ZEW Expert Brief on Solo Self-Employment During the Coronavirus Crisis
The coronavirus pandemic is having a major impact on the economy, with solo self-employed workers being particularly hard hit by the crisis. In a ZEW expert brief based on a survey among more than 16,000 full time self-employed individuals without employees, researchers analysed how these workers are affected by the coronavirus pandemic and in which ways digitalisation can help overcome the crisis.
“Highly digitalised solo self-employed workers are significantly more resilient to crises and less likely to suffer from the negative consequences of the pandemic,” explains Professor Irene Bertschek, head of the Research Department “Digital Economy” at ZEW Mannheim, summarising the central finding of the survey. At the time of the survey, around 75 per cent of the solo self-employed individuals with a low level of digitalisation stated that they were no longer able to work. Among solo self-employed individuals with a very high level of digitalisation, this share was only 28 per cent. “Solo self-employed workers will need more financial support to overcome the crisis, especially those who have lost their source of income due to the crisis. Furthermore, additional measures are needed that help drive forward digitalisation. One option could be to provide sector-specific financial incentives for solo self-employed individuals. Measures should, however, also target the expansion of digital infrastructure, since coming out of the coronavirus crisis with a higher level of digitalisation also means to be better equipped to handle the next crisis,” says Irene Bertschek.
Crisis is accelerating digitalisation
As the survey shows, one in two solo self-employed workers had highly digitalised internal business processes before the crisis, while one third of the respondents stated to have a highly digitalised range of products and services or to offer a highly digitalised customer service. However, the current situation puts solo self-employed individuals under strong pressure to adapt, resulting in considerable progress towards digitalisation. “Around one in three solo self-employed workers stated to have increased his or her digitalisation level due to the crisis. This is particularly true for further training and schooling, the health sector, social work and stationary trade. The leap towards digitalisation was particularly pronounced among female and comparatively young solo self-employed workers, who are currently working from home or who hold a university degree,” explains Dr. Daniel Erdsiek, ZEW researcher in the Research Department “Digital Economy”. However, it should be taken into account that the digitalisation potential also depends on the sectors in which the individuals work as well as on the existing level of digitalisation.
One in four solo self-employed workers under threat of going out of business
One in four of the solo self-employed persons surveyed consider it very likely that they will have to give up self-employment within the next twelve months. Just under 60 per cent stated that their monthly sales have collapsed by more than 75 per cent. At the time of the survey, half of the respondents were no longer able to perform their work, and more than 50 per cent of the respondents applied for emergency aid from the federal government or the federal state, which is granted for three months. However, 35 per cent of those surveyed expect to see significantly lower sales for longer than six months.
“The sectors hit hardest by the crisis are consumer-related industries such as the gastronomic and hotel business, events, tourism and sports, as well as wellness, hairdressers and cosmetics. Around nine out of ten solo self-employed individuals in these sectors have to cope with sales losses of over 75 per cent,” explains Irene Bertschek. Between 73 per cent and 85 per cent of the solo self-employed in these sectors have applied for emergency aid from the federal or state governments, and between 32 per cent and 49 per cent of the respondents fear that they will go out of business in the near future.
Information regarding the survey
The findings of the expert brief are based on a survey conducted by the Association of Founders and Entrepreneurs Germany (VGSD) in cooperation with ZEW Mannheim and the Forschungszentrum Mittelstand at Trier University. Of the more than 27,000 self-employed persons who took part in the survey, the analyses in this expert brief have focused on the approximately 16,000 full-time solo self-employed individuals aged between 24 and 65.