Abstract
Drawing upon the job demand-control model and analyzing more than 600,000 responses from the nationally representative Gallup survey data over the 2010–2016 period, we find that self-employed individuals in the USA report lower life satisfaction than paid employees (i.e., evaluative well-being). The self-employed also experience both positive feelings such as happiness and enjoyment and negative feelings such as anger and stress more than their wage-earning peers, leading to a stark emotional dichotomy in how they experience their daily lives (i.e., hedonic well-being) consistent with both high job control and high job demand that are prevalent in self-employment. Lastly, the self-employed also report more health problems and lower physical well-being. Income (and low local unemployment to some extent) successfully mitigates the negative effects of self-employment on subjective well-being while enhancing the positive, but education does not do so. Overall, the results suggest that self-employment is associated with predominantly negative well-being effects in the USA.
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Notes
“How Millennials Want to Work and Live”, Gallup Report, 2016.; Anna Bahney. “What Millennials Really Want at Work”, CNNMoney, https://money.cnn.com/2017/12/29/pf/millennials-work/index.html.
Reagan, Brad. “What the Silver Screen Tells Us About Entrepreneurship.” Wall Street Journal, December 2, 2013.
Author calculations using the subsample of the respondents from the USA (N = 3001) included in the publicly available Flash Eurobarometer 354 survey, which was carried out in a total of 40 countries in 2012. The survey publication is available here: http://ec.europa.eu/commfrontoffice/publicopinion/flash/fl_354_en.pdf
Despite the reported income gap between the self-employed and those in paid work (e.g., Hamilton, 2000), there is greater heterogeneity in the income of the self-employed. Moreover, Sorgner et al. (2017) document that 34% of the 500 wealthiest people in Germany earned their money by running their own business compared with 8% who were employees and 58% who inherited their wealth.
The major provisions of the Affordable Care Act came into force in 2014, but a significant number of additional people were covered during 2016 at the end of our sample period.
Results are author calculations using the US subsample of the Flash Eurobarometer 354 survey dataset.
Results are author calculations using the US subsample of the Flash Eurobarometer 354 survey dataset.
See more here: https://www.kauffman.org/kauffman-index/about/kiea-microdata
See more here: https://www.gemconsortium.org/
An average of 1000 households were surveyed daily across the USA until 2012. Since 2013, an average of 500 households are surveyed daily.
These estimates are roughly comparable with those reported on self-employment by the US Bureau of Labor Statistics (10.1% of all US workers including part time vs. 8.95% among full-time workers in our sample in 2015), Kauffman Entrepreneurship database (9.4% of full- and part-time workers), and Bureau of Economic Analysis (county average nonfarm proprietors employment including full- and part-time workers is 12.1% vs. 11.7% among those working full-time in our sample), even though each database measures self-employment slightly differently.
Using the General Social Survey, Kahneman and Krueger (2006) find that non-response rates for both evaluative and hedonic well-being measures are very low, below the 1% rate (in comparison with 17% non-response to questions on income). This low non-response rate is a characteristic of the Gallup survey as well, with only 0.22% of responses missing for the question on evaluative well-being. Testing whether individuals locate themselves on the same point on the scale measuring overall life satisfaction, Lucas et al. (1996) find that retesting individuals 4 weeks later leads to a 0.77 correlation between responses, reasonably near to the 0.90 correlation for most demographic questions that factually have not changed (such as education and income). A number of other scholars find that responses to life satisfaction track robustly with other indicators of well-being across countries (Graham, 2009; Sacks, Stevenson, and Wolfers, 2010; Helliwell, Layard, and Sachs, 2013). Neuroscience has also confirmed that self-reports of happiness and prefrontal cortex activity associated with positive affect correlate to a high degree (Urry et al., 2004).
It should be noted that the oversampling of the elderly is a common problem in surveys, particularly for the Gallup Poll. For example, the median age in Kauffman Survey is 43 and 56 in Gallup versus 37.9 for the US population overall. Luckily, our specific findings are less influenced by this problem, because we restrict the sample to full-time workers. Source for the US population data can be found here: https://www.cia.gov/library/publications/the-world-factbook/fields/2177.html
Available upon request from the authors.
