Employment
Older Workers "Pushed" and "Pulled" Toward Self-Employment, AARP Study Finds
News Release
March 17, 2004
Factors from poor health to personal wealth influence decision
Some are "pushed" and some are "pulled," but whatever the motivation, many older workers are exchanging the role of wage and salary worker for that of the self-employed, according to a study just released by the AARP Public Policy Institute.
About 10.2 percent of the overall workforce, 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.
Other factors that push or pull a wage and salary worker toward self-employment include marital status, a pension and health insurance coverage.
The study, 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 workforce as a whole. This is among the first to look at self-employment patterns and trends among workers 50 and older.
The study's findings support the results of a national survey released by AARP last year. In that report on workers aged 50 to 70, 10 percent of the workers surveyed 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 the RAND Corporation.
Highlights of the report include:
- 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.
- 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 the self-employed age 51 and older report a work-limiting health condition compared with eight 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 above, 47 percent are working part time compared with 26 percent of their wage and salary counterparts.
- The self-employed have higher household incomes and financial wealth than their wage and salary counterparts. Among those age 51 and older, financial wealth averages about $740,000 among the self-employed compared with $240,000 for wage and salary workers. At the median, the contrast is for the self-employed $312,000 compared with $119,000 for wage and salary workers.
- The self-employed are less likely to have employer-provided health insurance than their wage and salary counterparts. Among self-employed workers, age 51 and older, 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 eight percent of men; 66 percent of the women are married, compared to 82 percent of men.
- A growing fraction of self-employment is in incorporated businesses, a category of self-employment that is not officially counted by the Bureau of Labor Statistics. In 2002, among self-employed workers age 50 and above, 33 percent were in an incorporated business. That fraction was 26 percent in 1982 and 14 percent in 1975, the first year this distinction is recorded in the data.
John Rother, AARP's director of policy and strategy, said the study raises concerns about the retirement security, or lack of security, confronting many older workers.
"Choice is good," Rother said. "Self employment can hold many rewards for those who are 'pulled' to it. It can provide a valuable sense of fulfillment as well as grow the economy. But being 'pushed' into self-employment isn't good."
Rother said many workers 50 and older who leave the workforce to pursue self-employment for reasons beyond their control, such as health limiting conditions, are left without health insurance or pensions, undermining their retirement security.
"It can be a major barrier to people doing what they want to do," Rother said.
AARP is a nonprofit, nonpartisan membership organization dedicated to making life better for people 50 and over. We provide information and resources; engage in legislative, regulatory and legal advocacy; assist members in serving their communities; and offer a wide range of unique benefits, special products, and services for our members. These include AARP The Magazine, published bimonthly; AARP Bulletin, our monthly newspaper; AARP Segunda Juventud, our quarterly publication for Hispanic members; NRTA Live and Learn for National Retired Teachers Association members; and our Web site, www.aarp.org. We have staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.
The RAND Corporation is a non-profit research organization providing objective analysis and effective solutions that address the challenges facing the public and private sectors around the world. Julie Zissimopoulos, an associate economist with RAND, was co-author of the study.