Heterogeneity in Self-Employment and the Transition to Retirement among Older Adults in the United States

Published: 2021


The fraction of workers who are self-employed increases with age, but the types of self-employment that older workers do and the effects of this work on their well-being is not well understood. This project examines such heterogeneity by considering how differing investment and managerial responsibilities in self-employment contribute to disparities in characteristics and measures of economic, physical, and mental well-being. The paper first uses internal narrative descriptions of industry and occupation in the 1994 to 2018 Health and Retirement Study and machine learning methods to classify self-employment reports into a useful framework of self-employment roles. The project then uses these roles to examine self-employment heterogeneity and finds substantial differences in demographic characteristics, work characteristics, income, benefits, quality of life, and retirement expectations across self-employment roles. Further work finds distinctive patterns in role changes with the transition to retirement such that large shares of workers in all roles transition into independent self-employment at the time of retirement. Work linking to administrative records suggests substantial discrepancies, which vary across roles, between survey responses and administrative records and finds the most prominent discrepancies for post-retirement independent self-employment. The paper’s findings motivate future research exploring the work trajectories leading to these roles and their consequences on financial, physical, and mental well-being into retirement.

Key Findings