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New Findings Connecting Earnings and Health in Self-Employment

New Findings Connecting Earnings and Health in Self-Employment

Self-employment appears to be the next solution for economic recovery for individuals and countries. Or does it?

If it’s your next solution for financial independence, how would you determine if you are equipped with the right tools, skills, and mindset? This study suggests that optimal health can be a huge indicator.

In short, do you enjoy ideal, or average, physical and emotional health? If not, you may end up earning way less in your self-employment venture than you would in your day job. Even if it’s not a total failure, it’s a continued loss in income that you suffer only because of your less-than-ideal health.

Study Background

Self-employed sector makes a vital part of the economy which not only takes the responsibility of their financial well-being but also the financial health of other employees. This sector, however, experiences more complexity at work as they have to juggle numerous duties to make their venture financially viable.

Recent studies show that there is a significant relationship between earnings and the health of a self-employed person. This claim counters previous studies where no such relationship could be deduced. It also highlights that the relationship is stronger in self-employed than in wage workers.

There can be different reasons for this relationship. First is the ability of self-employed to manage their time. These professionals have higher control over their human capital, or their productivity; which translates into more targeted efforts on result-producing activities.

Second is the perceived relationship between their efforts and earnings. Self-employed know that their earnings directly depend on their efforts. Consequently, they put in every ounce of their health in maximizing results.

The complexity, which is unique to self-employment versus a job, also makes this relationship between health and earning more understandable. They have to juggle marketing, networking, operation, and human resource management to meet the everyday requirements of running their business. Oftentimes, these tasks come in addition to the primary business activity they are responsible to work on.

What does this complexity mean to the relationship between health and earnings of self-employed? An emotionally healthier entrepreneur would, for example, give enough time to marketing efforts without being stressed out because of excess pressure on primary business activity.

Research Question

Is the relationship between financial wellbeing and health stronger in self-employed than in wage workers.

Method

The study kept earnings as the dependent variable for which it took data from Households, Income and Labor Dynamics in Australia (HILDA)’s the longitudinal dataset from 2001. Its independent variable is health that includes general health, body pains, and mental health. This data is taken from the Short Form Health (SF-36) questionnaire. The survey self-employment status acted as a moderator variable.

Results

The study presented its results in three subsets; general health-income, physical health-income, and mental health-income relationships.

It showed that for the one standard deviation in general health resulted in a 1.1% increase in wage workers’ earnings as opposed to a 3.9% increase in self-employment income.

Secondly, one standard deviation in physical health equaled a 1.5% increase in wage workers’ earnings compared to a 4.2% increase in self-employment income.

Thirdly, one standard deviation in mental health equaled a 1.3% increase in wage workers’ earnings compared to a 1.0% increase in self-employment income.

As we can see, the health-income relationship is stronger in general and physical health areas but weaker in mental health scenarios.

Wrap Up

The study starts by referring to the fact that self-employed are healthier than job-holders. It then goes on to make this increase in health a consequence of survivorship bias. After all, all the less healthy people have to opt-out of the self-employment lifestyle because of the loss of income that resulted from ill-health. And what is left is a pool of healthy and healthier individuals who are not only striving but also thriving because of increased income that comes with better health in this lifestyle.

 

Source: Hessels, J., Rietveld, C., & van der Zwan, P. (2020). The Relation Between Health and Earnings in Self-Employment. Frontiers In Psychology11. doi: 10.3389/fpsyg.2020.00801

Written by Aruba Arif

Aruba Arif, Msc Psychology, is a freelance blogger who is passionate about understanding people, writing, and connecting with herself. When she is not writing she is playing Mommy to her beloved son.

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