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Coalition claims that "more people are in work than ever before" have been undermined by a report that shows the number of traditional employee jobs is falling or flatlining across the country – a phenomenon masked by an explosion in recorded self-employment which one economist describes as "the last refuge of the desperate".
Only London has shown a marked rise in employee jobs in the last six years, according to new analysis by the independent thinktank the Resolution Foundation, seen exclusively by the Guardian.
The research reveals that the total number of employed jobs fell in nine of 12 regions between 2008 and 2013, ranging from a drop of 156,000 posts in Scotland, to a fall of 24,000 in the east Midlands. The numbers of employee jobs in the south-east (-1,000) and eastern region (+4,000) remained virtually static, while in London, uniquely, 285,000 were created.
Any increase in the number in work in other regions over the 2008 baseline, after four years of recovery, was due to rising rates of self-employment, which was up everywhere except Northern Ireland.
The number of self-employed jobs rose by 116,000 in the south-east, by 85,000 in London itself, by 67,000 in the east and by 61,000 in the west Midlands. The 58,000 additional self-employed posts in the south-west and 43,000 in the east Midlands were sufficient to offset the loss of employed jobs locally.
The labour market economist and former Bank of England rate-setter David Blanchflower, who has studied trends in self-employment for many years, said: "Particularly after a prolonged downturn, there is a well-documented pattern of people failing as jobseekers and then moving into self-employment status, often out of desperation rather than anything more positive."
Hopes that burgeoning self-employment represents a genuine wave of entrepreneurialism are undermined by a second piece of work by the Resolution Foundation, also published on Tuesday. It finds that while weekly wages for employees have fallen 6% since 2007, typical self-employed pay has tumbled by 20% in the same time. This leaves the typical self-employed person now being paid 40% less than the average employee.
While 73% of self-employed people told a poll for the thinktank that their move into self-employment partially or largely reflected personal preference, a growing minority indicated they had gone self-employed because of a lack of alternative options.
Gavin Kelly, chief executive of the Resolution Foundation, said: "The defining feature of the post-crisis jobs market has been the strong performance of employment alongside an unprecedented fall in wages. But underneath the headline job figures over this period we saw a staggering increase in self-employment that cloaked far weaker performance for employees. Looking back over the whole downturn we see that in most regions the rise in people working for themselves ran alongside a fall in employees."
A particular concentration of older part-timers among the self-employed is one sign that sole trader status could now be masking semi-employment for some parts of the workforce.
"Self-employment is often a last resort of the desperate," Blanchflower said. He added: "Such workers operate under considerable strain, worried about where their income is coming from, and are sometimes forced to finance themselves by borrowing against their home, exposing their families to the same financial uncertainty that attaches to their job."
Gillian Guy, chief executive of Citizens Advice, added: "Many people working for themselves are seeing their efforts unravelled by debt."
Burgeoning self-employment is not the only indicator of insecurity gripping the workforce long after the recession officially ended. New data last week showed that there were now 1.4m zero-hour contracts for British employees, with no minimum hours or pay guaranteed and every indication that this form of hiring has become much more common.
The grim regional picture on employee jobs will particularly concern a government that once promised a recovery that would rebalance the economy. In practice the pattern of post-crisis growth has been shown – by separate Manchester University analysis – to have involved an even greater skew towards the south-east than was seen during the boom.
Looking at where employees live, as opposed to where people work, suggests a less extreme imbalance, but even then the number of employed jobs reduces in more than half the country, and is outstripped by the surge in self-employed jobs in 10 of 12 regions.
The available data does not extend into 2014, when total jobs growth has been particularly strong. Even though this improvement is not yet sufficient to repair the recessionary damage to employee jobs in many communities, Kelly explains that "in the last few years a more balanced picture of job growth has emerged with most parts of the country seeing the number of employees increase again alongside a continued surge in self-employment".
A government spokesman said: "Self-employment plays an important role in the UK's flexible labour market and as this report shows, the vast majority of those self-employed prefer to work for themselves."
Blanchflower counters that "less developed economies like Mexico, Chile and Greece often have more self-employment, while more developed and 'entrepreneurial' economies have less. The UK now has roughly twice as much self-employment as the US."Professor Stephen Machin of University College London – a leading expert on labour markets – said: "The changing composition of jobs, and in particular the rise in low-wage self-employment, is an important and worrying recent development that underpins some of the discussions about the number of jobs hitting record levels. This is especially true in some parts of the country where this compositional change is masking what is happening in terms of jobs growth."
The shadow work and pensions secretary, Rachel Reeves, said: "This report shows how the cost-of-living crisis is making life harder for millions of self-employed people who have seen their earnings fall dramatically. It's increasingly clear that David Cameron's government has failed to tackle low pay and insecure work. A Labour government will raise the minimum wage, get more employers to pay the living wage and look carefully at how universal credit supports the self-employed."
A Treasury spokesman said: "The government's long-term economic plan is working; the economy is growing, the deficit is falling, and more people are in work than ever before. But the job is not yet done, and the biggest risk to the recovery would be abandoning the plan that is delivering economic security for hardworking people."
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