We tend to think in absolute terms – not least when assessing the labour market. How many people are running their own business? And how many are employed by others in a typical job? Or are they unemployed entirely?
Such static snapshots have their uses – in part because they make the health of the economy easier to comprehend. But with an increasingly dynamic and fluid labour force, this rigid analysis is beginning to look flimsy and outdated.
Nowhere is this more apparent than in the sphere of self-employment. The most recent Business Population Estimates indicate that around 16.5 per cent of people are now working for themselves – the highest level on record. Yet many of these will be doing so on the side of something else. Perhaps on top of a full-time job, or adding to a part-time one.
According to the market analysts Key Note, close to 1.8 million people in the UK are running moonlighting businesses. Indeed, we see this phenomenon time and again in our own conversations with business owners, many of whom are juggling multiple jobs and ventures at once. One man in Bristol told of how we was starting up a couriers firm while working full-time at the university; another person in Orkney described how he is running a manufacturing business at the same time as working part-time for his local council. And then there are the countless numbers of young people we've encountered who are coming out of university with mini ventures to complement mini jobs.
What’s driving this trend? Partly technology, for sure. Platforms like Etsy – which will reach a milestone of a billion sales in 2013 – are radically reducing the time and costs of running a business, enabling people to operate a viable venture on as little as a few hours work each week. Etsy's recent survey of its sellers in the US found that 58 per cent work in other jobs in addition to managing their creative business (and half of these are combining it with full-time employment). Likewise, the emergence of peer-to-peer sharing websites like SideCar and Airbnb have the potential to turn everyone into entrepreneurs (of sorts).
But perhaps the biggest drivers of part-time business lie in wider economic shifts – namely falling living standards caused by declining wages and higher costs of living. A survey undertaken earlier this month by Aviva found that nearly half (44 per cent) of part-time business owners are running a business to supplement their existing income. What's interesting here is that the vast majority of those surveyed by Aviva already have a full-time job. In other words, it’s the 9-5ers who are becoming the new 5-9ers.
All of which suggests that moonlighting may be a means of propping up the incomes of a struggling middle class. We know from the work of the Resolution Foundation that low to middle income households are set to have incomes 15 per cent lower in 2020 than in 2008. Leaked findings from the Social Mobility Commission echo these concerns, suggesting that today’s middle class children are on track to be worse off than their parents – the first time this has happened in a century.
So the average turnover of £3,800 that comes from running a part-time business is not to be sniffed at. It works out as about double the typical wage cut that will be seen between 2010 and 2015 (according to Labour’s analysis of OBR forecasts). And a quick scan of the web shows that it could cover an average family's fuel bills for 2 years, over a year’s worth of food shopping, or a typical season ticket for commuting by train to London.
Indeed, what’s clear about many part-time businesses is that they are not simply a means of meeting basic needs – scraping enough together to put food on the table. They are also about retaining the high standards of living experienced in the pre-crash days. Taking Etsy sellers as an example, we see that 24 per cent are using their extra income for discretionary spending, while 20 per cent are putting their earnings into savings. It all comes back to the old adage of what it requires to live a meaningful life: give us bread, but give us roses, too.
So can a new wave of moonlighting dramatically change the fortunes of a diminishing middle class? The answer of course is no – at least not on its own. The major forces of technological change and global competition merit far greater responses. But clearly enterprise has to be recognised by policy makers and others as a valuable tool in stemming the tide.
The RSA and Etsy are exploring similar themes in a new project, The Power of Small.
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