It is not very hard to find commentary on the UK's failing productivity: they are commonplace because, as a matter of fact, our national productivity is falling.
This issue is the subject of some of my research at present. Working through the Corporate Accountability Network and in partnership with the University of Sheffield I have been looking at whether there are systemic signs of neglect of productivity within UK quoted companies. Two explanations are being explored. One is that the returns to financial engineering are better than they are from investing in labour productivity. The second is whether financial reporting - which gives no priority at all to any issue relating to productivity - is to blame in any way.
I'll hold back our findings for now, largely because they are not settled. Instead I'll note another possible cause for the UK's productivity crisis. That is the rise of self-employment. As Politics Home has reported, very clearly based on a press release:
HMRC stated that a record 11.1 million taxpayers have filled in a tax self-assessment this year, 10.4 million of whom did so online.
A record number of people have filed tax self-assessments because of the ever-growing number of self-employed people. There are now over 5 million self-employed in the UK.
It is my suggestion that this is another potential reason for the decline in our national productivity.
Firstly, given how hard it is to define a self-employment I suspect that the number of supposed employments in total (including the self-employed) is over-stated, even allowing for moonlighters.
Second, many of these self employments are very marginal and genuinely generate little in the way of income.
Third, given that many self-employments might be additional employments i.e. activity undertaken in addition to a paid employment, I would not be at all surprised if there is an element of cross-subsidisation going on here: time in the main employment is being used to support the self-employment and productivity declines as a result.
And, fourthly, the absence of almost any meaningful data on self-employment bar the self-declarations on tax returns, which even HMRC believe are understated in more than 40% of cases, means that any productivity data on this sector is exceptionally hard to appraise.
My suspicion is that many self-employments are exceptionally marginal. In particular, capital engaged will be very small. Productivity ratios will look poor on any conventional measure.
The fact that this sector has risen significantly in importance as productivity has stagnated may just be a coincidence. But I doubt it.
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I have referred to this previously, but how many registered as self employed are “bogus” self employed. My son is a LGV driver, persuaded by Agencies to register as self employed. In fact he has his own “business”. He has no capital. He is allocated work via an agency, he drives employers’ trucks, has to report for work at times stated and operates under their instructions. He is paid by the hour whatever the employer says is the rate of pay. How can this be classified as Self Employment! The employer is paying the same rate as he pays employees but is free from any responsibility for tax, National Insurance, pensions, sick pay and holidays!
Your son can claim workers rights and have some holiday paid – application to employment tribunal – after he finds a better job that is.
Just a thought
Richard I think self-employed statistics are badly needed for the reasons you state but the impact on how we think about employment has barely begun in my view. As someone who was self-employed for years but also went contracting full time with a big firm as needed with my wife and daughter running our business I can testify this area is complicated. Over the years our business has changed in many ways but one worth mentioning is the growth of platforms for small businesses and self-employed contractors they are gradually turning independent little businesses into something that is a cross between employment and being part of their supply chain. The treatment and sanctions for perceived slights or problems can be serious. Little is said about this but it must impact how we see productivity.
Another productivity issue must be the move away from manufacturing where it was easier to deploy capital investment and reduce Labour or enhance its outputs than in the service economy where so much is demand driven and therefore profitability per task or customer can vary considerably.
Thanks: valid points
“Two explanations are being explored. One is that the returns to financial engineering are better than they are from investing in labour productivity. The second is whether financial reporting – which gives no priority at all to any issue relating to productivity – is to blame in any way.”
Interesting thought.
Presumably you will be looking at these factors in countries such as Ireland, Norway, Germany the US and Switzerland which all have higher productivity levels.
The obvious point being that if these factors are also present in those countries then they can’t account for the lower productivity in the UK.
You do understand the nature of multinational corporations, don’t you?
Richard
I asked a perfectly simple and reasonable question and you respond in an obscure, condescending manner.
I’m sure most people reading this would be baffled by your comment.
If you will be claiming ‘factor A’ impacts on UK productivity and ‘factor A’ is present in a country with higher productivity then it begs the question as to why ‘factor A’ isn’t impacting on productivity elsewhere.
You either will be looking at what happens in other countries or you won’t. If you don’t, it would make any comment on why UK productivity is lower than elsewhere meaningless. Quite why you can’t simply say so, I am not sure.
Is your blog an arena in which you try to help people who have questions or not?
I am quite sure that most here will not be in the slightest bit baffled by my comment
As it apparent to me from the comments you have posted here, you fall into the category of those who arrive to be snide, and who ask questions without the slightest hint of sincerity as to their intent
Long experience has taught me to identify such people from a mile off
This is a place for people to comment and debate. But it is not a place where the snide are welcome, and it takes me a lot of effort to make sure that the vibrant conversations that do take place – to which I am not always in effect a party – can occur without fear of abuse arising
My comment reflected the fact that I do not think that based on your comments I think you have any intention of debating in that way
So I suggest you don’t call again
Hello Richard
I have to confess that I for one don’t understand your answer to the first question?
I think Paul was asking whether you would be looking at the same factors in different countries. If the same factors are present but the outcomes are different, there must be other factors?
We are looking at multinational corporations registered in the UK
It is well known that data reporting on a national basis by multinational corporations is unreliable because of tax misreporting
In that case the question cannot be answered by country but can be generically
And actually, the issue is common across most large economies and so withstands analysis at that level
But I stress, we are looking at UK registered companies so the national focus remains appropriate anyway
Yup, I am one of them. I’m a science tutor through one of the online sites. Thus far I have earned the grand total of 55p (trial lesson, travel costs, universal credit 63% marginal tax rate deduction). I am fully registered as self employed with HMRC, pushed to do so by UC in response to my honest declaration about it.
If I was after income as my prime motivation for doing it then the game would be an absolute bogey under UC. I do it for self respect and I have a science career’s lot of knowledge and understanding in my head and it is doing diddly squat for anyone.
Good luck…
Isn’t this just Uber drivers and all those delivery services?
Who knows?
I have wondered if the general hire-and-fire culture isn’t helping? I have no links or evidence other than personal experience.
Working for a large company. It’s national live system kept having outages which were costly even from a reputational point of view. I wrote a DCL command script that reduced the impact to near zero and eventually contributed to the solution. Saves said business about £300k as my managers told me and bought dinner for my wife and I. Made redundant six months later.
Moved on to pastures new. Read an article in a magazine about a device that sounded interesting. At my site it would save about £11k and the main site about £40k and country/business wide who knows? Bought said device for £7 and used a compact flash card from my digital camera. Went to the main site to test my new system but was intercepted at the door to be told on-notice of redundancy. Drove home and never tested it yet it was in my pocket but I’ll be damned if I’m going to help now.
Moved on again. Saw plenty of opportunities but kept quiet. Why should I put myself out?
As a colleague said “if you want loyalty – get a dog”. I’ve been to interviews where the interviewing business canvasses 35 prospective employees for “improvement ideas” but only one can be employed and seemed vaguely unethical.
I wholly understand
I employed people on a wholly different basis
I always sought to pay above the odd, provide flexibility and a generous training budget. Result? Very low staff turnover and a massive pay back
They were well paid but that just means the redundancy spreadsheet sorted by the “pay” column by highest to lowest you’re name is near the top!