Going Solo: Does self-employment offer a solution to youth unemployment?
Katy Jones, Ian Brinkley and Lizzie Crowley
17 November 2015
The UK has the largest number of self-employed under 25 in the EU – and three times more than in Germany. The UK accounts for nearly one in four of all self-employed under 25’s in the EU, and as such, it is clear that for some young people self-employment is a welcome and viable employment option.
But dig below the headlines, and the picture becomes more nuanced. The UK has so many self-employed young people because we have an unusually high share of young people in work by EU standards. Higher youth labour market numbers skew the figures, but rates of self-employment among young people are actually similar to the EU and OECD averages.
Furthermore, there was no clear link found between the prevalence of self employment among young people and overall performance of youth labour markets across the EU. Realistically, policies that focus on getting young people into self-employment can only make a small contribution to reducing youth unemployment. Most young people will be better served by policies helping them get into salaried employment, where they can learn the skills and make the connections to help them set up successful businesses later in life.
Self employment, and the autonomy and flexibility that comes with it are appealing to some, and future employers do value the associated ‘soft skills’ developed. But being your own boss can be risky, and can lead to lower financial returns, with little economic benefit seen for disadvantaged groups. Under-25s often lack the contacts, experience and capital needed to set up sustainable businesses. As such, starting a business from scratch is unlikely to ever become a common entry point into work for young people.
Policies to encourage more young people to set up their own business therefore need to recognise that it is only suitable for a small minority and that therefore they need to be carefully targeted. But at the moment policy is poorly informed about what works. We need to know to what extent the current approach is simply displacing existing businesses, how many young people would have gone into self-employment anyway.
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