Assessing the Horatio Alger myth: Is self-employment especially beneficial for those from less-advantaged family backgrounds?

The findings of this study contradict the popular belief that self-employment is especially beneficial as a path to economic progress for those from more disadvantaged backgrounds. Data from the National Longitudinal Survey of Youth 1979 Cohort (NLSY79) show that the relative earnings gain from being self-employed rather than working for an organization actually increases with the level of socioeconomic background. Those from a higher socioeconomic background can expect to earn much more in self-employment than in organizational employment while those from the lower socioeconomic background can expect to earn much less. While there are some indications that the more disadvantaged are more likely to attain very high incomes if they do become self-employed, the percentage of this group who attain higher incomes through self-employment is lower than it is for higher socioeconomic groups.