Think Tanks
 Printable version
|
IFS - New data show official statistics overcounted the self-employed for decades
New IFS analysis finds that official data overstated UK self-employment and top income shares between 2002–03 and 2017–18, offering a revised picture.
For two decades, official statistics have substantially overstated the size of both the UK’s self-employed population and the share of national income flowing to those with the highest incomes. The mismeasurement stems from a longstanding error in the Survey of Personal Incomes (SPI) – a dataset created by HMRC, derived from tax returns and widely used across government for internal modelling.
While rectified from 2018–19 onwards, earlier statistics remain uncorrected. In a new report, IFS researchers use newly available data to fill the gap in the statistical record. They find:
- The number of people with self-employment income has long been smaller than official statistics suggest. Between 2002–03 and 2017–18, the SPI overcounts the number of individuals with income from sole trading or partnerships by more than 500,000 each year on average – an overestimate of around 14%.
- Rapid growth in self-employment is a more recent phenomenon than was previously thought. The SPI suggests a relatively steady rise in self-employment since 2000, but the new data show that growth was in fact much slower before 2009–10, only matching growth rates seen in the SPI after the financial crisis.
- The share of income going to the highest earners is lower than previously thought. From at least 2005–06 onwards, the SPI overstates the top 1% share by around 0.5 percentage points. In 2017–18, for example, our correction reduces the top 1% share from 13.1% to 12.6%. While this may sound modest, it represents an overstatement of the aggregate income of the top 1% by roughly £9 billion per year, in today’s terms"
Isaac Delestre, Senior Research Economist at the IFS and coauthor of the report, said: ‘The rise of self-employed work has been one of the most important features of the UK labour market over the last 20 years. But these new data reveal a different narrative to the one told by official statistics – with the period preceding the financial crisis showing much slower growth in the self-employed population than we previously thought. That begs the question: what changed after the financial crisis that led to an acceleration in the growth of self-employment?’