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Acknowledgment
We thank the participants at the “Entrepreneurship and Wellbeing” workshop and Erik Monsen for valuable comments and suggestions and Carol Graham and Sergio Pinto for their assistance with data. Tuugi Chuluun has a user agreement with Gallup as a part of Graham’s well-being initiative.
Funding
The study is financially supported by summer research grants from Loyola University Maryland and Sellinger School of Business and Management.
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Appendices
Appendix 1: Literature on self-employment and subjective well-being
The table below summarizes the key findings from the existing studies that examine the relationship between self-employment (SE) and subjective well-being (SWB). We exclude studies that focus exclusively on job satisfaction of the self-employed.
Authors | Sample | SWB measures | Findings |
|---|---|---|---|
Studies in the US context: | |||
Baron, Franklin & Hmieleski (2016) | Survey of business founders located in the USA (N = 160) | Five-item Satisfaction with Life Scale | Founding entrepreneurs reported lower levels of stress when compared with participants in a large national survey of perceived stress, and this is partially due to entrepreneurs’ high levels of psychological capital. |
Patzelt and Shepherd (2011) | General Social Survey, USA, 1996 (N = 2794) | Number of negative emotions experienced | Above the effects of positive emotions, the self-employed experience fewer negative emotions than employees when they use different coping approaches. |
Studies utilizing European data: | |||
Andersson (2008) | Swedish Level-of-Living Survey, 1991 and 2000 | Job and life satisfaction, job stress and strain, mental health, and general health | Positive relationship is found between job and life satisfaction and SE, respectively. There is some evidence that SE leads to more mental health problems. |
Annink, Gorgievski & Den Dulk (2016) | European Social Survey, 2004 and 2010 | A combined measure based on life satisfaction, health, and happiness | Strong relationship between financial hardship (i.e., income level) and impaired well-being is documented among the self-employed, but unemployment benefits and education can serve as buffers. |
Binder (2017) | German Socio-Economic Panel, 1984–2015 | Job satisfaction and life satisfaction | SE typically negatively impacts life satisfaction compared with employment, especially if one enters SE from unemployment, earns low income from SE, or has no employees. |
Binder and Coad (2013) | British Household Panel Survey, 1996–2006 | Life satisfaction (mental well-being as a robustness check) | Individuals who move from regular employment into SE experience an increase in life satisfaction, while individuals moving from unemployment to SE are not more satisfied than those who move to regular employment. |
Berglund, Sevä & Strandh (2015) | EMRAPP survey, Sweden, 2011 (N ≈ 5000) | Job satisfaction and happiness | There are small (significant) differences between self-employed and regular employees in terms of the relationship between personality traits and happiness (job satisfaction). |
Blanchflower & Oswald (1998) | National Child Development Study, UK, 1981 and 1991 | Job and life satisfaction | The self-employed report higher levels of job and life satisfaction than employees. |
Hessels, Arampatzi, van der Zwan & Burger (2018) | Eurobarometer, 2008–2012 | Life satisfaction | After controlling for skill, job collar type, and occupation, the self-employed are still more satisfied with their lives than paid employees. |
Hetschko (2016) | German Socio-Economic Panel, 1999–2009 | Life satisfaction | Probability of losing work and becoming unemployed have a larger negative effect on life satisfaction for the self-employed than paid employees. |
Krause (2013) | IZA Evaluation Dataset S of entrants into unemployment in Germany, 2007–2009 | Residual life satisfaction | Residual happiness (i.e., life satisfaction) was found to be a driver of an unemployed individual’s entry into SE. |
