Self-employed: Long hours and low wages, but high job satisfaction

Self-employed male Britons have been found to work longer hours for lower wages than those of their employee counterparts. This is attributed to them facing greater uncertainty and so working harder as a way to insure their future livelihoods. In addition, according to the research funded by the Economic and Social Research Council, there was no evidence of growing female self-employment, or the anticipated greater labour flexibility resulting from self-employment during the 1990s.

The project, conducted by Professor Simon Parker and Olufunmilola Ajaji-obe of the Durham Centre for Entrepreneurship, University of Durham, sought a better understanding of the nature of work and the labour supply of self-employed people by studying various employment data sources in the UK and the USA.

"More than one-in-ten workers are self-employed in the UK, they employ a similar number of people and run most of the UK's firms. This makes them a very important part of the overall labour market," said Professor Simon Parker. "The study has revealed a number of key findings that might make it easier for policy-makers to successfully promote entrepreneurship and self-employment."

Although self-employed people work long hours, they were less satisfied with the length of time they felt they had to work than employees. Given the chance and like employees, male self-employed Britons respond to higher earnings by working fewer hours.

In addition to examining the changing nature of work of self-employed people, the project also developed a model of entrepreneurial learning and explored the retirement behaviour of older self-employed workers.

"We found that younger entrepreneurs are significantly more sensitive to new information than the older ones. However, overall the whole group adjust their expectations of unobserved productivity, in the light of acquiring new information, by only 16 percent," said Professor Parker. "Another observation was that greater, or potentially greater, earnings around retirement age decreases the probability of retirement of the self-employed. It seems to be, 'Why stop whilst there's a good thing going?' – a very understandable sentiment. Gender, health and family circumstances appear to have little bearing on entrepreneurs' retirement decisions."

Professor Parker identifies a number of key implications:

  • Advantageous welfare benefits policies could alleviate income risk – making self-employment more attractive.
  • In encouraging self-employment, Government should target younger rather than older workers as fewer workers switch into this form of employment in later working life.
  • Policies promoting better health among older workers are likely to discourage the self-employed switching to paid employment, whereas for employees such policies would principally postpone retirement.
  • Entrepreneurship programmes should be open to all levels of experience and promote continuous business awareness and learning.
  • While entrepreneurs exploit new information, they give greater weight to their prior beliefs when forming their expectations.

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FOR FURTHER INFORMATION:

Professor Simon Parker, tel.: 0191 334 6341, or e-mail: s.c.parker@durham.ac.uk

Or Alexandra Saxon or Annika Howard at ESRC on 01793 413032/413119

NOTES FOR EDITORS

1. The research report, 'Explaining the Nature of Work and the Labour Supply of the Self-employed', was funded by the Economic and Social Research Council (ESRC). Professor Simon C. Parker is based at Durham Centre for Entrepreneurship, The University of Durham, 23-26 Old Elvet, Durham, DH11 3HY. The report is available from ESRC Society Today : http://www.esrcsocietytoday.ac.uk/ESRCInfoCentre/ViewAwardPage.aspx?AwardId=2251

2. Research drew on panel data from the British Household Panel Survey, the US Panel Study of Income Dynamics and the UK Retirement Survey. Theoretical and empirical methods were employed to analyse labour supply data, including three econometric specifications dedicated to the self-employed and a model designed to measure their responsiveness to changing market conditions.

3. The ESRC is the UK's largest funding agency for research and postgraduate training relating to social and economic issues. It provides independent, high quality, relevant research to business, the public sector and Government. The ESRC total expenditure in 2005/6 is Ł135million. At any time the ESRC supports over 4,000 researchers and postgraduate students in academic institutions and research policy institutes. More at http://www.esrcsocietytoday.ac.uk

4. ESRC Society Today offers free access to a broad range of social science research and presents it in a way that makes it easy to navigate and saves users valuable time. As well as bringing together all ESRC-funded research (formerly accessible via the Regard website) and key online resources such as the Social Science Information Gateway and the UK Data Archive, non-ESRC resources are included, for example the Office for National Statistics. The portal provides access to early findings and research summaries, as well as full texts and original datasets through integrated search facilities. More at http://www.esrcsocietytoday.ac.uk

5. The ESRC confirms the quality of its funded research by evaluating research projects through a process of peer review. This research has been graded as Outstanding.


Last reviewed: By John M. Grohol, Psy.D. on 21 Feb 2009
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