Self-employment in Britain: when, who and why?

This work explores self-employment in Britain across recent years with a particular focus on when individuals became self-employed, who is more or less likely to enter self-employment and why individuals choose to enter self-employment. It complements previous microeconomic studies that focus on transitions into and out of selfemployment and presents new evidence on the returns to selfemployment and how these compare to the returns to paid employment. Lifetime employment history data from the British Household Panel Survey suggest that the large increase in self-employment in the 1980’s was due to increases in the inflow rate, while an increase in the outflow rate in the early 1990’s has stopped this trend. Panel data from the same source indicate that gender, parents occupation, assets and considering the work itself, the use of initiative or hours of work to be the most important aspect of a job emerge as key determinants of self-employment entry. Gender, age, occupation and elapsed duration in self-employment emerge as important determinants of selfemployment exit. Our analysis reveals that, all else equal, the selfemployed report higher levels of job satisfaction with pay and with the work itself than employees, but lower levels of satisfaction with job security.