Occupational choice and returns to self‐employment among immigrants

Purpose – Self‐employment has been stressed as a way for immigrants to enter and improve their situation in the labour market. However, research shows that some people who become self‐employed revert to wage employment or unemployment. The purpose of the paper is to study the labour market consequences of temporary self‐employment on paid employment among immigrants. Design/methodology/approach – The paper uses micro‐econometric methods to estimate the effect of self‐employment, relative to continued wage employment, on earnings and employment opportunities in 2006. The paper also identifies the type of wage earner that temporarily enters self‐employment. Findings – The paper finds that, relative to continued wage employment, self‐employment, with few exceptions, does not improve outcomes in the wage sector of immigrants and may in fact be associated with lower earnings and difficulties in returning to paid employment. Practical implications – The results indicate that encouraging immigrant wage earners to become self‐employed should be done with care, since self‐employment does not necessarily improve subsequent labour market outcomes. Originality/value – This study will be valuable to those who are interested in the economic consequences of immigrant self‐employment.