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Older Workers
Increasingly Turn to Self-Employment
March 22, 2004 - Last week AARP released
a study showing many older workers are joining the self-employed and
they conclude some are pushed and some are pulled, but the trend is
clear.
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, according to the
AARP Public Policy Institute.
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.
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