BLS WORKING PAPERS 

 

U.S. Department of Labor 

U.S. Bureau of Labor Statistics 

Office of Productivity and Technology 

Self-Employment Transitions among Older American Workers with Career Jobs 

Michael D. Giandrea, U.S. Bureau of Labor Statistics 

Kevin E. Cahill, Analysis Group, Inc. 

Joseph F. Quinn, Boston College 

Working Paper 418

April 2008

All views expressed in this paper are those of the authors and do not necessarily reflect the views or policies of the 

U.S. Bureau of Labor Statistics. 
Self-Employment Transitions among Older American Workers with Career Jobs 

Michael D. Giandrea, Ph.D. 

(corresponding author) 

U.S. Bureau of Labor Statistics 

Office of Productivity and Technology 

Postal Square Building, Room 2180 

2 Massachusetts Ave., NE 

Washington, DC 20212-0001 

Email: giandrea.michael@bls.gov

Phone: (202) 691-5628 

Kevin E. Cahill, Ph.D. 

Analysis Group, Inc. 

111 Huntington Avenue, 10th Floor 

Boston, MA 02199 

Email: kcahill@analysisgroup.com

Phone: (617) 425-8380 

Joseph F. Quinn, Ph.D. 

Department of Economics 

Gasson Hall 103 

Boston College 

Chestnut Hill, MA 02467-3803 

Email: joseph.quinn@bc.edu

Phone: (617) 552-2393 

April 10, 2008 

All views expressed in this paper are those of the authors and do not necessarily reflect the views or 

policies of the U.S. Bureau of Labor Statistics. The Alfred P. Sloan Foundation supported this research 

through a grant to the Center on Aging and Work/Workplace Flexibility at Boston College.
Abstract 

What role does self-employment play in the retirement process? Older Americans are staying in 

the labor force longer than prior trends would have predicted and many change jobs later in life. 

These job transitions are often within the same occupation or across occupations within wageand-salary employment. The transition can also be out of wage-and-salary work and into self 

employment. Indeed, national statistics show that self employment becomes more prevalent with 

age, partly because self employment provides older workers with opportunities not found in 

traditional wage-and-salary jobs, such as flexibility in hours worked and independence. This 

paper analyzes transitions into and out of self employment among older workers who have had 

career jobs. We utilize the Health and Retirement Study, a nationally-representative dataset of 

older Americans, to investigate the prevalence of self employment among older workers who 

made a job transition later in life and to explore the factors that determine the choice of wageand-salary employment or self employment. We find that post-career transitions into and out of 

self employment are common and that health status, career occupation, and financial variables 

are important determinants of these transitions. As older Americans and the country as a whole 

face financial strains in retirement income in the years ahead, self employment may be a vital 

part of the pro-work solution. 

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I. Introduction 

 Older Americans are staying in the labor force longer than prior trends would have 

predicted and they often change jobs later in life.1

 In fact, the majority of older Americans who 

have had career jobs make a job transition prior to retirement.2

 These transitions are often within 

the same occupation or across occupations within wage-and-salary employment. The transition 

can also be out of wage-and-salary work and into self employment. National statistics show that 

self employment becomes more prevalent with age,3 partly because self employment provides 

older workers with opportunities not found in traditional wage-and-salary jobs, such as hours 

flexibility and independence. This paper examines the prevalence and determinants of a specific 

type of self-employment transition – those that serve as a step in the retirement process. 

Self-employment transitions prior to retirement are of particular importance to 

policymakers and employers. The leading edge of the Baby Boomers have now reached 

retirement age, and their movement out of the labor force is expected to strain existing sources of 

retirement income. Today, the ratio of workers to retirees is about three to one; by 2030, the 

ratio will be two to one.4 As fewer workers support a growing retiree population, policymakers 

may look for ways to encourage individuals to remain in the labor force. 

Self employment may be one option because self-employed individuals tend to stay in the 

labor force longer than wage-and-salary workers. While some of the differences between selfemployed workers and wage-and-salary employees may be explained by selection effects (i.e., 

those who choose self employment are those who would have worked later in life anyway), self 

employment offers real advantages that are valued by older workers such as working for oneself 

 

1

 See Burkhauser and Quinn (1997). 

2

 See Cahill, Giandrea, and Quinn (2006). 

3

 See Hipple (2004). 

4

 See Social Security Administration Fact Sheet (2007). 

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and flexible work hours.5

 Older workers may also have access to capital that makes a transition 

to self employment possible and they have a lifetime of experience to increase the probability of 

a successful business venture. To the extent that self employment keeps individuals in the labor 

force longer than they otherwise would have, the country as a whole benefits from their 

additional output. These workers remain productive, have higher incomes, and will be less 

dependent on public programs, all as the nation has more goods and services to distribute among 

an aging population. 

Employers may also have a lot to learn from these transitions, especially as older workers 

become an increasingly attractive option to fill an expected shortfall in skilled workers. Workers 

who switch from wage-and-salary employment to self employment later in life may be opting for 

self employment because of what is lacking in wage-and-salary employment rather than what 

can be gained in self employment. Workers’ choices indicate that many select self employment 

and the benefits derived from it even when facing considerable risk in the form of returns to 

capital and variation in expected earnings. Employers may be able to woo those workers back to 

wage-and-salary employment – or prevent the transitions to begin with – by offering older 

workers some of the advantages that currently may be found predominantly in self employment. 

Flexibility in work schedule is a classic example. 

This paper analyzes transitions into and out of self employment among older workers 

who have had career jobs. The next section of the paper provides some background on the role 

of self employment in the retirement transitions of older workers. Section III describes the data 

set that we utilize for the analysis, the Health and Retirement Study, an ongoing longitudinal 

 

5

 Branchflower and Oswald (1998) found that self-employed workers exhibited higher levels of both job and life 

satisfaction than wage-and-salary employees. 

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survey of 12,652 older Americans that began in 1992. Section IV presents the results of our 

analysis and Section V summarizes the main points of the paper. 

