Are ‘Voluntary’ Self-Employed Better Prepared for Retirement than ‘Forced’ Self-Employed? The Case of the Netherlands and Germany

Abstract

When it comes to financial preparation for retirement, self-employed workers in many European countries face unique challenges not encountered by traditional wage earners. This is particularly true for self-employed workers who do not supervise subordinate personnel. This is the case because many self-employed individuals in nations such as the Netherlands and Germany do not have large-scale access to employer-sponsored pensions, which are a mainstay of pension support for most workers in those two countries. In this investigation, we explored the saving practices and perceived future pension adequacy of self-employed workers aged 15-65 in Germany (N = 702) and the Netherlands (N = 655). Of particular interest was whether respondents felt that they voluntarily chose to become self-employed, or whether they felt “forced” to enter self-employment due to economic or labor market pressures. Findings revealed that some 25 percent of workers were driven into self-employment out of necessity. Moreover, forced self-employed individuals were found to be less likely to save for retirement than their voluntary self-employed counterparts, and they envisioned a less optimistic future pension scenario for themselves. Additional analyses focused on the demographic and psychological dimensions that underlie saving practices and perceptions of pension adequacy. Discussion focuses on the need to change institutional practices and public policies that place self-employed individuals at a disadvantage — particularly those who are driven into self-employment based on economic pressures and a lack of opportunities in the traditional labor market.

Keywords: Self-employed, retirement, saving, pension, Netherlands, Germany, psychology