Self-employment can delay retirement for the healthy and wealthy
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Self-employment can provide an alternative career transition to retirement, but only for those in good health and in high-paying careers, research from Trinity Business School reveals.
People in unstable and low-paying careers, however, opt to just retire, according to the study published in the .
The study examined whether self-employment helps bridge the gap to retirement among those aged over 50, and drew on interviews with 123,000 people aged 50 and over in 21 European countries, including Ireland, France, the UK, and Sweden in the Survey of Health, Ageing and Retirement in Europe (Share) project.
The study comes as pressure continues to mount on policymakers to address the challenges posed by longer-living populations and insufficient older-age employment levels. Self-employment has been touted as a viable option to encourage people to continue to work into older ages — sometimes dubbed ‘olderpreneurs.’
The study, by associate professor Martha O'Hagan and senior research fellow Dr André van Stel from Trinity Business School, was conducted in collaboration with Dr Brigitte Hoogendoorn and Sanaz Ramezani from Erasmus University Rotterdam.
“Our research finds that many of those who switched from wage-employment to self-employment could have chosen to continue in employment or switch to another wage-paying job,” said Prof O’Hagan.
“In other words, those who switched to self-employment could probably reach a high retirement age in wage-employment as well.”
As life expectancy continues to rise across the EU, pension systems are facing increasing pressure, prompting a greater focus on extending active employment into older ages.
"Our findings also indicate that while self-employment can serve as a bridge to retirement, this pathway is far less accessible for precarious wage workers compared to those in higher-paying, more secure positions.
"Consequently, any government support aimed at promoting senior entrepreneurship may not reach the individuals it was designed to help.”
The research indicates that, while people with precarious careers will actively try to improve their employment situation, they will only consider switching to another wage job as a realistic option to achieve this goal, not switching to self-employment.
“One possible reason for the reluctance of older wage workers in precarious job conditions to voluntarily switch to self-employment is that they don’t want to give up their right to unemployment benefits in case their business fails.
"In many countries, the self-employed are not allowed to take part in collective unemployment insurance systems, while private unemployment insurance is often too expensive.”
The percentage of the European Union’s over-65 population will rise from 21% in 2020 to almost 30% in 2050, causing the dependency ratio to increase from 32 to 52%.
Although labour force participation for workers over 55 has risen in the past 30 years, the increase is insufficient to counterbalance the increase in economically inactive older individuals who need support from the working economy.
In recent years, senior entrepreneurship — starting a business after the age of 50 — has received policy attention as a possible measure to address the challenges caused by socio-demographic changes, such as a rising old-age dependency ratio.
Senior entrepreneurship may stimulate employment rates among older individuals by providing additional employment opportunities for those facing age-related discrimination, extending active employment at older ages and thereby reducing the pressure on public pension and related welfare payments.