II. Background 

A dominant theme in the self-employment literature is the role of financial capital in 

entrepreneurship. This section highlights a few key studies that address this theme, and several 

studies related to self-employment transitions later in life. Perhaps one of the most informative 

studies on self employment is by Evans and Jovanovic (1989), who developed a model of selfemployment based, in part, on the role of liquidity constraints. In this model, a person becomes 

self employed if expected income from wage-and-salary employment does not exceed income 

from self employment. Using a sample of young men in the National Longitudinal Survey of 

Youth, Evans and Jovanovic found that the value of assets had a positive effect on the likelihood 

of becoming self employed. Moreover, they found a positive correlation between assets and selfemployment income, which may imply that men with greater assets become more profitable 

entrepreneurs. 

Holtz-Eakin, Joulfaian, and Rosen (1994a) developed a related model of self employment 

where the decision to become an entrepreneur was dependent on assets and personal 

characteristics. They found that an inheritance has a positive effect on the probability of 

becoming self employed, other things equal, but that the impact of an inheritance decreased with 

wealth. This finding confirmed the results presented in Evans and Jovanovic (1989). In another 

article Holtz-Eakin, Joulfaian, and Rosen (1994b) found that the receipt of an inheritance while 

self employed increased the viability and revenues of the self-employed worker’s business. 

- 5 -
 Dunn and Holtz-Eakin (2000) investigated not only the relationship between financial 

capital and entrepreneurship, but also the impact of human capital on self-employment decisions. 

They estimated a model that included own and family assets, demographic variables, and 

parents’ self-employment status. Own assets had a positive but small effect on the likelihood of 

becoming self-employed, while parents’ self-employment experience exerted a large and positive 

impact on the probability of becoming self employed. 

Several studies have focused on self employment among older workers. Fuchs (1982) 

considered the role of self employment among older workers by focusing on the transitions from 

wage-and-salary employment to self employment. He found that the self employed were 

significantly more likely to continue to work, particularly by reducing work hours. Other factors 

that impacted the employment decision of older workers included health, age, and pension 

eligibility. One interesting finding was that the probability of switching from wage-and-salary 

employment to self employment was a function of a worker’s occupational experience in jobs 

that required skills similar to those needed in self employment. Examples included managerial 

and sales positions. 

Bruce, Holtz-Eakin, and Quinn (2000) focused on older workers and the transitions 

among wage-and-salary employment, self employment, and labor force non-participation using 

the first three waves of Health and Retirement Study data. They found that liquidity constraints 

played an important role in determining who became self employed. Moreover, they concluded 

that health insurance was not an important factor affecting the transition from wage-and-salary to 

self employment. 

 Hipple (2004) documented that self employment became more likely as workers age. 

The incidence of unincorporated self employment in 2003 by age bracket was 7.4 percent for 

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those age 35 to 44, 8.2 percent for those age 45 to 54, 10.5 percent for those age 55 to 64, and 

15.3 percent for those 65 and older. Most recently, Zissimopoulos, Maestas, and Karoly (2007) 

examined determinants of labor force exit among wage-and-salary and self-employed older 

workers, and found that defined benefit pension incentives were significant determinants of why 

exit rates were higher among wage and salary workers. Further, using a cross-country 

comparison of the United States and Britain, they found that the availability of publicly-provided 

health insurance impacted labor force exit. 

This paper contributes to the literature by focusing on transitions later in life from wageand-salary career jobs into self employment and from self-employed career jobs into wage-andsalary employment. One explanation for the shift to self employment later in life may be a 

change in preferences for leisure as individuals age and leave full-time career (FTC) 

employment. The mechanics behind this explanation can be seen graphically in Figure 1, in 

which the choice between wage-and-salary and self employment is simplified by focusing on the 

tradeoff between higher wages and hours flexibility (i.e., wage-and-salary workers have higher 

earnings relative to self employed workers, but they are constrained in their ability to reduce 

hours worked). The hours inflexibility associated with wage-and-salary employment is 

illustrated by the vertical line at point L, the maximum amount of leisure allowed under wageand-salary employment. In the first case, a worker chooses the higher wages and lower leisure 

hours associated with wage-and-salary employment. In the second case, perhaps one that 

follows FTC employment, the worker sacrifices higher wages in return for the increased leisure 

available with self employment. 

The underlying assumption about hours inflexibility in wage-and-salary employment is 

supported by several stylized facts. In some cases, high fixed costs per worker related to benefits 

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such as health insurance limit a firm’s willingness to employ part-time workers. In other cases, 

defined-benefit pension rules may result in significantly smaller pension valuations for those 

who work part-time (Penner, Perun, and Steuerle, 2002; Burkhauser and Quinn, 1997). While 

self employed workers may not experience these constraints on hours worked, they instead 

typically face lower wage profiles than comparable full-time wage-and-salary workers. 

Hamilton (2000) found a 35 percent earnings differential in favor of wage-and-salary workers 

relative to self-employed workers, and Lettau (1994) found that part-time workers earn 

substantially less in part-time work than in equivalent full-time work. 

Using this simplified framework and the existing literature on self employment as a 

guide, we extend the research on retirement transitions more generally by Cahill, Giandrea and 

Quinn (2006) to incorporate switches later in life from wage-and-salary employment to selfemployment and vice versa. 

III. Data 

 An ideal data set for this research is the Health and Retirement Study (HRS). The HRS is 

a nationally representative panel data set created with the objective of understanding the 

antecedents and consequences of retirement, monitoring work disability, and examining the 

relationship among health, income and wealth, and the patterns of wealth accumulation and 

consumption over time.6

 The HRS survey began in 1992 with interviews of over 12,500 people 

(known as the Core) aged 51 to 61 years, and their spouses, whatever their age. The interviews 

have been repeated every other year since 1992. 

The longitudinal nature of the HRS allows us to examine each respondent’s work history 

and identify job transitions. For the purposes of this analysis, we define a full-time career job as 

 

 

6

See Juster and Suzman (1995) for a detailed description of the HRS. 

- 8 -
one that consists of at least 1,600 hours per year (“full time”) and that lasts ten or more years 

(“career”). Jobs that follow FTC jobs and precede labor force withdrawal are considered bridge 

jobs. These definitions are consistent with earlier studies investigating bridge job behavior. 

