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July 2004, Vol. 127, No. 7
Self-employment among older U.S. workers
Lynn A. Karoly and Julie Zissimopoulos
According to published and unpublished data from the Bureau of Labor Statistics, 14.4 million U. S. workers, or 10.5 percent of the workforce, were self-employed in incorporated or unincorporated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 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 It begins by reviewing trends in self-employment rates evident in published and unpublished data series.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
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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).
Related BLS programs
Labor Force Statistics from the Current Population Survey
retirement age: ups and downs—Apr.
Older workers: employment and retirement trends .—Oct. 2000.
Older workers in the 21st century: active and educated, a case study.—June 1996.
Measuring self-employment in the United States.—Jan./Feb. 1996.
Work after early retirement: an increasing trend among men.—Apr. 1995.
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