Labor-force participation patterns of older self-employed workers

Self-employed persons work in a less constrained environment than do most wage-and-salary employees. Generally they are not subject to compulsory retirement nor are they affected by institutional rules concerning labor supply. Data from the 1969 and 1971 interviews of the Retirement History Study show that the labor supply and retirement patterns of the self-employed are distinct from those of other workers. The self-employed (espeically "career" self-employed) nearing retirement age are less likely to be out of the labor force, and those who continue in the labor force have a wider variation in the number of hours worked per year. Downward flexibility in hours (the option for gradual retirement) may be an extremely valuable aspect of self-employed status, and one wonders whether other older workers would also choose this pattern if more flexible opportunities were available. Despite these differences, labor-supply decisions of the self-employed are found to be influenced by many of the same factors that affect the rest of the workforce--health, eligibility for social security and pension benefits, the wage rate, and the flow of asset.