We begin our analysis by focusing on individuals who have had work experience since 

age 49, and obtain a sample of 10,540 HRS respondents (Table 1). We find that 91 percent of 

age-eligible men (n=5,344) and 77 percent of age-eligible women (n=5,196) have worked since 

age 50. Because this paper focuses on transitions from career employment, we restrict the sample 

to respondents with a FTC job at the time of the first interview, which reduces the sample to 

5,570 respondents. Slightly more than one half of the men (n=3,057) and one third of the 

women (n=2,513) were on a FTC job in 1992. Approximately 21 percent of the men and 10 

percent of the women were self employed on their FTC jobs at the time of the first interview. 

Therefore, among those HRS respondents who were on a FTC job at the time of the first 

interview, 4,668 were wage-and-salary workers and 902 were self-employed. 

IV. Results

Descriptive Statistics: Outcomes

 We begin the descriptive analysis with a high-level overview of how the prevalence of 

self employment increases as FTC workers age. Figure 2 presents the percentage of HRS men 

and women on FTC jobs in 1992 who were working for pay in each interview, from 1992 to 

2004. By 2004, fewer than half of respondents, now aged 63 to 73, were working. Women 

were somewhat more likely to be working than men, a result of the fact that women were 

younger, on average, at the time of the first interview and the fact that FTC status was a 

requirement to be included in the analysis. 

- 9 -
As the FTC respondents exited the labor force, the percentage of those working who were 

self employed increased substantially (Figure 3). At the time of the 1992 survey, slightly more 

than 20 percent of the men were self employed. The percentage of respondents who were self 

employed among those who remained working rose in every survey year through 2004, with the 

largest increases in the 2002 and 2004 surveys. Between 2000 and 2004, the percentage of men 

who were self employed among those who had a FTC job in 1992 and who were still working in 

2004 increased more than 7 percentage points to nearly 35 percent. A similar pattern was seen 

among the women, although the percentages were considerably lower. Among women with FTC 

jobs in 1992 and still working in 2004, about 17 percent were self employed on their 2004 job. 

The rise in self employment as workers age is a function of two factors. First, self 

employed workers may transition out of the labor force more slowly than wage-and-salary 

workers. Second, more wage-and-salary workers could be shifting into self employment as they 

grow older than vice versa. The longitudinal nature of the HRS allows us to examine both of 

these mechanisms separately. Rates of transition out of the labor force by self-employment and 

wage-and-salary status among men with FTC jobs are shown in Figure 4a. Those who were self 

employed on their FTC job in 1992 exited the labor force more gradually than those on wageand-salary jobs. In particular, about one third of men who were self employed in 1992 were no 

longer working by 2004, compared to about 60 percent of the wage-and-salary men. A 

difference also exists among the female sample (Figure 4b), although the 10 percentage point 

gap between self-employed and wage-and-salary women in 2004 was not quite as large as among 

men. 

 The second explanation for the observed increase in self employment as workers age is 

that more wage-and-salary workers shift into self employment than self-employed workers shift 

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into wage-and-salary employment. In percentage terms, men who were self employed on their 

FTC job moved into wage-and-salary worked at a much higher rate (about 23 percent) than 

wage-and-salary men moved into self employment (about 11 percent) (Figure 5). But because 

there were so many more wage-and-salary workers relative to self-employed workers, about 4 to 

1, the net impact was a rise in self employment. Again, a similar story held among women. 

 Before proceeding with an analysis of determinants, it is important to highlight a key 

distinction between the self-employed and wage-and-salary jobs noted above; namely, that those 

on self employed jobs are much more likely to be working part time (Table 2). Among men who 

were on a wage-and-salary FTC job in 1992 and who were still working in 2002, about three 

quarters were working full time in 2002. In contrast, only about 56 percent of their selfemployed counterparts were working full time in 2002. Among women, the gap was even wider. 

So it is important to note that while self-employed workers were staying in the workforce later in 

life, the hours worked does not appear to match those among wage-and-salary workers, at least 

with respect to a full-time, part-time distinction. 

To explore outcomes in more detail, we make use of the longitudinal nature of the HRS 

and categorize respondents according to their transitions from FTC jobs. Four general outcomes 

are possible by 2004: (1) remain on a FTC job, (2) move into self employment, (3) move into 

wage-and-salary employment, and (4) exit the labor force directly. Each of these outcomes is 

examined separately for those who were wage and salary on their FTC job and for those who 

were self employed (Table 3). The four-way outcome analysis results are consistent with the 

previous findings.7

 Those who were wage and salary on their FTC jobs were less likely to 

remain on their FTC jobs as of 2004 and more likely to exit directly from the labor force. 

Further, of those who were on a wage-and-salary FTC job in 1992 and who made a transition by 

 

7

 See Cahill et al. (2006) 

- 11 -
2004, about 12 percent of the men and 10 percent of the women had transitioned into a selfemployment position. Among their counterparts who were self employed on their 1992 FTC job, 

about 42 percent of men and 39 percent of women transitioned to a wage-and-salary position. 

Descriptive Statistics: Determinants

A key element of this research is to understand who transitions into self employment and 

why. To do so, we stratify the four-way outcome variable by various demographic and 

economic characteristics for the wage-and-salary and self-employed individuals separately. 

Among those who were wage and salary on the FTC job, we focus on the percentage who 

switched to self employment among those who made a transition (Tables 4a (demographic 

characteristics) and 5a (economic characteristics)). Among those who were self employed on the 

FTC job, we examine the percentage who switched to wage-and-salary jobs among those who 

made a transition (Tables 4b and 5b). 

The major differences in who became self employed during a transition appear to be 

related to health status although, to a lesser extent, differences exist for other factors such as age, 

education, marital status, and spouse’s employment status (Table 4a). Men who were wage and 

salary on their FTC job and who made a transition were much less likely to have become self 

employed if they were in fair or poor health. Approximately 4 percent of those in fair or poor 

health switched into self employment compared to 15 percent among those in excellent or very 

good health. Similar percentages were also associated with a spouse’s health status. Another 

large discrepancy among men existed by educational status. Self-employment transitions were 

much more common among college-educated men than those who did not complete college (22 

percent versus 10 percent). Further, self-employment transitions were somewhat more likely 

among men who were married and who had an employed spouse. 

