Can self-employment delay retirement? Only if you are healthy and wealthy

Posted on: 14 November 2024

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, low-paying careers, however, opt to just retire, according to the study published in the Cambridge Journal of Economics.

The study examined whether self-employment helps bridge the gap to retirement among those aged over 50. It drew on interviews with 123,000 people aged 50 plus in 21 European countries including Ireland, France, UK, and Sweden (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. 

Key findings:

• Over-50s who switched from wage-employment to self-employment were in good health and had good job prospects.
• Over-50s in unstable, low-earning careers, meanwhile, were found to be significantly less likely to switch to self-employment. 
• Switches to self-employment were only associated with positive circumstances.

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. 

Prof O’Hagan explained: “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. 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. In this context, self-employment among older workers has gained attention as a potential solution to extend working lives and offer opportunities to those facing age-related discrimination. 

“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 paper, Does self-employment provide a bridge to retirement?, was published in the Cambridge Journal of Economics, and can be accessed here.
• This study drew on data from the Survey of Health, Ageing and Retirement in Europe (SHARE) project, which conducted interviews with 123,000 individuals aged 50 plus and their spouses across 21 European countries in 2005, 2007, 2009, 2011, 2013 and 2015, collecting data on health, employment, socio-economic status, social networks and other demographic factors. See more here: https://share-eric.eu/

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