Self-employment among older U.S. workers

Monthly Labor Review

Volumn 127, Issue 7, 2004, Pages 24-45

  Karoly, Lynn A ^a   Zissimopoulos, Julie ^a  

^a RAND   (United States)

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EID: 20444483785     PISSN: 00981818     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (62)

1. We recognize that our analysis of the CPS and the Health and Retirement Study uses slightly different age groups (50 and older from the CPS and 51 and older from the Health and Retirement Study), but the difference is not analytically significant. In the appendix, we compare the level and rate of self-employment for both data sources for workers in the same age cohort (that is, age 51 and older).
2. F. Thomas Juster, and Richard Suzman, "An Overview of the Health and Retirement Study," Journal of Human Resources, 1995, pp. S7-S56.
3. The parenthetical phrase is asked only of households that responded to an earlier question that they run a family business as a way of identifying unpaid family workers.
4. This approach differs from that followed in many other countries (for example, Canada) where owners of incorporated businesses are also classified as self-employed. This latter approach is consistent with the 1993 International Classification of Status in Employment (ICSE-93) standards set by the International Labour Organization. The United States is one of only a handful of countries that deviates from the standard in the treatment of the self-employed. See Peter Elias, "Status in Employment: A World Survey of Practices and Problems," ILO Bulletin of Labour Statistics, No. 11-19, 2000.
5. The upward jump in self-employment rates between 1993 and 1994 evident in chart 1 across all the series (and especially the ones that include the incorporated self-employed) is due, in part, to changes in the CPS implemented in 1994. See Marilyn E. Manser and Garnett Picot, "The role of self-employment in U.S. and Canadian job growth, Monthly Labor Review, April 1999, pp. 10-25. This change in the series is discussed later in the text.
6. David M. Blau, "A Time-Series Analysis of Self-Employment in the United States," The Journal of Political Economy, June 1987, pp. 445-67.
7. Manser and Picot, "The role of self-employment," 1999, pp. 10-25.
8. The discussion that follows is based on tabulations using data from the sources cited in table 1.
9. Our analysis of CPS microdata allows us to look at self-employment rates for the older workforce using a definition that includes the self-employed in incorporated businesses.
10. See, for example, Theresa Devine, "Characteristics of self-employed women in the United States," Monthly Labor Review, March 1994, pp. 20-34;
11. Manser and Picot, "The role of self-employment," 1999, pp. 10-25;
12. Yannis Georgellis, and Howard J. Wall, "Who Are the Self-Employed?" Federal Reserve Bank of St. Louis Review, November/December 2000, pp. 15-23;
13. and Steven Haider and D. Loughran, "Elderly Labor Supply: Work or Play?" RAND DRU-2582, Santa Monica, CA, 2001.
14. Another strand of the self-employment literature considers the factors that lead individuals to choose self-employment over wage and salary work, as well as the determinants of transitions to self-employment. For a review of that literature, see Julie Zissimopoulos and Lynn A. Karoly, "Transitions to Self-Employment at Older Ages: The Role of Wealth, Health, Health Insurance, and Other Factors," paper presented at the 2003 annual meetings of the Population Association of America, April 2003.
15. Devine, "Characteristics of self-employed women," 1994, pp. 20-34;
16. John E. Bregger, "Measuring self-employment in the United States," Monthly Labor Review, January/February 1996, pp. 3-9;
17. Robert W. Fairlie, Ethnic and Racial Entrepreneurship: A Study of Historical and Contemporary Differences (New York, Garland, 1996);
18. Manser and Picot, "The role of self-employment," 1999, pp. 10-25;
19. and Yannis and Wall, "Who Are the Self-Employed?" 2000, pp. 15-23.
20. Fairlie, Ethnic and Racial Entrepreneurship: A Study of Historical and Contemporary Differences (New York, Garland, 1996);
21. Robert W. Fairlie and Bruce D. Meyer, "The Ethnic and Racial Character of Self-Employment," NBER Working Paper No. 4791 (National Bureau of Economic Research, 1994);
22. and Robert W. Fairlie and Bruce D. Meyer, "Ethnic and Racial Self-Employment Differences and Possible Explanations," Journal of Human Resources, Autumn 1996, pp. 757-93.
23. Barton H. Hamilton, "Does Entrepreneurship Pay? An Empirical Analysis of the Returns of Self-Employment," The Journal of Political Economy, June 2000, pp. 604-31.
24. William G. Deming, "Work at home: data from the CPS," Monthly Labor Review, February 1994, pp. 14-20;
25. and Linda N. Edwards, and Elizabeth Field-Hendrey, "Home-Based Work and Women's Labor Force Decisions," Journal of Labor Economics, January 2002, pp. 170-200.
26. David G. Blanchflower and Andrew J. Oswald, "What Makes an Entrepreneur?" Journal of Labor Economics, January 1998, pp. 26-60;
27. and David G. Blanchflower, Andrew J. Oswald, and Alois Stulzer, "Latent Entrepreneurship across Nations," European Economic Review, May 2001, pp. 680-691;
28. and Greg Hundley, "Why and When are the Self-Employed More Satisfied with Their Work?" Industrial Relations, April 2001, pp. 293-316.
29. Hamilton, "Does Entrepreneurship Pay?" 2000, pp. 604-31.
30. Hamilton, "Does Entrepreneurship Pay?" 2000, pp. 604-31.
31. Devine, "Characteristics of self-employed women," 1994, pp. 20-34;
32. Fairlie and Meyer, "The Ethnic and Racial Character of Self-Employment," 1994;
33. Fairlie, Ethnic and Racial Entrepreneurship, 1996;
34. Manser and Picot, "The role of self-employment," 1999;
35. and Georgellis and Wall, "Who Are the Self-Employed?" 2000, pp. 15-23.