- 12 -
 Women’s transitions appeared similar to men’s with respect to the impact of the set of 

demographic variables included in Table 4a. Two differences are of note. First, wage and salary 

women with dependent children were more likely to transition into self employment than those 

without dependent children. Second, rates of self employment were not impacted by a husband’s 

health status. 

 Several findings regarding switches into wage-and-salary employment are worth 

mentioning. First, younger men were much more likely than older men to switch into wage-andsalary employment (Table 4b). Health status also positively impacted a switch into wage-andsalary employment, although differences were not as large as those found for switchers into self 

employment. Further, transitions from self employment to wage and salary employment were 

much more likely among men without a college degree, who were married, and who had a 

spouse in fair or poor health. 

As with the findings regarding transitions into self employment, women with dependent 

children were more likely to switch employment status when making a transition. In contrast 

with the transition into self employment, however, women with a spouse in fair or poor health 

were more likely to switch into wage-and-salary employment. 

The largest influence among the economic characteristics examined in this study 

pertained to wage rates and occupational status of the FTC job. Men who were wage-and-salary 

on their FTC jobs were much more likely to transition into self employment if they were highwage earners (Table 5a). Fewer than ten percent of those who earned less than $10 per hour 

transitioned to a self-employed job, compared to about 18 percent of those who earned $20 to 

$50 per hour. About one half of those who earned $50 per hour or more on their wage-andsalary FTC job transitioned to a self-employed job. Occupational status was also a strong 

- 13 -
indicator of a transition into self employment. Approximately 20 percent of men with a whitecollar, highly-skilled wage-and-salary FTC job transitioned to self employment, compared to 

about 5 percent of men with blue-collar, non-highly-skilled FTC jobs. Differences by health 

insurance status and pension status were not notable. 

The impact of wage and occupational status was somewhat different for women on wageand-salary jobs in 1992 than their male counterparts. Differences by wage were smaller in 

magnitude, although the general trend was the same – those with higher wages were more likely 

to switch into self employment. In terms of occupation, women in blue-collar, non-highlyskilled jobs were more likely than those in white-collar, highly-skilled jobs to switch into self 

employment. Also unlike the male sample, differences existed by health insurance and pension 

status. Women without health insurance on their FTC job were much more likely than others to 

switch into self employment, as were those without pensions. This result should be interpreted 

with caution, however, because sample sizes were small. 

Economic characteristics also appeared to influence transitions into wage-and-salary 

employment from self employment (Table 5b). Among men who were self employed on their 

FTC job and who made a transition, those who would lose their health insurance were less likely 

than others to switch to a wage-and-salary job. Another factor that positively influenced a switch 

to wage-and-salary employment was having a defined-contribution pension plan. Those with 

DC plans were much more likely to switch to wage-and-salary employment compared to those 

with DB pensions (51 percent versus 33 percent). Wages were generally not a strong influence 

on switching into wage-and-salary employment, although low wage workers were more likely 

than others to switch. Differences by occupational status existed as well, with those in highlyskilled white-collar and blue-collar jobs more likely to make a switch. 

- 14 -
The number of observations for the female sample in several of the economic categories 

was too small to draw inferences; however, where observations were sufficient to examine 

outcomes, there were some findings of note. Women without pension coverage had a similar 

rate of switching into wage-and-salary employment as men without pensions. Unlike the men, 

though, low-wage women had the lowest prevalence of switching from self employment to 

wage-and-salary employment. Differences by occupational status did not follow any particular 

pattern. 

Multivariate Analysis 

This section examines transitions into self employment in a multivariate context. We 

estimate two self-employment models based on HRS respondents who were on a FTC wage-andsalary job in 1992 and for whom later employment status could be identified. The first 

specification is one in which self employment is viewed as a dichotomous decision. The 

dependent variable is equal to one if a worker who was on a FTC wage-and-salary job in 1992 

ever transitioned into self employment between 1992 and 2004, and equal to zero otherwise. 

The second specification examines transitions from wage-and-salary FTC jobs in more detail, 

using the four-way dependent variable presented earlier in Tables 4 and 5. The outcomes are 

defined as of 2004 and are as follows: (1) remained on a FTC job, (2) moved to a different wageand-salary job, (3) moved to a self-employed job, and (4) exited the labor force directly from a 

FTC job. The coefficients of each model are estimated for men and women separately using 

logistic regression for the first model and multinomial logistic regression for the second model. 

 The multivariate analysis generally confirms the descriptive findings. Among men, the 

logistic regression results show that respondents in fair or poor health or respondents with 

spouses in fair or poor health were about five percentage point less likely than otherwise similar 

- 15 -
respondents to switch from wage-and-salary FTC jobs to self employment (Table 6a). 

Occupational status was also a strong predictor of self-employment transitions, with white-collar, 

highly-skilled workers the most likely to switch into self employment. Pension status was also 

marginally significant, as those without a pension on the FTC job were more likely to switch into 

self employment. 

 The logistic regression for the female sample revealed fewer statistically-significant 

coefficients, but those that were significant appeared consistent with the findings for the male 

sample (Table 6b). Two coefficients were significant among women that were not significant for 

men. The lack of health insurance appeared to be positively associated with switching into self 

employment, all else equal, and home ownership was negatively associated with switching into 

self employment (after controlling for wealth). One observation of note is that, like the 

descriptive statistics, occupational status was not a significant predictor of switching into self 

employment among women. 

