Everyone Wants to Be Self‑Employed. A Major Study Just Exposed the Hidden Risks for Certain Work |
Everyone Wants to Be Self‑Employed. A Major Study Just Exposed the Hidden Risks for Certain Work
New data shows that working for yourself can be rewarding, but it has downsides.
BY KIT EATON @KITEATON
Countless millions of people are very clear that working for themselves is much better than working for “the man,” for numerous reasons. There’s even a theory that Gen-Z workers, turned off by many restrictive workplace traditions like the 9-to-5 grind, are turning to self-employed trade work in increasing numbers. But new research reminds self-employed people that this choice doesn’t come without challenges. Though accepted wisdom says being self-employed can make you happier, data shows certain types of self-employment may be linked to negative health and financial outcomes.
The research, part of a University of Michigan study that used archival data on around 10,000 U.S. families, shows that not all forms of self-employment are the same. The study split self-employment into three types: people who own businesses, “formal” self-employment (jobs like consulting on contract), and “informal” self-employment—a category that you can imagine includes everything from short-contract gig work, to workers who carry out infrequent odd-job style duties.
The first big take away from the data is that the number of people working in the last category has dramatically increased recently, while more formal forms of self-employment have fallen off. Essentially, this data backs the notion that we really are now in the “gig economy,” thanks to technological advances like fast internet, fully remote working, and shifting perceptions around employment.
The second big take-away is that informal self-employed people, though they now make up the largest self-employed group, are suffering the worst side-effects of being self-employed. This group typically earns less and has lower satisfaction levels, leading to people saying they have worse mental and physical health, Phys.org notes.
How Canva Became the Power Player in the AI Design Wars
On the other side of the coin, and backing up what many people may expect, if you own your own business you’re more likely to have a higher income and say you’re satisfied, reporting better health. Business owners own more assets, tend to have higher education levels, while gig workers have the fewest assets, lower education levels and have more routine-style duties.
Co-author Joelle Abramowitz, an associate social research scientist at the University of Michigan, wrote that informal self-employment often “lacks benefits, stability and a path to growth” compared to other ways you can work for yourself. These types of workers are also “far more likely to cycle in and out of unemployment” she notes, and not necessarily out of choice: if they encounter health issues, they may slip into unemployment and cycle in and out of informal work to “get by.” This type of cycle can then lock “people into work that doesn’t pay much and doesn’t lead to long-term growth.”
But Abramovitch noted that self-employment can also be strikingly fluid—with people also able to shift into more stable formal work, or move into a more entrepreneurial role. This fluidity is possible thanks to the very nature of self-employment, the paper notes, and may even be enabled by technology. For example, the researchers suggest someone working in the transport sector “could choose to innovate a new platform or technology, drive for an app-based ride-sharing service, advertise their own chauffeur services, drive on a contract basis for an established business.” They may even shift gears and begin to “manage their own or someone else’s established business.”