Fall, rise and decline: the story of New Zealand’s self-employment rate

It is not uncommon to be self-employed in New Zealand, with 415,511 or 16.7% of the total workforce currently self-employed. That’s one self-employed worker for every six wage and salaried workers. New Zealand’s self-employment rate is high compared to other small advanced economies and the OECD average.

Self-employment is widespread across the economy

The presence of self-employment is felt across all the industries and hence, not dominated by any single industry. However, some industries have higher proportion of self-employed than the others. Construction, professional services and agriculture have the largest number of self-employed, together accounting for nearly half of all the self-employed.  Likewise, most broad industries namely, retail trade, rental hiring and real estate services, administrative and support services and accommodation and food services have a self-employment rate exceeding 10%. 

Graph 1

Self-employment rate is on a long-term decline

The self-employment rate has been steadily declining since 2000. Overall, the self-employment rate has declined by 2.9 percentage points, moving from 19.6% in 2000 to 16.7% in 2018. This decline in the self-employment rate is largely attributed to changes in in the agriculture sector, over the past 19 years.  In 2000, more than 50% of the agricultural workforce was self-employed. This rate dropped to 33.2% in 2018. Not surprisingly, of the total 2.9 percentage point decrease in self-employment across the whole economy, 2.3 percentage points is attributable to the agriculture sector.

Graph 2

This declining rate of self-employment in the agricultural sector, points to a changing business model in this industry due to the corporatization and, agglomeration of farms. Between 2000 and 2017 the total number of farms in New Zealand declined from 76,879 to 52,295. The decline in farms is accompanied by the decline in the number of self-employed farmers.

Graph 3

The decline in the self-employment rate abated during and shortly after the GFC

In the period during and shortly after the GFC, the downward trend in the self-employment rate reversed and the rate increased over a three-year period (see figure 1). This may have been driven by employees who lost their jobs during the recession being forced into self-employment as a last resort.

Industries that experienced an increase in the self-employment rate around the GFC period were those that offered essential services and needed to continue with business as usual. These included healthcare, education and training, other essential services. People still need these services whether there is a financial crisis or not.

Decline continues during the economic upswing

Once the economy recovered after the GFC, the self-employment rate started declining again. With strong job creation and flourishing business workers were once again lured out of self-employment. The decline in self-employment in agriculture once again became a driving force behind the overall decline in the self-employment rate. 

 

 

 

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