Published May 2004

Study: More seniors becoming self-employed

By John Wolcott
SCBJ Editor

Many older workers are exchanging the role of wage-and-salary worker for a new role — being self-employed, according to a study released by the American Association of Retired People (AARP) Public Policy Institute in March.

The report by the RAND Corp., “Self-Employment and the 50+ Population,” is based on census bureau data and the National Institute on Aging’s “Health and Retirement Study.”

Traditionally, studies of self-employment have focused on younger workers or the work force as a whole. This is among the first to look at self-employment patterns and trends among workers 50 and older. Its findings support a national AARP study released last year showing that 10 percent of workers aged 50 to 70 said that in retirement they would have their own business or work for themselves.

“Workers, at older ages, by choice or by necessity, are moving to self-employment,” said the report’s co-author, Lynn Karoly, a senior economist with RAND. Some older workers have been self-employed for much or all of their working careers, but others have made the leap to self-employment later in their careers, often as part of the transition to retirement.

About 10.2 percent of the overall work force, or 13.8 million workers, are self-employed. But the study finds that among workers aged 50 and older, 16.4 percent — 5.6 million workers — are self-employed. And about one in three of those workers made the transition to self-employment after age 50.

The study identifies factors that either “push” or “pull” the older worker to self-employment. For example, older workers may be forced out of wage and salary work into self-employment because of poor health, while greater personal wealth and more education may incline them toward self-employment.

Compared to their salaried counterparts, the self-employed are older; are more likely to be male, white, married and college-educated; and are more likely to be healthier, but to have a health condition that limits their work. Fifteen percent of self-employed men and women age 51 and older report a work-limiting health condition compared with 8 percent of salaried workers in the same age group.

The self-employed are more likely to be working part time and to have family-owned businesses or spouses who are also self-employed than salaried workers. Among the self-employed age 51 and older, 47 percent are working part time compared with 26 percent of their wage and salary counterparts.

Self-employed workers are less likely to have employer-provided health insurance than their wage and salary counterparts. Among those age 51 and older who are self-employed, 34 percent have employer-provided health insurance compared with 67 percent among wage and salary workers of the same age.

Women who are self-employed at older ages are younger than men as well as more racially diverse, somewhat less educated, less likely to be married and in somewhat poorer health. For example, 18 percent of self-employed women age 51 and older report a work-limiting health condition compared with 13 percent of self-employed men.

For the same two groups, 11 percent of the women are black or Hispanic compared with 8 percent of men; 66 percent of the women are married compared to 82 percent of men.

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