Does Self-Employment Increase the EconomicWell-Being of Low-Skilled Workers?

Low-skilled workers do not fare well in today’s skill intensive economy and their opportunitiescontinue to diminish. Given that individuals in this challenging skill segment of the workforceare more likely to have poor experiences in the labor market, and hence incur greater publicexpenses, it is particularly important to seek and evaluate their labor market options. Utilizingdata from the Survey of Income and Program Participation, this paper provides acomprehensive analysis of the economic returns to business ownership among low-skilledworkers and addresses the essential question of whether self-employment is a good optionfor low-skilled individuals that policymakers might consider encouraging. The analysis revealsubstantial differences in the role of self-employment among low-skilled workers acrossgender and nativity – women and immigrants are shown to be of particular importance bothfrom the perspectives of trends and policy relevance. We find that although the returns tolow-skilled self-employment among men are relatively high we find that wage/salaryemployment is a substantially more financially rewarding option for most women. Thesefindings raise the question of why low-skilled women enter self-employment. Our businessstart-up results are consistent, but not conclusive, with lack of affordable child care optionsand limited labor market opportunities in the wage/salary sector as motivating native bornwomen to enter self-employment. We do not find empirical evidence of similar constraintsamong immigrant women....