Examines how self-employment or operating a family-owned business influences income mobility for individuals and their children.
“Test[s] the notion that entrepreneurship is a path to economic advancement in the United States by comparing the income mobility of self-employed and family-business owning entrepreneurs to the income mobility of wage and salary workers, using data from the PSID [Panel Student of Income Dynamics] covering 1968–2007” (p.1). The report describes the sample of about 6,600 respondents in each year from 1968 to 2007, explains a common method of measuring income or status mobility, and uses various measures to examine the effects of self-employment and family-business ownership on income mobility. The study also questions the role of policy in supporting self-employment or family-business owning entrepreneurs and suggests parameters for cost-benefit calculations for such new polices. (Abstractor: Author and Website Staff)

Major Findings & Recommendations

• “Family-business ownership is associated with faster upward mobility than observed in paid work” (p.16). • Evidence suggests that self-employment does not provide an advantage in achieving upward mobility. “In comparison to wage-and-salary workers, the self-employed are far more likely to experience downward income mobility. Self-employment both significantly lowers the probability of upward mobility and significantly increases the probability of downward mobility in comparison to paid work. However, self-employment may produce an intergenerational benefit, at least for those with weaker wage and salary prospects” (p.16). • “Even though the case for increasing self-employment as a means of promoting economic mobility is weak in our data and the case for family business promoting economic mobility is strong, there is no clear evidence that any family is better off on average from pursuing either option, since variability of outcomes are greater as well” (p.17). (Abstractor: Author and Website Staff)