The biggest change in the Western Region’s labour market over the past year has been an exceptionally rapid expansion in self-employment. According to a special run of the CSO’s Quarterly National Household Survey for Quarter 1 2016 for the Western Region, between Quarter 1 2015 and Quarter 1 2016 the number of people in the Western Region who are self-employed grew by 15.4%. That was an increase of 10,000 people, from 65,000 up to 75,000. This was in sharp contrast to the change in the number of people who were working as employees in the region, which actually declined marginally over the same period -0.2% (from 249,600 down to 249,200).
There has been a steady upward trend in the numbers self-employed in the region since 2012, but 2016 was marked by an exceptionally large rise (Fig. 1). From Fig. 1 it can be seen that the number of self-employed who are employing others actually declined between 2012 and 2014 but has grown strongly since. Indeed between 2015 and 2016 this type of self-employment increased by a quarter (up 25%). The strong growth in the number with employees is a very positive indication of the growth potential of some of these businesses. Currently there are 19,000 people self-employed and employing others in the Western Region.
Self-employed with no paid employees is by far the more common type of self-employment however. This has grown in each year since 2012, except 2015, and increased by 12.4% in the past year to now stand at 56,000. This type of self-employment plays a key role in ensuring that people can continue to live and work in smaller towns and rural areas.
The growth in self-employment was the sole driver of any jobs growth that took place in the Western Region in this period. The total number of people at work in the region rose by 3.5% between Q1 2015 and Q1 2016 and this was entirely due to self-employment.
Contrast to situation in rest of the state
The massive growth in self-employment between 2015 and 2016 was unique to the Western Region. For the rest of the state (all other counties in Ireland combined) the number of self-employed people actually fell during this period by -1.3%, it was the same for those with and without employees. The number of people working as employees grew however (up 2.8%) in contrast to the decline experienced in the Western Region.
Total jobs growth in the rest of the state was lower than that in the region (2.2% v 3.5%) over the period and the region’s stronger overall performance was caused by people creating their own jobs. While the region had stronger jobs growth during 2015-2016, over the longer period since 2012 the region has had lower growth. The total number in employment rose by 6.4% in the Western Region between 2012 and 2016, but by 8.7% in the rest of the state.
High share of all jobs are in self-employment
The Western Region’s labour market differs markedly from that elsewhere. The recent growth in self-employment in the region has further reinforced its key role. 22.9% of people at work in the Western Region work for themselves, while in the rest of the state it is 15.2% (Fig. 2).
In the rest of the state the share of self-employed has not fluctuated a great deal over the past decade. There was only a 1.5 percentage point difference between the highest and lowest years. In the Western Region, volatility has been far greater with a 4.3 percentage point difference between the highest (2016) and lowest (2012) years. It is notable that the share now in 2016 is even higher than it was in 2007 or 2008 when self-employment in the construction sector would have been at its highest.
Reasons for growth
The underlying factors driving strong self-employment growth in the region are varied and complex. The relative lack of more standard forms of job opportunities, especially in smaller towns and more rural areas can mean that in order to remain living in these areas people need to choose the option of self-employment. General trends in the world of work such as the growth of the so-called ‘gig economy’, contract working and trends to outsourcing of certain services and activities by larger companies (e.g. transport) is also driving growth in self-employment, though whether such trends would manifest themselves more strongly in the Western Region is unclear.
The other key explanation for the growth in self-employment, while employee numbers fell, was the sectoral pattern of jobs growth during this period. At a sectoral level the strongest jobs growth by far was in accommodation & food service, perhaps partly influenced by the Wild Atlantic Way tourism initiative as well as increasing domestic demand, followed by transportation & storage and construction (Fig. 3) all of which are sectors that show high levels of self-employment.
The 2014 Business Demography data showed that in the Western Region 88.8% of those working in accommodation & food service enterprises were employees with the remainder (11.2%) either owners or relatives. In the rest of the state only 6.5% were owners/relatives showing greater self-employment in this sector in the region. For transport the share of owners/relatives was 33.7% in the region compared with 21.5% in the rest of the state while for construction the difference was 43.4% in the region compared with 30.1% elsewhere. The three sectors with the strongest jobs growth in the Western Region between 2015 and 2016 all exhibit a far greater extent of self-employment in the region.
In contrast, industry, the sector which has the highest share of employees (96%) and therefore the lowest share of self-employment (4%), actually had jobs decline in the Western Region between 2015 and 2016. The predominantly public service sectors of education, health and public administration, which would have low shares of self-employment, also reduced employment over the past year.
Increasingly, jobs growth in the Western Region is driven by self-employment and far more so than in the rest of the state. This has significant implications for how jobs growth in the region is being, and can be, supported and encouraged. It shows the importance of supports for the self-employed including issues around social protection, enterprise supports especially soft supports as many may be in locally trading sectors not eligible for grant aid, work space, broadband access and opportunities for networking. The growth in the number of self-employed with employees is very positive and shows the potential contribution of the self-employed to jobs growth. It also shows the importance of making it as easy as possible for the self-employed to begin hiring employees as well as the provision of information and advice on employment law and employee rights.
At the same time, these figures raise concerns about the capacity of job creation in other types of businesses, as the number of employees actually declined in the past year in the region while growing elsewhere. This seems to have been due to employment in the predominantly public sectors of education and health (significant employers) falling in the region, while growing in the rest of the state. Jobs in industry and information & communications also declined. We will return to the topic of 2016’s sectoral employment performance in a future post, but for now it is important to note that in the Western Region those sectors driven by self-employment are strongly out-performing the others.