Poverty and Enterprise

A new report presented by University academics at the Scottish Parliament has cast doubt on the widely accepted view that private business and enterprise are always positive for individuals and beneficial to the economy.

The report, 'In-work Poverty and Enterprise', suggests a very different reality, with a strong link between some types of enterprise and poverty. Based on key informant testimony and case studies, it shows that far from the uniformly glowing image of enterprise and its benefits, of value creation, opportunity and economic growth, in some cases the opposite is true.

Authors Professors Laura Galloway and Mike Danson, of the School of Management and Languages, say that while the government claims that work is the best route out of poverty, and that enterprise is to be encouraged, the potential for poverty in self-employment and business is very real.

They found that many self-employed workers earn less than the national minimum wage, are also not entitled to statutory sick pay, maternity or paternity pay, paid holidays or training support, and in many cases will be reliant on the state and their own savings in retirement.

The report also identifies a range of reasons why people choose self-employment. While for some it is a positive response to necessity, for others it is a 'last resort' and here especially, the report says, the chances of sustainable self-employment are low.

The researchers also looked at the rise of companies using contract workers to undertake work previously done by their own staff. Here, in addition to the effects on the individuals involved, they found that not only was innovation stifled, as people tended to service their contracts rather than investing themselves in organisations or industry, but that the practice may well be having a negative effect on the national tax base.

Professor Laura Galloway, Professor of Business and Enterprise in the School of Management and Languages at Heriot-Watt University, said, “While enterprise is widely seen as a wholly 'good' thing, our research raised concerns about the extent to which self-employment has been increasing and extending to individuals ill-equipped in terms of skills and finance for it. We are also concerned about the lack of support for this area of the economy and those who operate in it.

“We don't dispute the macro-level view that private enterprise is a net economic contributor. Our research does, however, highlight a hidden form of enterprise, one where the reality for those involved can mean very low rates of pay, or where people are effectively forced into self-employment, with the loss of security, holiday and sick pay and other contractual employee rights.”