Baby boomers aren’t so entrepreneurial after all

Pardon me if I’m confused: I thought aging baby boomers like myself represented the next wave of entrepreneurship.

The Kauffman Foundation, for example, reported that 23.4 percent of all entrepreneurs in the U.S. were in the 55-64 age range in 2012, compared with 14.3 percent in 1996. That prompted headlines like this one, “ Why Baby Boomers Can Be Great Entrepreneurs,” in U.S. News & World Report.

Well it turns out that the main reason why baby boomers account for a growing share of entrepreneurs is because there are so many of us boomers out there, not because we’re particularly prone to starting out own businesses.

Self-employment rates do rise with age, but the share of Americans in the 55-64 age who are self-employed has declined from above 18 percent in 1994 to 14.3 percent in 2012, according to a new study published by the Small Business Administration’s Office of Advocacy.

There are three reasons for this decline in self-employment, according to the study:

  • More self-employed people in this age group are leaving self-employment to get jobs with other businesses;
  • The rate of self-employment has declined for 55-year-olds i.e. the youngest of these old folks), particularly in retail; and
  • The share of 55-year-olds in the 55-64 age cohort has increased.

The study also found that women and African-Americans are less likely than others to be self-employed at age 55, and that self-employment at that age increases with educational level and income.

It’s possible Obamacare could boost the rates of self-employment, if it makes health insurance more accessible and affordable for the 55-64 age group.

“Such changes in health insurance would counter the ‘job lock’ phenomenon particularly detrimental during a recession, e.g. individuals not wanting to leave jobs that provide health insurance,” the duty states.

Even if the Affordable Care Act succeeds on this front, however, current tax law concerning health insurance discourages self-employment, the study noted. Self-employed individuals can deduct their health insurance premiums from their income taxes, but they can’t deduct this cost when they calculate their payroll taxes (self-employment taxes).

Changing this tax inequity has been a top priority for the National Association for the Self-Employed for years.


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