Hidden costs of entering self-employment: the spouse’s psychological well-being

Spouses are known to play a critical supportive role for the self-employed, yet very little evidence is available concerning how entrepreneurial pursuits affect the spouse. The present analysis offers a contribution by evaluating short-term psychological well-being dynamics among spouses of individuals entering self-employment, using panel survey data from Australia. We construct matched control samples based on a range of relevant characteristics to mitigate selection bias and find that spouses of self-employed individuals report substantially higher levels of well-being before entry into self-employment and experience a modest but statistically significant decrease in well-being following entry. This is consistent with the hypothesis that self-employment demands substantial psychological capital from spouses. These patterns hold for both genders, with only moderate gender differences identified. In contrast, spouses of those entering self-employment from unemployment report improvements in well-being. If contemplating self-employment, consider your spouse: Spouses of the self-employed report reduced psychological well-being following transition into self-employment. However, they report improved well-being if transitioning from unemployment. We compare the psychological well-being of spouses of individuals who enter self-employment with comparable others before and after transition. Spouses of self-employed individuals report substantially higher levels of well-being before entry into self-employment and a modest decrease in well-being following entry. This is consistent with the hypothesis that self-employment demands substantial psychological capital from spouses. These patterns hold for both genders, with only moderate gender differences identified. In contrast, spouses of those entering self-employment from unemployment report improvements in well-being. Our results suggest would-be entrepreneurs should recognise the impact this may have on their spouses. Policymakers should and recognise the important role held by spouses and consider improving access to support services to assist the self-employed and their families.