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Can working solo be good for entrepreneurs?

The self-employed are a diverse group, but they can help us better understand the drivers of well-being at work and help design better policies.

Publishing date
13 July 2022
Authors
Milena Nikolova
.

Policymakers and employers need to understand better the drivers of well-being at work, especially in non-traditional work settings, such as self-employment

Because it matters for workers’ productivity, creativity, absenteeism and turnover, well-being at work has been receiving increasing attention from employers and policymakers. Therefore it is essential to understand better the factors contributing to well-being, especially in atypical work settings, such as self-employment and platform work. Given the rise of non-traditional work settings, boosting well-being in these groups could help European start-ups and scale-ups (ie growing to employ others), which can drive innovation and growth.

The self-employed enjoy better health, job satisfaction, autonomy and work meaningfulness than employees. Yet, the group of self-employed is diverse, and not everyone who is their own boss can achieve the same well-being benefits. For example, necessity self-employment, or starting a business because of no other opportunities to earn a living, can bring workers less well-being and financial benefits compared with salaried employment or opportunity self-employment.

Another important distinction is whether the self-employed employ others or not. Most self-employed workers are solo entrepreneurs (‘solopreneurs’). In the third quarter of 2021, two-thirds of the self-employed worked solo, while a third employed others. Solo entrepreneurs are also a diverse group – comprising high-skilled and financially successful freelancers and precariously employed gig and platform workers. Their importance for dynamic economies has increased over time as companies strive for agile, flexible, and project-based organisational forms and workers look for autonomy and freedomTherefore, understanding whether the well-being benefits of self-employment depend on employing and supervising others can provide important insights.

To this end, in a paper for Small Business Economics: An Entrepreneurship Journal we analysed data on over 80,000 workers living in 30 European countries in 2005, 2010 and 2015. We examined the autonomy and work meaningfulness outcomes of solopreneurs, the self-employed who employ and supervise others, supervisors in the private and public sectors, and traditional workers without supervisory authority in the private and public sectors. We compared workers with similar socio-demographic and job characteristics who differ in terms of their self-employment and supervisory statuses.

The self-employed who employ and supervise others experience slightly higher work meaningfulness levels than similar individuals in any other group, even managers in the public and private sectors (Figure 1). The difference of 2.4 points in work meaningfulness between self-employed supervisors and wage supervisors is small but significant in the statistical sense (predicted work meaningfulness of 53 compared to 50.6 in Figure 1). This difference in work meaningfulness between the self-employed supervisors and wage supervisors arises even though the self-employed who employ others work a bit more, perform more monotonous tasks, learn less on the job and report slightly higher job insecurity and less career advancement compared to salaried managers (Table 1). This again highlights the importance of looking beyond standard job quality indicators.

 

However, it is the solopreneurs who enjoy the greatest benefits of autonomy, and their autonomy levels are even slightly above those of self-employed supervisors (Figure 2). This is important because many people find entrepreneurship a desirable career option primarily because of the freedom it provides.

 

Are the solo self-employed better off than the self-employed who employ others? Not necessarily. We found that solopreneurs earn less than the self-employed who supervise others. They also have more monotonous tasks, greater job insecurity, less learning and lower career chances. However, they work less and enjoy lower stress levels than the self-employed who employ others (Table 1). The solo self-employed thus enjoy less stressful and shorter work weeks, contributing to their slightly higher levels of autonomy. This may be because they can more flexibly determine their schedules or because they do not have to deal with the stress of managing others.

Yet, despite these autonomy benefits, solo self-employment brings slightly less fulfilment and purpose than supervisor self-employment, likely because it limits the ability to communicate with co-workers and form relationships at work.

Our results help support the emerging conclusion that well-being at work is not just about working conditions, such as earnings or working hours. Rather, it is also about job content, relationships at work, the chance to learn and supervising others. Understanding the diversity of work experiences of entrepreneurs and traditional workers in the private and public sectors can help design better policies and programmes to promote the well-being and flourishing of workers.

Companies, policymakers, and societal partners all have a role to play in boosting employee well-being and job quality at work. Policies enhancing autonomy, learning and employee voice can be particularly beneficial in this regard.

 

 

Recommended citation:

Nikolova, Milena (2022) ‘Can working solo be good for entrepreneurs?’, Bruegel Blog, 13 July

About the authors

  • Milena Nikolova

    Milena Nikolova is a Non-resident Fellow at Bruegel and an Associate Professor at the University of Groningen.

    Before joining the University of Groningen, Milena was a Research Associate at the Institute of Labor Economics (IZA), where she is now a Research Fellow. Nikolova is also a Non-resident Fellow at the Brookings Institution and a Fellow at the Global Labor Organization. Dr. Nikolova's work has appeared in leading peer-reviewed journals such as the Journal of Public Economics, World Development, the Journal of Economic Behavior and Organization, the Journal of Business Venturing, and the Journal of Population Economics.

    In addition to her academic career, Nikolova has demonstrated research experience in leading think tanks, such as the Urban Institute and the Brookings Institution.

    Dr. Nikolova is an Editor of the Journal of Population Economics

    Milena holds a Ph.D. in public policy from the University of Maryland, College Park (2014).

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