 The multinomial logistic regressions reinforced many of the descriptive findings and the 

logistic regression results. Again, the main drivers of post-FTC transitions were age, health 

status, occupational status, and pension status. Among men, younger respondents were more 

likely to switch to a different wage-and-salary job and older men were more likely to exit the 

labor force directly (Table 7a). Those in fair or poor health were less likely to take a selfemployed job after FTC wage-and-salary employment and were more likely to exit the labor 

force directly. Blue-collar workers were less likely than white-collar workers to take either a 

different wage-and-salary or a self-employed job after FTC wage-and-salary employment and 

were more likely to exit directly. Sample sizes for women appear to have limited the extent to 

which statistical significance could be found. Two findings from the logistic regression remain, 

- 16 -
however; women without health insurance and without pensions were less likely to exit the labor 

force directly than otherwise similar women (Table 7b). 

V. Conclusion 

Self employment among the working population increases substantially as workers 

approach retirement age. According to data from the Health and Retirement Study, about 20 

percent of men aged 51 to 61 in 1992 were self employed, already a sizable proportion. Twelve 

years later, more than one third of those working were self employed – an increase of more than 

50 percent. Among older women, the increase in self employment was from about 10 percent to 

more than 15 percent. The rise in self employment later in life is a result of a combination of 

factors, including the fact that self-employed workers tend to stay in the labor force longer than 

wage-and-salary workers and that more wage-and-salary workers switch into self employment 

later in life than vice versa. Some of the key determinants of these transitions included health 

status, spouse’s health status, educational attainment, and occupational status. 

The degree to which older Americans switch from wage-and-salary employment to self 

employment is an interesting outcome. The implication is that self-employment decisions are 

not predetermined during middle age; in fact, it is just the opposite. Older workers exhibit a 

great deal of flexibility in their work decisions and appear willing to take on substantial risks 

later in life. In a sense, the outcome is intuitive, as older workers are more likely than younger 

workers to have access to investment capital. Their lifetime of experience may also help them 

avoid many of the pitfalls associated with running a business that may ensnare younger, less 

experienced workers. 

- 17 -
Policymakers and employers may have a lot to gain by understanding the selfemployment transitions of older Americans, because the decision to remain working later in life 

is likely linked to the type of work people will be doing. Self employment, for example, 

provides many older workers with the flexibility that they desire in a work schedule. If needs 

such as these are met, many older workers may continue to work later in life and be a valuable 

resource as the population ages. 

- 18 -
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Retirement and Part-Time Work by Older Workers. Urban Institute. Retrieved from 

http://www.urban.org/Publications/410587.html 

Social Security Administration Fact Sheet downloaded April 11, 2007 from 

http://www.ssa.gov/pressoffice/factsheets/basicfact-alt.pdf 

Zissimopoulos, J., Maestas, N., & Karoly, L. (2007). The Effect of Retirement Incentives on 

Retirement Behavior: Evidence from the Self-Employed in the United States and England. 

University of Michigan Retirement Research Center, WP 2007-155. 

- 20 -
Men Women Total

All HRS Core respondents

 n 5,869 6,783 12,652

Worked since age 50

 n 5,344 5,196 10,540

 % of HRS Core 91% 77% 83%

Worked since age 50 and had a FTC job

 n 4,697 3,470 8,167

 % of HRS Core 80% 51% 65%

 

On a FTC job in 1992

 n 3,057 2,513 5,570

 % of HRS Core 52% 37% 44%

 Wage and salary

 n 2,418 2,250 4,668

 % of FTC in 1992 79% 90% 84%

 Self employed 

 n 639 263 902

 % of FTC in 1992 21% 10% 16%

Source: Authors’ calculations based on data from the Health and Retirement Study.

HRS Core: Respondents Age 51 to 61 in 1992

Table 1

Sample Size, by Gender
n Full Time Part Time Full Time Part Time

1992 3,057 100% 0% 100% 0%

1994 2,427 96% 4% 86% 14%

1996 2,078 91% 9% 73% 27%

1998 1,782 86% 14% 65% 35%

2000 1,447 80% 20% 61% 39%

2002 1,180 72% 28% 56% 44%

 

n Full Time Part Time Full Time Part Time

1992 2,513 100% 0% 100% 0%

1994 2,110 92% 8% 85% 15%

1996 1,771 88% 12% 65% 35%

1998 1,568 84% 16% 70% 30%

2000 1,331 77% 23% 63% 37%

2002 1,103 72% 28% 51% 49%

Source: Authors’ calculations based on data from the Health and Retirement Study.

Wage & Salary Self Employed

Table 2

Self Employment Status

Sample: HRS Core Respondents on a FTC Job in 1992

Wage & Salary Self Employed

Men

Women

by Full-time/Part-time Status, Year and Gender
Still on a Moved Moved to SE 

 FTC Job to Self Employment Wage and Salary Out (SE+WS+Out) 

Wage and salary

Males 10.6% 10.4% 31.7% 47.3% 11.6%Females 17.0 7.9 36.2 38.9 9.5

Self employment

Males 23.1 23.3 32.0 21.6 Females 17.1 26.9 32.1 23.9 

Source: Authors’ calculations based on data from the Health and Retirement Study.

Table 3

Transitions Into and From Self Employment as of 2004

Sample: HRS Core Respondents on FTC Jobs in Wave One
Category Still on a Moved to Moved to SE Category Still on a Moved to Mo

Determinants Percentage FTC Job Self Employment Wage & Salary Out (SE+WS+Out) Percentage FTC Job Self Employment Wage Age in 2004

 61 and younger 4.4% 34.2% 6.6% 34.2% 25.0% 10.0% 27.8% 41.1% 8.5% 31 62 - 64 30.2 21.9 10.8 36.9 30.4 13.8 26.4 22.1 9.8  65 - 69 42.1 10.3 11.3 30.9 47.5 12.6 33.5 10.4 6.8  70 and older 23.3 3.7 13.0 29.9 53.4 13.5 12.3 3.6 8.5 Subjective health status excellent / very good 60.1 14.7 13.0 32.3 40.1 15.2 62.4 24.2 9.5  good 29.8 12.3 10.5 33.3 44.0 12.0 28.5 17.4 6.6  fair / poor 10.1 8.6 4.0 32.8 54.6 4.4 9.1 12.1 4.9 Less than college degree 76.2 12.0 9.1 33.9 44.9 10.4 78.3 20.6 7.4 College degree 23.8 17.6 18.3 28.5 35.6 22.2 21.7 23.4 11.4 Received inheritance 20.2 12.7 15.6 30.0 41.8 17.8 17.6 18.9 11.0 Never received inheritance 79.8 13.4 10.2 33.3 43.1 11.8 82.4 21.8 7.6 

