For a long time, the freelance-heavy construction sector has been one of the key focal points for the debate about self-employment. And with Britain’s housing crisis looming ever-larger, the focus on this vital sector is only intensifying. That’s why Hudson and the Centre for Research on Self-Employment (CRSE) commissioned the landmark new report, Freelance Workers in the Construction Industry. You may find the results a little surprising…
There is a growing myth at the moment that the widespread self-employment in the construction sector is somehow harming not only the welfare of construction workers themselves, but also the productivity of the industry as a whole. What this report has shown is just how untrue this is. It has proved beyond doubt that using a freelance-intensive workforce model is better both for many highly skilled construction workers, and for most firms in the industry.
In terms of worker welfare, as with many other sectors, it is now widely believed that the most vulnerable, lowest-paid workers in construction must be those who are self-employed. In fact, the report shows that the self-employed contingent of the workforce (roughly half) actually sit in the middle of the scale in terms of economic wellbeing. The least financially secure group in the construction sector is low-skilled employees. In fact, the lowest 40 per cent of earners in the construction industry are predominantly employees.
Drill down into part-time and full-time work and the difference becomes even starker: in every quartile of the part-time workforce, the self-employed are more financially secure. The idea that employment status is what is impeding worker welfare in the construction sector is quite simply the wrong diagnosis. As the Association of Independent Professionals and the Self Employed (IPSE) pointed out in their Vulnerable Work report, the real problem actually seems to be access to training.
On productivity, the evidence is even clearer. Firms across the construction sector make extensive use of freelance labour not because they are forced to, but because they understand the productivity boost it offers. For the report, we spoke to managers from firms right across the construction industry, and again and again they gave the same reasons for using freelance labour: flexibility and productivity gains.
The managers said that by using freelancers instead of employees for specialist work, they were able to avoid idle, unused downtime. Our research found that by taking on temporary freelancers instead of maintaining full-time employees, firms can make labour cost savings of anywhere between 27 and 86 per cent per project.
As well as avoiding the cost of downtime, the freelance model also allows firms – especially smaller ones – to expand with only limited risk. By using freelancers, they can stop and start projects at short notice, so if they realise they’ve misread the market and experience a sharp drop in demand, they can mothball a project and restart it later without causing long-term problems. Otherwise, without freelance labour readily available, it would only be construction giants who could readily expand into new projects and absorb the shock of failure. Freelance workers therefore also drive up productivity by boosting competition – allowing smaller firms to compete with the titans of the industry.
Ultimately then, as the public eye draws in and pressure grows on the construction sector, there is one clear way to improve it: legitimise and enable its self-employed workers. Our report has clearly shown that not only is self-employment a positive financial choice for construction workers; the flexibility freelancers provide is also a powerful productivity boost for the sector. This crucial productivity boost also reduces the price of homes and other buildings by keeping labour costs approximately 40 per cent lower than they would be with an employee-only model.
Professor Andrew Burke is Chairperson of the Centre for Research on Self-Employment, London, and Dean of Trinity Business School, Trinity College Dublin.