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July 23, 2018

The Different Pictures of Self-Employment Between Developing and Developed Nations

Interviews and surveys conducted by the International Labour Organization show that nearly three in every ten workers worldwide are self-employed. These workers are defined as any person working for more than one hour per week and can be found all over the world. However, the status and working conditions of self-employed individuals are different based on where the worker is located. In developing nations, self-employment carries a different connotation than in developed nations.

Where is the World’s Self Employed?

Data released by the Organization for Economic Co-operation and Development revealed that self-employment is highest in countries with lower income per capita. In 2014, Greece, Mexico, and Turkey topped the charts with about 30 percent of these nation’s entire workforce comprising of self-employed workers. Other studies conducted by the World Bank show that countries such as Afghanistan, Albania, Algeria, Bangladesh, Ghana, Madagascar, and Mali have extremely high self-employment rates over 50 percent. In general, most of the world’s poor people are self-employed and rely on themselves to make a living.

The Picture of Self-Employment in Developing Nations

Three billion of the world’s self-employment population lives off $2 a day. In poorer areas, self-employment is a survival strategy. In an environment where people have no other means of generating an income, people have started to create their own sources of revenue. Therefore, surveys show that a majority of self-employed individuals in developing nations work for themselves either because they have been rationed out of wage jobs or because it provides the flexibility to move around. If a person’s home is uprooted, the individual can still create a living in another area and continue to provide for their family. Therefore, older generations of the family tend to be the ones in self-employment and making a living for the younger generations.

What About Developed Nations?

Although self-employment in developing nations is a means of survival, the term has a different meaning in more developed economies. In nations such as the United States and the United Kingdom, self-employment is a marker of entrepreneurship and creativity. Therefore, the self-employment rate in these countries is much lower than in developing nations. In the United States, the rate is 10 percent while the United Kingdom sits at 15.4 percent.

The Picture of Self Employment in Developed Nations

In developed nations, self-employment is a choice rather than a lack of choice. According to a Freshbooks survey, the number one reason people transition to self-employment in the United States is for control over their career and a more flexible way to make money. Also, in contrast to developing nations, 54 percent of people that make the move to self-employment make more money than they did under contractual employment. 42 percent of these independent workers are also millennials, which shows that self-employment in developed nations targets younger generations rather than the older generations targeted in developing countries.

Self-employment is drastically different between developing and developed nations. While independent work is seen as a means of survival in developing nations, it is seen as creativity and entrepreneurial success in developed nations. 

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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