Not married 10.5 13.3 8.3 31.1 47.2 9.6 25.3 13.9 8.1 Married 89.6 13.4 11.7 32.8 42.2 13.5 74.7 23.6 8.4 No dependent children 79.4 11.6 11.5 32.6 44.3 13.0 82.4 17.5 8.3 Dependent children 20.6 20.0 10.7 32.7 36.6 13.4 17.6 38.6 8.2 No employed spouse 39.5 13.1 10.4 30.6 45.9 12.0 41.6 17.0 8.3 Spouse employed 60.5 13.5 11.9 33.9 40.7 13.7 58.4 24.2 8.2 Spouse's health status

 excellent / very good 58.1 12.4 13.9 32.4 41.3 15.9 53.0 24.2 8.4  good 27.5 14.5 9.9 32.7 42.9 11.6 29.4 21.7 8.0  fair / poor 14.4 15.7 5.6 34.3 44.4 6.6 17.5 25.1 7.8 Source: Authors’ calculations based on data from the Health and Retirement Study.

Men Women

Table 4a

Transitions Into Self Employment as of 2004, by Demographic Characteristics

Sample: HRS Core Respondents on Wage and Salary FTC Jobs in Wave One
Category Still on a Moved to Moved to WS Category Still on a Moved to Mo

Determinants Percentage FTC Job Wage and Salary Self Employed Out (SE+WS+Out) Percentage FTC Job Wage and Salary Self EAge in 2004

 61 and younger 4.2% 27.8% 38.9% 22.2% 11.1% 53.8% 29.3% 29.5% 24.6% 32 62 - 64 25.4 45.9 15.6 25.7 12.8 28.8 28.4 22.0 30.5  65 - 69 41.2 29.4 25.4 29.4 15.8 36.0 28.9 16.7 26.7  70 and older 29.3 12.7 26.2 40.5 20.6 30.0 13.5 7.1 32.1 Subjective health status

 excellent / very good 63.0 34.3 22.5 30.3 12.9 34.3 68.3 23.9 23.2  good 27.4 15.3 27.1 36.4 21.2 32.0 25.0 13.5 42.3  fair / poor 9.5 29.3 22.0 24.4 24.4 31.0 6.7 14.3 21.4 Less than college degree 70.5 29.4 24.8 29.4 16.5 35.0 84.6 18.2 28.4 College degree 29.5 26.8 21.3 36.2 15.8 29.0 15.4 34.4 25.0 Received inheritance 27.3 18.0 29.1 39.3 13.7 35.4 24.0 20.0 24.0 Never received inheritance 72.7 32.7 21.8 28.2 17.3 32.4 76.0 20.9 29.1 

Not married 9.3 22.5 22.5 35.0 20.0 29.0 17.8 18.9 29.7 Married 90.7 29.2 23.9 31.0 15.9 33.7 82.2 21.1 27.5 No dependent children 81.2 26.1 24.4 32.7 16.9 33.0 82.2 20.5 26.9 Dependent children 18.8 39.5 21.0 25.9 13.6 34.7 17.8 21.6 32.4 No employed spouse 37.0 24.5 24.5 35.2 15.7 32.5 33.7 21.4 27.1 Spouse employed 63.0 31.0 23.3 29.2 16.6 33.7 66.4 20.3 28.3 Spouse's health status

 excellent / very good 68.5 31.6 21.7 31.2 15.6 31.7 57.4 20.4 29.0  good 21.1 28.4 24.7 30.9 16.1 34.4 21.0 20.6 17.7  fair / poor 10.4 12.5 37.5 32.5 17.5 42.9 21.6 22.9 31.4 Source: Authors’ calculations based on data from the Health and Retirement Study. 

Men Women

Table 4b

Transitions Out Of Self Employment as of 2004, by Demographic Characteristics

Sample: HRS Core Respondents on Self Employment FTC Jobs in Wave One
Category Still on a Moved to Moved to SE Category Still on a Moved to Mov

Determinants Percentage FTC Job Self Employment Wage & Salary Out (SE+WS+Out) Percentage FTC Job Self Employment Wage & Health insurance status

 Not covered on career job 5.0% 20.5% 10.3% 39.7% 29.5% 12.9% 7.4% 27.1% 17.0% 39 "Covered, would maintain" coverage 81.2 11.2 11.7 32.0 45.1 13.2 80.2 19.0 6.9 3 "Covered, would lose" coverage 13.8 21.4 10.7 28.8 39.1 13.6 12.4 25.0 8.2 3

Pension status

 No pension 20.0 16.5 10.7 39.1 33.6 12.8 27.1 19.7 12.0 4 DC only 22.8 18.1 10.9 34.9 36.1 13.4 25.8 24.0 7.1 3 DB only 50.6 9.4 11.2 28.9 50.5 12.4 43.5 18.9 7.0 3 DC and DB 6.6 17.7 15.0 33.6 33.6 18.3 3.6 40.0 4.6 4Wage rate < $6/hour 5.4 15.1 7.0 46.5 31.4 8.2 12.3 28.0 8.1 3 $6 - $10/hour 17.5 16.4 7.5 36.4 39.6 9.0 35.2 21.4 8.5 3 $10 - $20/hour 52.1 12.4 9.5 30.7 47.4 10.8 43.5 18.4 7.4 3 $20 - $50/hour 23.8 11.5 16.2 31.9 40.3 18.3 8.8 26.0 9.3 2 > $50/hour 1.3 33.3 33.3 9.5 23.8 50.0 0.3 0.0 20.0 4Occupation status

 White collar, highly skilled 34.5 14.4 16.1 32.0 37.6 18.8 35.0 22.9 9.6 3 White collar, other 12.8 15.5 13.2 33.2 38.2 15.6 37.3 22.5 6.4 3 Blue collar, highly skilled 40.5 10.2 8.6 32.2 48.9 9.6 12.3 13.0 5.8 3 Blue collar, other 12.2 19.1 4.3 34.5 42.1 5.3 15.4 20.8 11.8 3Source: Authors’ calculations based on data from the Health and Retirement Study.