Noorderhaven, Thurik, Wennekers & van Stel (2004) | Compendia 2000.2 and Eurobarometer, 1978–2000 | Percentage of respondents disappointed with life and democracy | In addition to a negative impact of per capita income, dissatisfaction with both life and democracy has a positive influence on SE rates at the country level. |
Odermatt, Powdthavee & Stutzer (2017) | German Socio-Economic Panel, 1991–2013 | Current and expected life satisfaction | Newly self-employed people are overly optimistic, and their predicted life satisfaction is higher than their actual life satisfaction in 5 years. |
Sevä, Vinberg, Nordenmark & Strandh (2016) | European Social Survey, 2002–2010 | Life satisfaction | The self-employed generally have higher life satisfaction than employees, but particularly for the self-employed who are women, first-generation immigrants, employ others, and also during high economic growth periods. |
Stephan & Roesler (2010) | German National Health Survey, 1998 (N = 298) | Life satisfaction, blood pressure, somatic diseases, mental disorders, behavioral health indicators | Entrepreneurs showed significantly lower overall somatic and mental morbidity, lower blood pressure, lower prevalence rates of hypertension, and somatoform disorders, as well as higher well-being and more favorable behavioral health indicators compared with employees. |
van der Zwan, Hessels & Rietveld (2018) | German Socio-Economic Panel, 1984–2012 | Life, work, and leisure satisfaction | Switching to self-employment from paid employment benefits work satisfaction, but not life satisfaction. |
Warr (2018) | European Social Survey, 2006 and 2012 (N = 2304) | Hedonic well-being, life satisfaction, flourishing well-being | The self-employed report higher flourishing well-being, but only those without subordinates. Hedonic well-being is similar between the self-employed and employees. |
Studies focusing on other geographical areas: | |||
Aguilar, Munoz & Moro-Egido (2013) | Latinobarometro survey, 2007 | Life, job, and household income satisfaction | Self-employed individuals report lower life satisfaction than employed individuals in Latin America, but there is heterogeneity depending on one’s income and occupation. |
Jamal (1997) | Survey of employed Canadians (N = 235) | Nonwork satisfaction, job stress, job satisfaction, psychosomatic health problems, and mental health | Compared with employees, the self-employed experienced higher job stress, nonwork satisfaction, and psychosomatic health problems, and spent more time in voluntary organizations. No significant differences were found in job satisfaction and mental health, and limited support was found for age, gender, education, and marital status as moderators. |
Markussen, Fibæk, Tarp & Tuan (2017) | Vietnam Access to Resources Household Survey, 2012 | Life evaluation (i.e., pleased with life) | Positive effect of SE on life evaluation in farming in Vietnam. |
Naudé, Amorós & Cristi (2014) | GEM sample, World Database on Happiness | Life satisfaction | Opportunity-motivated entrepreneurship may contribute to a nation’s happiness but only to a certain point. |
Uy, Foo, and Song (2013) | Survey of Manila-based entrepreneurs (N = 156) | Psychological well-being (PWB) as measured by 12 items on the General Health Questionnaire | Use of avoidance coping predicted better immediate PWB for more experienced entrepreneurs, but the opposite held for entrepreneurs with less startup experience. Over the extended period, entrepreneurs who used avoidance coping had improved PWB only if they also used active coping. |
Uy, Shun, and Foo (2017) | Survey of Manila-based entrepreneurs (N = 63) | Psychological well-being as measured by 12 items on the General Health Questionnaire | Entrepreneur’s affect variability (i.e., affect spin) is negatively related to well-being, but goal orientation moderated this relationship. |
Appendix 2: Geographical distribution of the sample
Sample size | Sample proportion | Population proportion | |
|---|---|---|---|
Alabama | 30,468 | 1.72 | 1.53 |
