The role of self-employment in Ireland’s older workforce

August 6, 2019

The Journal of the Economics of Ageing, Vol. 14, 2019, 100201

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A feature of employment at older ages that has been observed in many countries, including Ireland, is the higher share of self-employment. This pattern of higher self-employment rates may reflect lower rates of retirement among the self-employed compared to employees, as well as transitions into self-employment at older ages. While the US literature finds evidence for both explanations, the non-US literature is more ambiguous. In this paper, we use data from four waves of the Irish Longitudinal Study on Ageing (TILDA), spanning the period 2010–2016, to test whether higher rates of self-employment at older age results from both a lower probability of retirement on the part of the self-employed, as well as transitions into self-employment. We also examine the characteristics of the older self-employed and focus on the role of differences in supplementary pension cover between the employed and self-employed in determining retirement decisions. We find that the higher proportion of self-employed people at older ages in Ireland results from lower retirement rates among the self-employed and not from transitions from employment to self-employment. This is in contrast to the US where transitions into self-employment are more prevalent. We find that the self-employed are older, more likely to be male, and significantly less likely to have any form of supplementary pension cover than the employed. These lower retirement rates and lower degrees of supplementary pension cover suggest that standard approaches to pension provision may be less effective in proving attractive to the self-employed in Ireland.