Men Women

Table 5a

Transitions Into Self Employment as of 2004, by Economic Characteristics

Sample: HRS Core Respondents on Wage and Salary FTC Jobs in Wave One
Category Still on a Moved to Moved to WS Category Still on a Moved to Mov

Determinants Percentage FTC Job Wage and Salary Self Employed Out (SE+WS+Out) Percentage FTC Job Wage and Salary Self EmHealth insurance status

 Not covered on career job 20.8% 25.0% 25.0% 37.5% 12.5% 33.3% 21.7% 12.5% 32.5% 32 "Covered, would maintain" coverage 71.2 28.1 25.6 29.2 17.2 35.5 76.1 22.1 25.0 3 "Covered, would lose" coverage 8.1 35.5 16.1 25.8 22.6 25.0 2.2 25.0 50.0 

Pension status

 No pension 68.4 28.9 20.1 32.3 18.7 28.2 85.6 21.4 25.3 3 DC only 12.6 31.5 35.2 24.1 9.3 51.4 7.2 26.7 33.3 2 DB only 14.2 31.2 23.0 34.4 11.5 33.3 6.7 7.1 50.0 4 DC and DB 4.9 9.5 47.6 28.6 14.3 52.6 0.5 ---- ---- Wage rate

 < $6/hour 17.2 29.6 31.5 31.5 7.4 44.7 46.6 15.9 20.3 3 $6 - $10/hour 17.8 25.0 23.2 35.7 16.1 31.0 18.2 22.2 37.0 2 $10 - $20/hour 33.1 31.7 22.1 29.8 16.4 32.4 19.6 27.6 27.6 3 $20 - $50/hour 22.3 28.6 24.3 30.0 17.1 34.0 13.5 15.0 30.0 2 > $50/hour 9.6 30.0 16.7 33.3 20.0 23.8 2.0 ---- ---- Occupation status White collar, highly skilled 38.4 30.3 26.1 29.7 13.9 37.4 30.3 25.4 23.8 3 White collar, other 19.5 23.8 20.2 32.1 23.8 26.6 30.3 23.8 31.8 3 Blue collar, highly skilled 24.4 30.5 24.8 31.4 13.3 35.6 3.9 37.5 0.0 3 Blue collar, other 17.7 27.6 21.1 34.2 17.1 29.1 35.6 12.2 31.1 2Source: Authors’ calculations based on data from the Health and Retirement Study.

Table 5b

Men Women

Transitions Out of Self Employment as of 2004, by Economic Characteristics

Sample: HRS Core Respondents on Self Employment FTC Jobs in Wave One
coef p-value

Age in 1992

 54 or younger ------ ------

 55 - 59 -0.009 0.499

 60 or older 0.002 0.900

Respondent health

 Excellent/very good 0.005 0.740

 Good ------ ------

 Fair/poor -0.048 0.067

Spouse health

 Excellent/very good 0.017 0.257

 Good ------ ------

 Fair/poor -0.048 0.067

College graduate 0.023 0.162

Married 0.006 0.805

Dependent child -0.001 0.972

Spouse employed -0.002 0.875

Occupational status

 Blue collar - high skilled -0.040 0.022

 Blue collar - other -0.058 0.038

 White collar - high skilled ------ ------

 White collar - other -0.013 0.500

Health insurance status

 Portable -0.012 0.406

 Non-portable ------ ------

 None 0.017 0.577

Pension status

 Defined-benefit -0.030 0.071

 Defined-contribution -0.038 0.048

 Both -0.030 0.283

 None ------ ------

Own home -0.005 0.801

Constant -0.164 0.000

Source: Authors' calculations based on data from the Health and Retirement Study.

Note: Logistic regression also controls for race, wage, wage squared, wealth, wealth 

squared, receipt of an inheritance, and region.

Table 6a

Marginal Effects from Logistic Regression

Dependent Variable: Switch to Self Employment by 2004

Sample: Men on Wage & Salary FTC Jobs in 1992
coef p-value

Age in 1992

 54 or younger ------ ------

 55 - 59 -0.005 0.675

 60 or older 0.002 0.918

Respondent health

 Excellent/very good 0.020 0.091

 Good ------ ------

 Fair/poor -0.030 0.149

Spouse health

 Excellent/very good -0.003 0.802

 Good ------ ------

 Fair/poor -0.005 0.786

College graduate 0.013 0.415

Married 0.002 0.903

Dependent child -0.004 0.775

Spouse employed 0.002 0.851

Occupational status

 Blue collar - high skilled -0.013 0.501

 Blue collar - other 0.012 0.489

 White collar - high skilled ------ ------

 White collar - other -0.011 0.432

Health insurance status

 Portable 0.011 0.350

 Non-portable ------ ------

 None 0.036 0.031

Pension status

 Defined-benefit -0.035 0.002

 Defined-contribution -0.038 0.004

 Both -0.066 0.061

 None ------ ------

Own home -0.024 0.059

Constant -0.169 0.000

Source: Authors' calculations based on data from the Health and Retirement Study.

Note: Logistic regression also controls for race, wage, wage squared, wealth, wealth 

squared, receipt of an inheritance, and region.