Alaska | 5383 | 0.3 | 0.23 |
Arizona | 41,742 | 2.36 | 2.10 |
Arkansas | 19,639 | 1.11 | 0.94 |
California | 169,344 | 9.57 | 12.12 |
Colorado | 35,220 | 1.99 | 1.67 |
Connecticut | 20,440 | 1.16 | 1.14 |
Delaware | 5346 | 0.3 | 0.29 |
District of Columbia | 3952 | 0.22 | 0.21 |
Florida | 97,845 | 5.53 | 6.19 |
Georgia | 51,229 | 2.9 | 3.16 |
Hawaii | 5224 | 0.3 | 0.44 |
Idaho | 12,758 | 0.72 | 0.51 |
Illinois | 58,768 | 3.32 | 4.07 |
Indiana | 40,105 | 2.27 | 2.08 |
Iowa | 21,746 | 1.23 | 0.98 |
Kansas | 18,432 | 1.04 | 0.91 |
Kentucky | 28,329 | 1.6 | 1.39 |
Louisiana | 25,456 | 1.44 | 1.46 |
Maine | 11,424 | 0.65 | 0.42 |
Maryland | 32,851 | 1.86 | 1.88 |
Massachusetts | 37,061 | 2.09 | 2.12 |
Michigan | 50,665 | 2.86 | 3.13 |
Minnesota | 35,762 | 2.02 | 1.71 |
Mississippi | 16,600 | 0.94 | 0.95 |
Missouri | 36,532 | 2.06 | 1.91 |
Montana | 10,888 | 0.62 | 0.32 |
Nebraska | 13,227 | 0.75 | 0.59 |
Nevada | 14,252 | 0.81 | 0.88 |
New Hampshire | 8841 | 0.5 | 0.42 |
New Jersey | 44,689 | 2.53 | 2.81 |
New Mexico | 14,906 | 0.84 | 0.66 |
New York | 94,358 | 5.33 | 6.22 |
North Carolina | 59,615 | 3.37 | 3.11 |
North Dakota | 5216 | 0.29 | 0.23 |
Ohio | 64,363 | 3.64 | 3.66 |
Oklahoma | 26,743 | 1.51 | 1.22 |
Oregon | 30,172 | 1.71 | 1.24 |
Pennsylvania | 86,818 | 4.91 | 4.04 |
Rhode Island | 6254 | 0.35 | 0.33 |
South Carolina | 27,348 | 1.55 | 1.51 |
South Dakota | 5755 | 0.33 | 0.27 |
Tennessee | 41,293 | 2.33 | 2.05 |
Texas | 118,932 | 6.72 | 8.37 |
Utah | 20,885 | 1.18 | 0.92 |
Vermont | 5854 | 0.33 | 0.20 |
Virginia | 51,113 | 2.89 | 2.61 |
Washington | 48,748 | 2.76 | 2.20 |
West Virginia | 12,727 | 0.72 | 0.59 |
Wisconsin | 38,289 | 2.16 | 1.82 |
Wyoming | 5536 | 0.31 | 0.18 |
Total | 1,769,143 |
Appendix 3: Variable descriptions
Well-being measures: | |
|---|---|
Evaluative well-being | |
Life satisfaction | Please imagine a ladder with steps numbered from zero at the bottom to ten at the top. The top of the ladder represents the best possible life for you and the bottom of the ladder represents the worst possible life for you. On which step of the ladder would you say you personally feel you stand at this time? (scale from 0 to 10) |
Expected life satisfaction in 5 years | On which step do you think you will stand about five years from now? (asked immediately after the question on life satisfaction) |
Hedonic well-being: positive | |
Happiness/smile/enjoyment | Did you experience the following feelings during a lot of the day yesterday? How about happiness/enjoyment? (binary outcomes) Did you smile or laugh a lot yesterday? (binary outcome) |
Hedonic well-being: negative | |
Sadness/stress/anger | Did you experience the following feelings during a lot of the day yesterday? How about sadness/stress/anger? (binary outcomes) |
Physical health | |
Health | My physical health is near perfect. (on scale from 1 to 5 with anchors “strongly disagree” and “strongly agree”) |
Health problems | Do you have any health problems that prevent you from doing any of the things people your age normally can do? (binary outcomes) |
Employment type: | |
Paid employee | Thinking about your work situation over the past seven days, have you been employed by an employer—even minimally like for an hour or more—from whom you receive money or goods? (This could be for one or more employers.) In a typical week (seven days), how many hours do you work for an employer? One is classified as employed full-time if he/she worked for an employer for at least 30 h in the past week, following the Gallup’s official definition, as seen for example here: https://news.gallup.com/poll/125639/gallup-good-jobs.aspx |
Self-employed | Again thinking about the last seven days, were you self-employed, even minimally like for an hour or more? This means working for yourself, freelancing, or doing contract work, OR working for your own or your family’s business? Self-employment also includes fishing, doing farm work, or raising livestock for either your own or your family’s farm or ranch. In a typical week (seven days), how many hours do you work as a self-employed individual? One is classified as self-employed full-time if he/she worked as a self-employed individual for at least 30 h in the past week. |
