Male/Female Earnings Differences in Self-Employment: The Effects of Marriage, Children, and the Household Division of Labor

Abstract

Data from the National Longitudinal Study of the High School Class of 1972 and the Panel Study of Income Dynamics are used to investigate reasons for the gender earnings gap among the self-employed. Compared to organizational employment, self-employment may allow workers freer adjustment of work effort in response to changing needs for market work income and household production. Consistent with that hypothesis, the analysis shows that self-employed women's earnings declined with marriage, family size, and hours of housework, whereas self-employed men's earnings increased with marriage and family size. Organizationally employed workers' earnings exhibited a similar but less pronounced pattern, suggesting that in the self-employment sector the structure of female/male relative earnings was more sensitive to family size and composition. Self-employed women and men specialized more intensively in housework and market work, respectively. Women apparently tended to choose self-employment to facilitate household production, and men to achieve higher earnings.A tendency for self-employed women to have relatively low earnings is well documented.According to Aronson (1991), the average annual income of fulltime self-employed women was 37% of the income of full-time self-employed men and 28% of the income of male wage and salary workers. Devine's (1994) estimates put the female/male ratio of median self-employed earnings in 1990 at .47 for full-time, fullyear self-employed workers (compared to .69 for wage-and-salary workers) and at .33

How does motherhood affect self-employment performance?

“…Less is known about the existence of such a gap among self-employed women. Hundley (2000Hundley ( , 2001 analyzes the effects of marriage and children on self-employment earnings using US data (NLS-72). He finds that both marriage and children have a negative impact on self-employment earnings among women, while it is positively related to selfemployment earnings among men.…”

“…He finds that both marriage and children have a negative impact on self-employment earnings among women, while it is positively related to selfemployment earnings among men. He also finds that earnings among wage-earners are much less sensitive to both marital status and family size (Hundley 2000). Marshall and Flaig (2014) use a nationally representative dataset for the US to analyze the association between marriage and children and self-employment earnings among women.…”

“…1 Studies exploring this idea find in general that there is a positive correlation between the presence of young children in the household and self-employment probabilities among women (Boden 1996(Boden , 1999Budig 2006;Carr 1996;Hundley 2000;Lombard 2001;Wellington 2006). Two recent papers for Norway and Sweden also find a positive correlation between the presence of young children in the household and self-employment entry (Rønsen 2014;Andersson Joona 2017)-this in spite of the existence of family-friendly policies that encourage labor force participation among mothers and fathers with young children.…”

Earnings, Effort, and Work Flexibility of Self-Employed Women and Men: The Case of St. Croix County, Wisconsin

“…A central hypothesis in these studies, based on the theory of effort proposed by Becker (1985), is that self-employed women earn less than their male counterparts becausedue to specialization in housework-they have less energy available for market work. Hundley (2000Hundley ( , 2001 found empirical support for the hypothesis with the result indicating a negative effect of housework hours on the earnings of self-employed women in OLS regressions.…”

“…1 This compares to an earnings ratio of 75% between women and men working full-time in the wage and salary sector (Blau and Kahn 2000). Hundley (2000Hundley ( , 2001, who also focused on the non-agricultural sector, provided the first systematic analysis of the gender-based earnings gap in self-employment. A central hypothesis in these studies, based on the theory of effort proposed by Becker (1985), is that self-employed women earn less than their male counterparts becausedue to specialization in housework-they have less energy available for market work.…”