Table 6b

Marginal Effects from Logistic Regression

Dependent Variable: Switch to Self Employment by 2004

Sample: Women on Wage & Salary FTC Jobs in 1992
coef p-value coef p-value coef p-value

Age in 1992

 54 or younger ------ ------ ------ ------ ------ ------

 55 - 59 -0.109 0.000 0.001 0.933 0.178 0.000

 60 or older -0.124 0.000 0.003 0.866 0.263 0.000

Respondent health

 Excellent/very good 0.029 0.257 -0.006 0.694 -0.039 0.155

 Good ------ ------ ------ ------ ------ ------

 Fair/poor -0.034 0.388 -0.071 0.017 0.159 0.000

Spouse health

 Excellent/very good 0.000 0.990 0.018 0.257 0.001 0.977

 Good ------ ------ ------ ------ ------ ------

 Fair/poor 0.025 0.507 -0.018 0.513 -0.020 0.635

College -0.022 0.535 0.017 0.332 -0.044 0.240

Married 0.026 0.539 -0.006 0.817 -0.051 0.267

Dependent child -0.020 0.475 -0.007 0.703 0.005 0.880

Spouse employed 0.017 0.503 0.010 0.524 -0.029 0.302

Occupational status

 Blue collar - high skilled -0.082 0.010 -0.044 0.016 0.155 0.000

 Blue collar - other -0.074 0.098 -0.079 0.012 0.131 0.008

 White collar - high skilled ------ ------ ------ ------ ------ ------

 White collar - other -0.026 0.505 -0.019 0.354 0.042 0.320

Health insurance status

 Portable 0.040 0.102 -0.031 0.038 -0.006 0.831

 Non-portable ------ ------ ------ ------ ------ ------

 None 0.051 0.348 0.023 0.489 -0.075 0.213

Pension status

 Defined-benefit -0.083 0.007 -0.017 0.341 0.125 0.000

 Defined-contribution -0.014 0.683 -0.026 0.212 0.001 0.970

 Both -0.017 0.738 -0.003 0.927 -0.003 0.963

 None ------ ------ ------ ------ ------ ------

Own home -0.054 0.105 0.002 0.925 0.063 0.090

Constant 0.196 0.005 -0.066 0.092 -0.069 0.363

Source: Authors' calculations based on data from the Health and Retirement Study. 

Note: Multinomial logistic regression also controls for race, wage, wage squared, wealth, wealth squared, receipt of an inheritance, and 

region.

Wage & Salary Bridge Job Self Employed Bridge Job Exit the Labor Force

Table 7a

Marginal Effects from Multinomial Logistic Regression

Dependent Variable: First Transition from Full-Time Career Job

Men on a Full-Time Career Job in 1992
coef p-value coef p-value coef p-value

Age in 1992

 54 or younger ------ ------ ------ ------ ------ ------

 55 - 59 -0.018 0.507 -0.002 0.899 0.180 0.000

 60 or older -0.051 0.356 0.009 0.705 0.345 0.000

Respondent health

 Excellent/very good 0.031 0.266 0.027 0.053 -0.113 0.000

 Good ------ ------ ------ ------ ------ ------

 Fair/poor -0.059 0.196 -0.021 0.388 0.144 0.001

Spouse health

 Excellent/very good -0.014 0.652 0.004 0.788 0.005 0.885

 Good ------ ------ ------ ------ ------ ------

 Fair/poor -0.097 0.025 0.009 0.649 0.074 0.079

College 0.029 0.430 0.011 0.545 -0.057 0.120

Married -0.017 0.679 -0.003 0.876 -0.032 0.463

Dependent child 0.085 0.013 0.005 0.766 -0.192 0.000

Spouse employed -0.022 0.509 0.000 0.983 0.032 0.348

Occupational status

 Blue collar - high skilled -0.002 0.961 -0.006 0.769 0.084 0.064

 Blue collar - other -0.024 0.596 0.027 0.177 0.006 0.891

 White collar - high skilled ------ ------ ------ ------ ------ ------

 White collar - other 0.007 0.825 -0.021 0.234 0.025 0.449

Health insurance status

 Portable 0.042 0.103 0.008 0.542 -0.017 0.512

 Non-portable ------ ------ ------ ------ ------ ------

 None 0.080 0.124 0.049 0.012 -0.135 0.022

Pension status

 Defined-benefit -0.098 0.001 -0.020 0.133 0.106 0.001

 Defined-contribution -0.089 0.008 -0.023 0.137 0.056 0.104

 Both 0.064 0.354 -0.060 0.179 -0.122 0.119

 None ------ ------ ------ ------ ------ ------

Own home -0.007 0.831 -0.027 0.075 0.056 0.115

Constant 0.205 0.003 -0.118 0.000 -0.064 0.362

Source: Authors' calculations based on data from the Health and Retirement Study.

Note: Multinomial logistic regression also controls for race, wage, wage squared, wealth, wealth squared, receipt of an inheritance, and 

region.

Wage & Salary Bridge Job Self Employed Bridge Job Exit the Labor Force

Table 7b

Marginal Effects from Multinomial Logistic Regression

Dependent Variable: First Transition from Full-Time Career Job

Women on a Full-Time Career Job in 1992
Earnings

 wws

 wse

 I1

I0

 lws lse L

Leisure

Earnings

 wws

 wse

 I1

 I0

 lse

Leisure

Figure 1

lws = L

Case I: Worker prefers wage-and-salary employment

Case II: Worker prefers self employment

The Choice between Wage-and-Salary Work and Self Employment
Figure 2

Percent Working, by Gender, 1992 - 2004

Sample: HRS Core Respondents On a FTC Job in 1992

0

102030405060708090

100

1992 1994 1996 1998 2000 2002 

Year

Percent working
Figure 3

Percent Self Employed among those Working, by Gender, 1992 - 2004

Sample: HRS Core Respondents On a FTC Job in 1992

05

10152025303540

1992 1994 1996 1998 2000 2002 

Year

Percent working

MalesFemales
Figure 4a

Percent Working, by Self Employment Status in 1992, 1992 - 2004

Sample: HRS Core Males On a FTC Job in 1992

0

102030405060708090

100

1992 1994 1996 1998 2000 2002 

Year

Percent working

W&SSE
Figure 4b

Percent Working, by Self Employment Status in 1992, 1992 - 2004

Sample: HRS Core Females On a FTC Job in 1992

0

102030405060708090

100

1992 1994 1996 1998 2000 2002 

Year

Percent working

W&SSE
Figure 5

Percent of Individuals Who Switched Work Status between 1992 and 2004, by Ge

Sample: HRS Respondents On a FTC Job in 1992

05

1015202530

Males Females

Percent

SE to W&SW&S to SE