior to the financial crisis, the self-employed workforce was increasingly made of lower-earning workers, explaining the flatlining of earnings.

However, since then earnings have been falling even on a like-for-like basis. Typical earnings dropped by £100 a week between 2006-08 and 2013-14, with the vast majority of this squeeze arising even after the characteristics of the workforce held constant.

Adam Corlett, economic analyst at the Resolution Foundation, said: "Modern self-employment is less likely to involve very long working weeks, and today's workers are far less likely to be business owners with staff of their own. And while returns may have increased recently, many workers are still feeling the painful effects of the financial crisis.

"With so many self-employed workers earning so little, it is right that the Government investigate how public policy should catch up to meet the needs of these workers.

"For many people, self-employment brings a freedom that no employer can provide. But the growth of low pay and short hours, along with a summer of protest about conditions, means that it's no surprise some workers in the 'gig economy' feel that self-employment is just a positive spin on precarious work."

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