self-employment and ethnicity: an escape from poverty? nida broughton chief economist, social market...
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Self-employment and ethnicity: an escape from poverty?
Nida Broughton Chief Economist, Social Market Foundation
4in10 Good Practice Seminar on Poverty and Ethnicity30th September 2015
@SMFthinktank | smf.co.uk
Self-employment is on the rise, but patterns differ across ethnic groups
• Self-employment is rising: 15% of those in employment, compared to 12% in 2000.
• In London self-employment is at 17% and has seen biggest jump of all regions since crisis
• Varying patterns across men and women from different ethnic groups.
• Historically SE has tended to be high in ethnic minority groups.
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All OtherCaribbean
AfricanChinese
BangladeshiPakistani
IndianMixed White-Asian
Mixed White-AfricanMixed White-Caribbean
Other WhiteWhite Irish
White BritishAll Other
CaribbeanAfrican
ChineseBangladeshi
PakistaniIndian
Mixed White-AsianMixed White-African
Mixed White-CaribbeanOther White
White IrishWhite British
Men
Wom
en
0% 5% 10% 15% 20% 25% 30%
Self-employment in 2011, split by men and women (proportion of ethnic group active in labour market, 16-49)
Catney & Sabater (2015)
Differences across groups have been narrowing
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White
British
Pakistani
Bangladeshi
Africa
n
Caribbean
ChineseIndian
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Self-employment, women 2011 (proportion active in labour market)
2001 2011
White
British
Pakistani
Bangladeshi
Africa
n
Caribbean
ChineseIndian
0%
5%
10%
15%
20%
25%
30%
Self-employment, men 2011 (propor-tion active in labour market)
2001 2011
Source: Catney & Sabater (2015)
What are we to make of these trends?
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• Poverty rates higher among ethnic minority groups
• Self-employment has often been seen as a way out of poverty for ethnic minority groups
Scarman report (1981) in response to Brixton riots: encourage more self-employment among Black Caribbean and Black African groups as a way of reducing unemployment
• So how should we view the trends in self-employment among ethnic minority groups?
• And can history tell us whether self-employment works as a way out of poverty?
Self-employment can be a good option for some individuals: pull factors
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• Want flexibility and control• Seen as aspirational• Willingness to take risks• Partly cultural?
Preferences
• Specialist businesses• Taking advantage of strong networks Good opportunities
In London, may be particularly good opportunities – highest rate of business start-ups…
Some evidence of unmet aspirations among Black Caribbean and Black African groups (BTEG 2011)
Reasons to worry about high rates of self-employment: push factors
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Push factors - fits with experience of many ethnic minority groups in self-employment
• Lack of (recognisable) skills/quals• Type of work/sector• Lack of useful networks• Lack of lab mkt knowledge
Poor opportunities to work as employees
Groups that have very high SE rates are often disadvantaged
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White
British
Pakistani
Bangladeshi
Africa
n
Caribbean
ChineseIndian
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Self-employment, women 2011 (proportion active in labour market)
2001 2011
0%
5%
10%
15%
20%
25%
30%
Self-employment, men 2011 (propor-tion active in labour market)
2001 2011
Source: Catney & Sabater (2015)
A way out of poverty anyway?
@SMFthinktank | smf.co.uk
Problem No.1: A lot of self-employment is low paid
o Reasons why getting a job is hard make SE hard too
o 40% of London’s self-employed earned less than £15,000 and are more likely to be low pay than London’s employees (GLA, 2013)
o Top job roles in SE: construction, taxi-driving, carpentry (ONS, 2014)
o London has highest rate of start-ups but also highest rate of business deaths (ONS, 2014)
Problem No.2: It doesn’t necessarily stop disadvantage perpetuating down the generations
o Indian, Chinese group improvement is not a general trend.
So what should we do?
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Group Policy response
UnemployedThose facing difficulty finding work
Take into account the likelihood of wage progression in helping people to find work.
SE an option, but may not be a way out of poverty
“Unmet aspirations”Those that wish go into self-employment or start their own business, but face barriers
Progress has already been made in this area, e.g. support programmes like NEA But need longer term evaluation
Self-employed stuck in low pay
Support needs to be wider than simply advice on business growth. Alternative employment opportunities, as well as training and support to access higher paying jobs.
Encourage those who employ contractors to think about pay/progression
Can consumers play a role?
Future SMF work
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Full paper on poverty, ethnicity and self-employment published with JRF, available here.
Plans to undertake further work on tackling low income self-employment, with focus on London