Although self-employment brings advantages such as autonomy and flexibility, being your own boss can be risky and can lead to lower financial returns, with little economic benefit for disadvantaged groups. These risks are particularly acute for young people aged under 25 who often lack the contacts, experience and capital needed to make their business work, argues Lancaster University’s Work Foundation in their report  ‘Going solo - Does self-employment offer a solution to youth unemployment?’

The paper points out that self-employment is not currently functioning as a route into the labour market for young people. Although the UK is home to the largest number of self-employed young people in the EU – with three times more than in Germany – the rates of young self-employed are similar to EU and OECD averages. Just five per cent of young people who are in work are self-employed compared to 15 per cent of the total working age population.

Lizzie Crowley, Head of Youth Employment at Lancaster University’s Work Foundation and co-author of the report, said: “These figures reveal the unusually high prevalence of self-employment among young people in the UK. However, our research shows it is clear that supporting more people into self-employment shouldn’t be a priority.

“Young people will be better served by policies helping them get into traditional salaried employment, where they can learn the skills and make the connections to help them set up more sustainable, successful businesses later in life.”

The report recognises the UK’s exceptionally large digital and internet economy offers low-cost opportunities for young people to get started on their own – especially for those with significant digital skills. However, self-employment is very unlikely to ever become a common entry point to work for young people.

Policies that are implemented to support young people into self-employment need to be carefully targeted to focus on quality not quantity. The government’s focus should be on supporting young people into meaningful employment. said: “Realistically, policies that focus on getting young people into self-employment can only make a small contribution to reducing youth unemployment.

“On the whole, emphasis and resource to support the young unemployed should instead be focused on supporting young people to get into work. Those with strong business ideas should be encouraged to develop plans and set-up while in education and develop their business on the side, once in work.”

The report highlighted the lack of evidence to demonstrate the effectiveness of supporting young jobless people into self-employment and called for better data to be made available.

The paper was based on available evidence, including case studies from the Citizens Advice Bureau caseload database and interviews with key stakeholders.

More information about Lancaster University’s Work Foundation can be found by visiting www.theworkfoundation.com  

Recommendations

If policy makers are serious about supporting self-employment amongst the young unemployed, intensive support and a longer-term commitment are required. Schemes supporting young unemployed to work for themselves should:

• Be measured and rewarded on the basis of sustainable job outcomes, rather than, for example, the number of loans provided or businesses registered.
• Provide long term and intensive support, with a focus on both earnings and business growth.
• Grow the network of business mentors and better match business advisors to provide young unemployed people with realistic role models.
• Thoroughly assess the viability of business plans and ensure all risks are fully considered by the young person.
• Contain safeguards to ensure young people do not take on unmanageable debt from multiple sources.
• Provide support for young people who wish, or need, to make a transition away from self-employment or enterprise into waged employment.
• Improve local co-ordination of support services for young people starting businesses.
• Raise young people’s awareness of employment rights including the differences between being a contractor and self-employed.