Self-employment as an Alternative to Labor Market Bifurcation: The Role of Human and Ethnic Social Capital

Abstract

The article examines the role of self-employment in a post-industrial labor market bifurcated between high paying-jobs in the profession and low-paying jobs in the services and construction. In the context, self-employment emerges as an alternative to pour wages and unemployment among both native and immigrant workers. The analysis shows that self-employment is not homogenous between “survival” enterprises yielding minimal income and incorporated firms whose owners earn incomes significantly above their wage-earning counterparts. We examine these differences among whites, blacks, native born and major immigrant nationalities. We examine determinants of earnings and self-employment and find that both are significantly influenced by human capital factors but that, controlling for them, significant differences exist among ethnic groups. These are attributed to differences in social capital linked to ethnic networks. The paper illustrates these differences with examples from the immigrant economic literature and discusses the implications for individual and collective economic achievement.