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Skills for self employment - Executive summary

Evidence report 31 Skills for self employmentThis executive summary presents the key findings and policy considerations from the Skills for self-employed research. The research is one of the most comprehensive reviews and syntheses undertaken in the UK of the evidence on the relationships between skills and self-employment.

Skills for self employment: Evidence report 31 - Executive summary (PDF, 271 Kb) 
Published August 2011

The past decade has seen a steady growth in self-employment in the UK to 13 per cent of the employed workforce along with an increased policy interest in promoting self-employment in general, and as an option for unemployed and disadvantaged people in particular.

This exploratory piece of research, undertaken by the Institute of Employment Studies, draws together a wide range of evidence on the importance of skills for the self-employed. The study provides an invaluable resource to inform policy in this area covering business start-up, support for unemployed to become self-employed, enterprise education, and business growth.

The research consisted of analysis of the Labour Force Survey in relation to self-employment, a literature review of over 400 documents, and 22 interviews with experts including practitioners, policy-makers, and researchers.

The evidence on the relationship between educational background and success in self-employment is complex. The relationship varies between occupations and sectors. In some sectors and occupations self-employment is more of a ‘norm’ than in others. Overall, however, someone is more likely to be self-employed if they have no qualifications than if they have some, but among those with qualifications there is no clear relationship between the level of qualifications and the likelihood of being self-employed.
For occupational skills, the research finds that at the top end of the skill spectrum there is no evidence that the self-employed are less likely to have high level skills than employees in the same occupation. At the bottom end of the spectrum, however, the self-employed are more likely than employees to have no formal qualifications. This last finding does not necessarily imply a real skills deficit among the self-employed; it may simply mean that the least skilled jobs in any occupation are more likely to be done by self-employed workers.

The evidence suggests that a wide range the generic competences are important for success in self-employment over and above any occupational skills which may be required. These include: the individuals values, beliefs and attitudes; ‘soft’ skills including interpersonal, communication and networking skills; realistic awareness of the risks and benefits of self-employment; functional business skills; and relevant business knowledge. Prior work experience, particularly if it includes previous spells of self-employment, contributes to success in self-employment.

The relative importance of each of these may vary between the nature of the business (growth-oriented or lifestyle, for example), and between the different stages of the self-employed lifecycle (pre-entry; entry and survival; growth etc).

Compared with employees, the self-employed need the ability to combine and deploy a wider range of competences at once. The research also suggests that self-employment can enhance skill utilisation, with some self-employed individuals able to have more control over and make better use of their human capital, outside the constraints of an organisation.

There is little robust or systematic evidence on how far the existing self-employed, or the potential self-employed (whether currently unemployed, employed or inactive) possess these skills and competences, although several small scale studies suggest that many self-employed/potential self-employed may have difficulties due to:

  • insufficient self-awareness of own skill needs, and lack of self-assessment as ‘business people’
  • lack of business experience and/or lack of relevant business training: with particular reference to skills such as cash flow/financial management, marketing/winning business, creating and management business systems
  • insufficient ‘soft’ skills, including interpersonal skills
  • lack of staff management skills (where relevant)

Compared with employees, the self-employed are only half as likely to participate in work-related training or education. This raises an important question about whether, over time, this lower level of work-related training leads to a widening skills gap between employees and the self-employed, as the latter fail to update and develop their skills and competences.

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