Why you should care
Because starting your own business isn’t necessarily the ticket to fulfillment.
America has created a cult of the entrepreneur — from the daring Elon Musk to the visionary Steve Jobs to those Main Street small business owners glorified in political speeches. But for the 10 percent of the country that is self-employed, the truth is different from the heroic picture.
Self-employed people report lower life satisfaction than wage earners.
The finding comes from a Brookings Institution analysis of 600,000 data points from the Gallup-Healthways survey of the United States from 2010–2016. It finds the self-employed, on average, make less money and are less educated than the public at large. That’s because many entrepreneurs are doing so by necessity rather than striking off on their own after telling the boss to take this job and shove it.
The independent contractors of the new economy often go without health insurance, retirement plans and paid vacation.
Those who selected self-employment by choice, and were on average more educated and more wealthy, reported being “as happy as otherwise employed people, maybe a little happier,” says Carol Graham, who co-authored the study for Brookings. But when looking at the well-being of people forced into self-employment by their circumstances, “it’s not what they thought their lives would be like,” she says.
In many ways it’s a story of the crack-up of the old economy, with less job stability across the board and fewer opportunities for the less educated. The independent contractors of the new economy — snatching gigs with Upwork and TaskRabbit, and driving for Uber on the side — often go without health insurance, retirement plans and paid vacation. Another interesting finding, Graham says, is that entrepreneurs are disproportionately Muslim — a signal that many are immigrants and have fewer connections to find jobs so they have to hustle for themselves.
Boris Nikolaev, a business school professor specializing in entrepreneurship at Baylor University, says the Brookings study tracks with other research into entrepreneurs’ characteristics. One important distinction he points out: job satisfaction versus life satisfaction. For the self-employed, job satisfaction is consistently higher than those who have to report to a boss. But life satisfaction is a mixed bag because the self-employed on average work longer hours for less pay, so their personal lives can suffer. A recent study in Germany, for example, found some entrepreneurs enjoyed life benefits — but only if they chose the path themselves, and even then they were less satisfied with their leisure time.
Yet when Nikolaev asks his students if they want to work for themselves, nearly every hand in the room goes up. Granted, some of this is self-selection: They’re taking an entrepreneurship class. And many Americans long have told surveys they want to be their own boss. But Nikolaev says “younger people today are probably more drawn toward this idea of entrepreneurship, working for themselves, having more freedom, partly because of the images of entrepreneurs — we have more around us.” But just like for aspiring rock stars and NBA players, the odds of achieving Zuckerbergian heights remains remote. Reality, it turns out, is far more grueling