By Maria Minniti, Teemu Kautonen & Ewald Kibler
The average age of the global population is increasing. Aging individuals are not always able to find satisfactory outlets for their abilities.
Moreover, finding sufficient funds to maintain the current level of pension and health-care benefits is a major concern for many countries.
We looked at a group of late-career workers who chose to work for themselves or start small companies, instead of retiring or remaining in their current jobs. We found that, despite making less money on average, becoming entrepreneurs triggered a significant increase in their quality of life.
To better understand the outcomes achieved by these workers, we compared individuals who switched to entrepreneurship with those who remained in their original employment, as well as with those who switched to another job as paid employees. Our data came from five biennial surveys conducted between 2002 and 2011 for the English Longitudinal Study of Aging. We considered, in addition to quality of life and income before the career switch, each person’s gender, age, physical and mental health, close social network and overall financial wealth. Important, to measure quality of life accurately we computed a detailed index based on multiple indicators of autonomy, self-realization, control and pleasure developed and thoroughly tested by gerontology scholars.
Switching to a new job increases the quality of life index compared with staying in the same job. However, the increase experienced by late-career workers switching to entrepreneurship is significantly larger, on average, than those experienced by all others. That is, transitioning to entrepreneurship increases quality of life significantly more compared with staying in the same job or switching to another paid job. Yet, switching to entrepreneurship meant, on average, a significant reduction in income not observed in the other groups.
Previous research has focused exclusively on income considerations, which suggested that older workers may be less likely to engage in entrepreneurship than their younger counterparts. The financial benefits from starting a business tend to be risky and realized over time, often with significant delays. Older workers are, therefore, less likely to get a long-run financial gain from entrepreneurship. Our study points to a different story: When nonfinancial motives are added to the picture, entrepreneurship allows late-career workers to achieve a higher quality of life even if it comes at a significant cost in income.
Maria Minniti is the director of the Institute for an Entrepreneurial Society at Syracuse University. Teemu Kautonen is an associate professor of entrepreneurship at Aalto University in Helsinki, Finland. Ewald Kibler is an assistant professor of entrepreneurship at Aalto University.