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- Until recently, academics lumped ‘entrepreneurs’ together with all the ‘self-employed’. A new paper, however, split the self-employed into those who owned incorporated businesses and those who don’t. (Though note that the incorporated self-employed are still very different from startup founders.)
- Self-employed people who own incorporated businesses earn about 50% more than people with regular jobs.
- Most of this is due to them being more educated and working harder. However, even if you correct for these factors, it seems like shifting into owning an incorporated business boosts income by about 18%.
- The unincorporated self-employed (mostly running things like hairdressers, restaurants, corner shops etc.) earn less than salaried workers on average.
- Once you try to compare like-for-like workers, you find that when people switch into unincorporated self-employment, 50% earn less than they would as a salaried worker (but gain more freedom), and 30% earn more. The overall average is about the same.
It’s widely believed that entrepreneurs earn more than salaried workers. However, until recently the research did not seem to back this up. In fact, the findings of several studies in 1989 presented a puzzle: entrepreneurs appeared to earn less than their salaried counterparts.
In his 2013 book The Founder’s Dilemmas,