Monthly Archives: May 2017

Quality of life increases for older individuals who switch from organisational employment to self-employment

Policymakers advocate the promotion of business start-ups by people aged 50 or over as a means of tackling the grand challenge of population ageing. The principal societal benefit is extension of working careers: research shows that self-employed individuals tend to retire later than their employed counterparts, which generates savings in public pensions and the prolonged deployment of those individuals’ human capital in the economy. However, to date, we do not know whether taking up self-employment in late career improves ageing workers’ quality of life.

This study utilises data from the first five biennial waves (2002-2011) of the English Longitudinal Study of Ageing to examine whether switching from paid employment to self-employment affects the individual’s quality of life. The measure of quality of life is CASP-19.

We used propensity score matching to create quasi-experimental scenarios involving individuals who are very similar at the baseline (t) but who followed different career paths in the following two years (t+2). We compared individuals who switched to self-employment (‘treatment group’) with i) those who remained in their original employment and ii) those who switched to another organisational job (‘control groups’). In addition to changes in quality of life, we also examined changes in the level of income.

Our results show that on average, older workers who switch to self-employment experience a significant increase in quality of life. The increase in quality of life is also significantly greater than that experienced by individuals who switch to another organisational job. At the same time, individuals who switch to self-employment experience a significant average reduction in income.

Our further analyses suggest that switching to self-employment in late career is not about a phased withdrawal from career employment into retirement with the objective of working less. In fact, the improvement in quality of life as a result of switching to self-employment is greatest among individuals who increase their weekly working hours. Instead, our analyses point to the important role of the pursuit of self-realisation in improving quality of life through self-employment.

From a policy perspective, our findings suggest that promoting late-career switches to self-employment can be socially sustainable because older workers undertaking such transitions are, on average, better off. Hence, the promotion of late-career business start-ups can provide an attractive opportunity for societies to move from ageing models that emphasise economic inactivity and dependence on pension benefits towards active ageing models that are better suited to address the personal needs of ageing individuals.

Reference

Kautonen, Teemu, Kibler Ewald, & Minniti, Maria (2017). Late-career entrepreneurship, income and quality of life. Journal of Business Venturing, 32(3), 318-333. https://doi.org/10.1016/j.jbusvent.2017.02.005

Dr Teemu Kautonen, Aalto University School of Business

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