Is self-employment a key to happiness?

29 April 2022. The current study provides a quantitative summary of the findings of 94 research works over a period of 40 years and from 82 countries. The result: generally, it is worth quitting employment and setting up a company of one’s own since as a rule, self-employed people enjoy a significantly higher degree of well-being than employees – even more so if their entrepreneurial activity is the result of a deliberate decision rather than having been imposed by circumstances. The source data of the meta-analysis were derived from quantitative studies in a number of disciplines such as business administration with a focus on entrepreneurship and management, but also economics, psychology and medicine. All in all, the survey concerning well-being and entrepreneurship thus analysed the results of 6.7 million individual interviewees.

More autonomy makes for more contentment

One of the main reasons for a greater measure of contentment among self-employed people is the higher degree of autonomy that characterises entrepreneurship. To a much greater extent than employees, entrepreneurs are able to mould their work (and their company) in line with their skills and values, and to decide when, how, on what and with whom they want to work. “Autonomy is an important resource for well-being since it enables us to make self-determined decisions and to take self-regulated actions which satisfy fundamental psychological needs,” says Prof. Dr. Isabella Hatak of the Swiss Institute of Small Business and Entrepreneurship of the University of St.Gallen (KMU-HSG). She conducted the study in cooperation with Prof. Dr. Ute Stephan of King’s College London and Prof. Dr. Andreas Rauch of the Audencia Business School. “Our findings are relevant to the configuration of future working conditions, which will increasingly be shaped by entrepreneurial characteristics such as flexibility, autonomy and responsibility, particularly for strategic executive staff, who share their well-being resources and stressors with entrepreneurs.”

Weak legal systems cause stress

The study also found, however, that entrepreneurs’ well-being can also be influenced by institutional framework conditions. Thus legal security is essential to their happiness, indeed even more so than the economic development in terms of the GDP. Countries with pronounced legal security have effective and fair legal systems, secure rights of ownership, little corruption and a democratic government. In such countries, entrepreneurs can be certain that they are able to reap the fruits of their endeavours and investments and to achieve self-realisation through their company. Conversely, in countries with weak legal security, entrepreneurship becomes more stressful and entrepreneurs are even less happy than employees, explains Isabella Hatak. “The latest research reveals that a deterioration of legal security prevents people from turning to self-employment. Thus investments in legal security enable political decision-makers to increase both the number of start-ups and the well-being of those who run them.”

Digital communication impairs well-being

The opportunity to examine data from such a long period of time enabled the international team of researchers to understand longer-term changes. It was revealed that self-employed people’s contentment had decreased slightly since 2000. This can be explained by, among other things, the increase in digital communication, which resulted in a situation whereby entrepreneurs are always accessible, which turned out to be an additional stress factor for them.

Although according to the study, well-being increased significantly among entrepreneurs, Isabella Hatak cannot say that self-employed people have fewer negative emotional states or mental challenges than employees: “Entrepreneurship makes you happier but not less unhappy.”

Image: Unsplash / Avi Richards