Socio-economic controls: | |
Gender | Female/male |
Age | Age of respondent |
Household pretax income | Detailed version: 11 categories: under $720, $720 to $5999, $6000 to $11,999, $12,000 to $23,999, $24,000 to $35,999, $36,000 to $47,999, $48,000 to $59,999, $60,000 to $89,999, $90,000 to $119,999, $120,000 and over Short version: low income (< $24,000), medium income ($24,000–$120,000), high income ($120,000+) |
Education | Detailed version: six categories: less than high school, high school, technical/vocational school, some college, college graduate, postgraduate Short version: low education (=less than high school), medium education (high school–college graduate), high education (=postgraduate) |
Children | Yes if at least one child is present in the household; no if none |
Marital status | Single, married or in a domestic partnership, divorced or separated, and widowed |
Race | White, Black, Asian, Hispanic, Other/mixed race |
Religion | 8 categories: Protestant, Roman Catholic, Jewish, Muslim/Islam, Mormon/Latter-Day Saints, other Christian religion, other non-Christian religion, and no religion/atheist/agnostic |
Local controls: | |
State fixed effects | Binary variables for 50 states and Washington, DC |
Urban/rural | Binary variable for whether the respondent resides within an MSA or outside of it |
Wage garnishment severity score | 3 categories for state-level wage garnishment restrictions: federal level (3 = the most strict), additional restrictions (2), and no restrictions (1 = the least strict). 3 categories for state-level garnishment exemption groups. The average of these two scores is the state wage garnishment severity score. Measured at year − 1. |
Local unemployment rate | County unemployment rate at year − 1. Unemployment below median is a dummy variable that equals to one if the county unemployment rate is below the median value of all counties, and zero otherwise. |
County nonfarm proprietorship employment | County nonfarm proprietorship employment at year − 1. |
Year | Binary variables for each year from 2010 to 2016. |
Appendix 4: Correlation matrix for key variables
Self-employed | Life satis-faction | Expected life satisfaction | Happy | Enjoy | Smile | Sadness | Stress | Anger | Health | Health problems | Income | Education | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Life satisfaction | 0.88 | ||||||||||||
Expected life satisfaction | − 0.01*** | 0.53*** | |||||||||||
Happy | 0.01*** | 0.20*** | 0.16*** | ||||||||||
Enjoy | 0.02*** | 0.21*** | 0.15*** | 0.54*** | |||||||||
Smile | − 0.00** | 0.18*** | 0.15*** | 0.44*** | 0.47*** | ||||||||
Sadness | 0.01*** | − 0.20*** | − 0.11*** | − 0.20*** | − 0.21*** | − 0.21*** | |||||||
Stress | − 0.01*** | − 0.19*** | − 0.09*** | − 0.15*** | − 0.21*** | − 0.190*** | 0.26*** | ||||||
Anger | 0.01*** | − 0.15*** | − 0.08*** | − 0.13*** | − 0.18*** | − 0.17*** | 0.30*** | 0.27*** | |||||
Health | − 0.01*** | − 0.27*** | − 0.22*** | − 0.14*** | − 0.14*** | − 0.12*** | 0.14*** | 0.11*** | 0.11*** | ||||
Health problems | 0.03*** | − 0.12*** | − 0.11*** | − 0.08*** | − 0.10*** | − 0.08*** | 0.11*** | 0.10*** | 0.07*** | 0.33*** | |||
Income | − 0.00** | 0.23*** | 0.10*** | 0.07*** | 0.07*** | 0.02*** | − 0.10*** | − 0.01*** | − 0.05*** | − 0.21*** | − 0.06*** | ||
Education | − 0.03*** | 0.15*** | 0.09*** | 0.03*** | 0.04*** | − 0.01*** | − 0.04*** | 0.06*** | − 0.04*** | − 0.21*** | − 0.03*** | 0.40*** | |
Unemployment | 0.00*** | − 0.04*** | − 0.03*** | − 0.02*** | − 0.02*** | 0.00** | 0.02*** | − 0.01*** | 0.01*** | 0.02*** | 0.00 | − 0.11*** | − 0.04*** |
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Bencsik, P., Chuluun, T. Comparative well-being of the self-employed and paid employees in the USA. Small Bus Econ 56, 355–384 (2021). https://doi.org/10.1007/s11187-019-00221-1
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DOI: https://doi.org/10.1007/s11187-019-00221-1