🎯 Employing Others Is Linked To Wealth And Wellbeing

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By Jonathan Rothwell | April 11, 2024

A view long held in American political philosophy is that working for oneself is a more desirable state than working for others.1

New research on entrepreneurial insights from Gallup, supported by the JPMorgan Chase Foundation and Ewing Marion Kauffman Foundation, finds empirical evidence to support such ideals about entrepreneurship. Adults who employ others score higher than other groups, including employees and non-employer owners, on a variety of measures -- income, wealth, life evaluation and work engagement.

Owner-Employers in the United States Are Rare

Business owners with employees (hereafter referred to as owner-employers) only comprise an estimated 2.4% of all working adults in the U.S. Yet, other forms of business ownership are somewhat common. In addition to owner-employers, 15.3% of the workforce earns some money from self-employment but primarily works for an employer. Another 11.3% are mostly self-employed, and 6.9% are non-employer owners, meaning they are not independent contractors but business owners who do not have employees. Just under two-thirds of workers (64.2%) work entirely for others.

Owner-employers consistently enjoy the highest levels of subjective wellbeing among workers of all different types of work arrangements. Self-employed adults tend to have the lowest scores, whereas non-employer owners and employees have similar scores.

For this study, Gallup asked working adults about their wellbeing in five dimensions:

1. Engagement at work
2. Evaluation of employment situation
3. General life evaluation
4. Financial wellbeing
5. Whether basic needs are being met

Three in four owner-employers (75.4%) indicate high levels of engagement at work, compared with 68.1% of non-employer owners and 50.9% of employees. In this study, high engagement means they believe their opinions count at work, get to do what they do best, are respected at work, get to be creative and get along with colleagues. There is also a large gap in overall job evaluation: 78.1% of owner-employers provide an evaluation score of 7 or higher (out of 10), compared with 57.6% of non-employer owners and 55.5% of employees.

Regarding financial wellbeing, 58.4% of owner-employers say they live comfortably on their present income, compared with 36.0% of non-employer owners and employees. Likewise, only 15.2% of owner-employers indicate having had some level of financial hardship in the past year, compared with 25.6% of non-employer owners and 27.3% of employees.

Owner-employers also rate their overall lives much higher than other workers do. Two-thirds of owner-employers (66.7%) rate their current and future lives highly enough to be considered “thriving” on a zero-to-10 scale. That figure compares with 52.1% among non-employer owners, 50.7% among employees and 48.1% among self-employed workers.

Income and Wealth

The higher rates of subjective wellbeing associated with owning a business that employs others also correspond to higher levels of income and wealth.

In the Gallup survey, owner-employers have a median personal income of $110,000, compared with $24,000 for non-employer owners and $62,000 for employees who do not own a business. Owner-employers also have a strong advantage in median household income, reporting they earn $175,000 annually, compared with $100,000 for non-employer owners. Employees have similar household incomes ($110,000) as non-employer owners.

The median value of non-business assets is approximately $550,000 for owner-employers, compared with $135,000 for non-employer owners and $130,000 for employees. Self-employed adults have the lowest median asset value: $46,000.

The relative differences in income and wealth between non-employer owners and owner-employers in these data are consistent with the U.S. government’s leading source for the analysis of wealth -- the Survey of Consumer Finances (SCF). A Gallup analysis of the 2022 SCF also finds that median household income is approximately twice as high for owner-employers as non-employer owners. As for wealth, SCF data show that median net worth is approximately 4.6 times higher for owner-employers relative to non-employer owners, which is close to the 4.1-to-1 ratio seen in the Gallup data.2

Bottom Line

Entrepreneurship is a narrow pathway to wealth. Being a business owner with no employees is not associated with significantly higher income, wealth, job satisfaction or life evaluation. The entrepreneurial pathway to wealth and wellbeing often requires that a business be large or profitable enough to be able to employ others. However, just 2% of all working adults and 9% of business owners currently employ others. In 2021, 5.4 million business applications were filed with the Internal Revenue Service;3 of those, only 476,000 (9%) employed workers when they launched.4

The associations discussed in this report are consistent with the idea that owning a business that employs others promotes higher subjective wellbeing, income and wealth, but other explanations are possible. Many entrepreneurs launch a business using their personal savings, so higher wealth could lead to ownership, even if ownership does not reliably increase wealth. Yet, the higher incomes generated by owner-employers both in the Gallup and SCF data suggest that being an owner-employer does, in fact, generate more wealth.

Similarly, personality traits associated with confidence and optimism may simultaneously predict both higher subjective wellbeing and business ownership. Gallup will seek to conduct longitudinal research on the subjective wellbeing of working adults to better evaluate how baseline ownership predicts changes in financial and wellbeing-related outcomes.

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