Given the rising life expectancy and rapidly aging workforce population in many developed countries, the decision when to retire becomes an increasingly relevant issue. In response to these demographic changes, policymakers are considering the promotion of senior entrepreneurship.
A recent IZA discussion paper by Michael Fritsch, Alina Sorgner and Michael Wyrwich reveals that transitions into self-employment among the elderly population are extremely rare. At the same time, the share of self-employed individuals among all senior employed individuals increases as people age, suggesting that senior self-employed remain active longer in the labor market.
Comparison of senior entrepreneurs, paid employees and retirees
The authors address the following questions: What keeps seniors in self-employment? How can self-employment in old age be explained? Are senior entrepreneurs happier than their paid-employed and, particularly, their retired counterparts?
The study explores whether senior self-employed in Germany lead happier lives than their retired or paid-employed counterparts. The findings indicate that senior entrepreneurs are more satisfied with their lives than senior paid-employed and retired individuals. Income appears to play a key role in the higher life satisfaction of senior self-employed individuals, influencing their preference to remain in self-employment rather than retire.
Health is an important factor
Furthermore, health, both physical and mental, emerges as a crucial factor for higher life satisfaction among senior entrepreneurs compared to senior paid employees and retirees. Controlling for health status, retirees are found to be more satisfied with their lives than employed seniors.
The results strongly suggest that policy initiatives aimed at promoting senior entrepreneurship should consider health as a key barrier to entrepreneurship in older age. In cases where poor health conditions hinder attempts to earn additional income, public support might be necessary.
In turn, younger entrepreneurs should proactively address potential health challenges that may arise later due to the mental and physical demands of their entrepreneurial activity. Educational programs should be designed to make younger entrepreneurs aware that poor health at older age may decrease life satisfaction particularly for the self-employed.