Self-Employment at Older Ages


The share of workers who are self-employed rises markedly with age. Self-employment may be an attractive option for older workers who seek more flexibility and autonomy or reduced hours of work, or for those who experience difficulty finding suitable wage and salary work. Understanding the role that self-employment plays in facilitating work at older ages is increasingly important as more Americans work into their late 60s or early 70s.

The self-employed are often treated as a homogenous group due to the limited information available in standard labor force surveys. Yet their ranks include business owners who may have employees, independent contractors operating as sole proprietors, day laborers, online platform workers, and others who do informal work for pay. Self-employment is a full-time job for some, while for others it is part-time, casual, or intermittent.

In Contract Work at Older Ages (NBER RDRC Working Paper 19-19a), researchers Katharine Abraham, Brad Hershbein, and Susan Houseman provide new insights on the self-employment arrangements of older Americans.

The authors collected new data on self-employment using a module that they designed and fielded through the Gallup Education Consumer Pulse Survey, a large, nationally-representative telephone survey. The survey, fielded in 2018 and 2019, had about 40,000 responses from adults age 50 and older and about 20,000 responses from younger adults.

The module is designed to capture all work for pay, including contract and informal work. Importantly, it allows the authors to identify people who report that they work for an employer when responding to standard employment questions but indicate when probed that they are self-employed, as well as people doing other work that they did not report in response to standard questions. The module also allows the researchers to distinguish independent contractors, consultants, and freelancers from other self-employed and to study the subset of contractors obtaining work through a mobile app or online platform.

The authors find that among those with any work activity, the share self-employed (as their main job) rises sharply with age — from under 20 percent of workers for adults below age 50 to 25 percent of workers ages 55 to 59, 46 percent of workers age 65 to 69, and 68 percent of workers age 75 to 79. Even accounting for the lower rates of work at older ages, the self-employed are a large share of the population in all age groups, representing 17 percent of individuals age 65 to 69 and 13 percent of individuals age 75 to 79.


Next, the authors examine the frequency of different types of self-employment. Independent contractors who are initially miscoded as employees based on traditional survey questions are a sizeable group — 6 percent of workers age 55 to 59, 9 percent of workers age 65 to 69, and 11 percent of workers age 75 to 79. Adding them to those who consistently identify as contractors, independent contractors are the largest group within the self-employed, representing 15 percent of all workers age 55 to 59, 25 percent of workers age 65 to 69, and 33 percent of workers age 75 to 79. The group that includes more traditional small business owners is slightly smaller, representing 10, 18, and 29 percent of workers in these three age groups, respectively. Finally, the group that reports doing other informal work only is small but rising with age, from 1 percent of workers 55 to 59 to 6 percent of workers 75 to 79.

The share of workers who work part-time rises sharply with age, with such work more common among the self-employed. Multiple job holding and the combining of employment and self-employment fall modestly with age but remain prevalent at older ages, with at least 16 and 11 percent of all age groups, respectively, in these work arrangements. The share of workers engaged in online platform work is 2 to 3 percent for workers age 55 to 79, below the peak rate of 4 percent for workers age 18 to 29.

Next, the authors explore the role of education by estimating age profiles of self-employment by education. Their findings support two stylized facts. First, highly educated older adults are considerably more likely to be in self-employment arrangements than older adults with less education. Second, highly educated older workers are more likely to be working as independent contractors, while for less-educated older workers self-employment is more concentrated in traditional business ownership.

These patterns may be explained in part by occupational differences. By age 70, 40 percent of professional workers are in an independent contractor arrangement. In contrast, the share of workers in service, sales, and office occupations who are independent contractors remains low, perhaps because opportunities for self-employment are limited. While the share of blue-collar workers in independent contractor arrangements rises with age, the number of people working in these professions is low, likely due to the physical demands of this work.

Finally, the authors examine workers' motivation for being in an independent contractor arrangement. About one quarter of independent contractors report working for a former employer, an arrangement that may accommodate either an employee's desire for a flexible schedule or an employer's desire to shed responsibilities associated with having an employee. Motivations for working as an independent contractor shift with age, with younger workers reporting a need to earn income as the main reason for such work and older workers reporting a desire to connect with others or pursue a hobby as being more important.

Overall, an important finding from this work is that the incidence of self-employment may be higher than is measured in standard household surveys, both because some self-employment may be miscoded as employment and because some low-hours work may be missed. This research also points to the importance of independent contracting among older workers and to the strong association between education and self-employment, particularly in independent contractor work. As the authors note, "to the degree that Americans, and particularly the less-educated, need to work later in life for financial reasons, any impediments to independent contractor work they face — and whether these might be addressed with training or improved access to computers and other technology — warrant further study."

This research was supported by grant RDR18000003 from the U.S. Social Security Administration to the NBER Retirement and Disability Research Center. The findings and conclusions expressed are solely those of the author(s) and do not represent the views of SSA, any agency of the Federal Government, or the NBER.