36. Devine, "Characteristics of Self-Employed Women," 1994, pp. 20-34.
37. Fairlie and Meyer, "The Ethnic and Racial Character of Self-Employment," 1994.
38. Georgellis, and Wall, "Who Are the Self-Employed?" 2000, pp. 15-23.
39. Greg Hundley. "Why Women Earn Less Than Men in Self-Employment, " Journal of Labor Research, Fall 2001, pp. 817-29.
40. Manser and Picot, "The role of self-employment," 1999, pp. 10-25.
41. Data presented earlier in chart 1 show that after 1996, the last year in the Manser and Picot ("The role of self-employment," 1999, pp. 10-25) analysis, there was a decline in self-employment rates for the United States.
42. David G. Blanchflower, "Self-Employment in OECD Countries," Labour Economics, September 2000, pp. 471-506;
43. and Yuji Genda, and Ryo Kambayashi, "Declining Self-Employment in Japan," Journal of the Japanese and International Economies, March 2002, pp. 73-91.
44. Robert W. Bednarzik, "The role of entrepreneurship in U.S. and European job growth," Monthly Labor Review, July 2000, pp. 3-16.
45. Haider and Loughran, "Elderly Labor Supply," 2001,
46. and Doreen Duchesne, "Seniors at Work," Perspectives on Labour and Income (Canada), Summer 2002, pp. 33-44.
47. Victor R. Fuchs, "Self-Employment and Labor Force Participation of Older Males," Journal of Human Resources. Summer 1982, 339-57.
48. Joseph Quinn, "Labor Force Participation Patterns of Older Self-Employed Workers," Social Security Bulletin, April 1980, pp. 17-28.
49. The sample size for the Annual Demographic File increased beginning with the March 2001 survey, although the public use file we use for March 2001 is based on the old sampling scheme. (For detail, see on the Internet: www.bls.census.gov/cps/ads/data_dissem_letterng.htm.) The sample for the March 2002 file is about 50 percent larger than that of the prior year. To minimize potential discontinuities in the data series, we expect to use the 2001 public use file for the sample that replicates what was used in earlier surveys.
50. Our estimates will not exactly replicate the published figures presented in the BLS data section because the official data are based on annual averages from the monthly CPS surveys. We rely on the March data for our analysis because the monthly surveys do not include the supplemental information available only in the March interview (for example, on employment in the prior year, and income and income sources in the prior year).
51. For one-fourth of the sample starting in 1994, the CPS also provides information on the class of worker for secondary jobs, if any, held during the reference week.
52. Manser and Picot, "The role of self-employment," 1999, pp. 10-25.
53. The last year of data available for all five series is 2001.
54. In the case of definitions C1 and C2, those who report they are with a job but not at work (for example, they may be absent for reasons of illness or vacation) in the reference week are also counted as employed. These individuals do not report their weekly hours, so this information is missing for this part of the sample.
55. As discussed earlier in the article, only definitions C1 and C3 (the self-employed in unincorporated businesses) are available for the full time series, whereas the other definitions can be calculated starting in 1975 (C4 and C5) or 1989 (C2), given the way class of worker is coded in the CPS public use files. In addition, series C3 to C5 end in 2001 because they are based on data for the prior calendar year.
56. As discussed later in the article, this peak in 1994 may be an artifact of the change in the survey questionnaire in that year.
57. Manser and Picot, "The role of self-employment," 1999, pp. 10-25.
58. Note that this adjustment means the change from 1993 to 1994 is from 13.7 to 13.8 percent versus 13.7 to 14.7 percent.
59. Although self-employment rates are lower on average for the workforce as a whole, compared with workers age 50 and older, a similar time series analysis for all workers age 16 and older shows the same general patterns for the entire workforce as what is observed for workers age 50 and older. For all workers, the pattern since the mid-1990s is one of decreasing rates of self-employment, due largely to a declining rate of self-employment in unincorporated businesses. From the mid-1970s to the mid-1990s, self-employment rates in unincorporated and incorporated businesses increased due to a growth in the latter form of business organization.
60. In addition to the self-employed and wage and salary workers, our sample of workers during the reference week includes those who report they work without pay in a family business. These workers are treated as a residual class of workers in official employment statistics and represent less than 1 percent of the workforce.
61. Computation of Social Security wealth and pension wealth is available only for researchers with restricted data permission. These data are currently available for the original Health and Retirement Study cohort only rather than the full 1998 cross-section examined here.
62. In particular, we rely on several sources of retrospective information. Individuals currently not working are asked about his or her last job and whether they were self-employed. These individuals are also asked about jobs lasting 5 years or more in a job history segment and self-employment is identified for those prior "long" jobs. Health and Retirement Study respondents working at the time of the interview are also asked about employment status on previous jobs lasting 5 years or more. In addition, for the Health and Retirement Study 1931-41 birth cohort, we look prospectively over the panel from 1992 to 1998 to determine if there was other self-employment prior to when they are observed in 1998.