Self-Employment among Older U.S. Workers: The 1990s Showed a Downward Trend in Self-Employment Rates, However, the Fact That Self-Employment Rates Rise at Older Ages and That the Baby-Boom Cohort Is Approaching Retirement Suggests That Demographics Alone May Halt or Reverse That Trend

By Karoly, Lynn A. | Monthly Labor Review, July 2004 | Go to article overview

Self-Employment among Older U.S. Workers: The 1990s Showed a Downward Trend in Self-Employment Rates, However, the Fact That Self-Employment Rates Rise at Older Ages and That the Baby-Boom Cohort Is Approaching Retirement Suggests That Demographics Alone May Halt or Reverse That Trend


Karoly, Lynn A., Monthly Labor Review


According to published and unpublished data from the Bureau of Labor Statistics, 14.4 million U. S. workers, or 10.5 percent of the workforce, were self-employed in incorporated or unincorporated businesses in 2002. Of those self-employed, middle aged or older workers constitute a disproportionate share because rates of self-employment rise with age. For example, in 2002, workers age 45 and older represented 38 percent of the workforce in total, but they made up 54 percent of the self-employed (in unincorporated businesses only). Some of these older

workers have been self-employed for much or all of their working careers while others have made the transition to self-employment later in their careers, often as part of the transition to retirement.

Although self-employment is an important labor force phenomenon among individuals at older ages, there is a paucity of studies that examine the patterns of self-employment among older U.S. workers. The studies that do exist are largely confined to younger workers or analyses of the self-employed workforce as a whole, with only a few efforts that focus on how patterns may differ at older ages. With the leading edge of the baby-boom cohort reaching retirement years, the rising rates of self-employment with age suggest that it is important to have a solid understanding of who is self-employed at older ages and how patterns of self-employment may j be changing over time.

This article helps to fill a gap in the research by focusing on self-employed workers age 50 and older. In particular, it describes the overall trend in rates of self-employment among the population as a whole and for those age 50 and older, and examines the characteristics of the self-employed, particularly those in middle-age and older and compares them with their wage and salary counterparts. It begins by reviewing trends in self-employment rates evident in published and unpublished data series. It also reviews prior studies of the characteristics of the self-employed, with a particular focus on analyses of older workers. Next it analyzes the trends in self-employment rates based on the Current Population Survey (CPS) for workers age 50 and older. This article examines trends using alternative definitions, as well as changes in the characteristics of older self-employed workers over time. It continues with a descriptive analysis using cross-sectional data from the 1998 Health and Retirement Study (HRS98) on workers age 51 and older, examining detailed characteristics of the self-employed in total and for subgroups and by whether they became self-employed before or after age 50. (1)

This study relies on two primary sources of complementary data: cross-sectional time-series data from the annual CPS from 1968 to 2002 and cross-sectional data from the Health and Retirement Study from 1998. Conducted by the Census Bureau, the CPS is a nationally representative survey of the U.S. noninstitutionalized civilian population and serves as the source of official statistics on self-employment. For this study, the CPS is used to provide information on trends in self-employment rates in general and for the population age 50 and older. The CPS provides data on demographic and employment characteristics of the self-employed over time. Beginning in 1992, the Health and Retirement Study has conducted biennial interviews with a nationally representative cohort of individuals born between 1931 and 1941 and their spouses. (2) Additional cohorts have been added over time so that starting with the 1998 survey wave (HRS98), the sample is representative of all cohorts born prior to 1947 and their spouses. The HRS98 data--with their more detailed information on economic and health status--provide an even richer portrait of self-employed workers age 51 and older than what is available using the CPS.

BLS data on self-employment

Employment data, analyzed and published by BLS through the monthly CPS, are the official source of data on self-employment in the United States. …

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Self-Employment among Older U.S. Workers: The 1990s Showed a Downward Trend in Self-Employment Rates, However, the Fact That Self-Employment Rates Rise at Older Ages and That the Baby-Boom Cohort Is Approaching Retirement Suggests That Demographics Alone May Halt or Reverse That Trend
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