Self employed income data is necessarily biased with survivorship bias of only including those those succeed at being self employed.So yes, on average, people who have the ability to sustain self-employment income tend to do better than people who are employed.
But that doesn't account for the enormous number of the self-employed people who rapidly fail.
It's a bit of an apples to oranges kind of thing.
Your first argument is the popular wisdom. But I've argued for a long time that it's misleading.For one thing, it assumes someone only gets one "at bat." E.g., if there's a 50% chance of failure in a venture, you assume someone's chance of succeeding at self-employment equals 50%. But if someone makes two attempts or three? Or what if someone smart and disciplined makes two or three attempts.
Why is the chance they will fail not more like 50% times 50%? (So 25%?) Or 50% times 50% times 50%? (So 12.5%?)
The other thing is the data presumably include the failures. So those are averaged in. They're grouping all the self-employed people, successful and unsuccessful. New and old.
One other philosophical point: The "most people fail" argument can be applied to a bunch of pursuits: Attending a selective university. Applying to medical school or dental school. Starting a Ph.D. program. Just an observation.
P.S. I don't say this to change your mind. I'm responding for benefit of folks who think about self-employment and entrepreneurship as career options.
The data doesn't include the failures though because the failures quickly self-select themselves out of the data.
Anyone who is reporting ongoing self-employed income is someone who is succeeding at making an income self-employed.
A LOT of self employed people fail within a few years, especially those starting businesses.
Meanwhile, most people who secure employment tend to stay employed. It is much more probable that someone just continues to collect a paycheque than that someone successfully starts their own business and makes money off of it for years on end.
I get your point, but I come from a family of almost entirely small business owners, I've always been self-employed, and as a side hustle have worked (self-employed) in the finance world specifically advising self-employed people. One of my closest friends also specifically researches self-employment data for the government. So my perspective on this is fairly reasonably informed and not at all biased against self-employment.
My point is not that other data doesn't have survivorship bias baked in, of course it does, and I'm often the first person to argue that. My point is that when comparing employee income on average to self-employed income, you will see a significant impact of that survivorship bias because A LOT of the people who fail at self-employment will end up back on the employment side of the equation.
The big difference in comparing the two is that someone who fails in their professional goals as an employee usually still stays an employee making less money than they had hoped.
Someone who fails at self-employment doesn't usually just make less money than they had hoped, they usually leave self-employment altogether.
This makes comparing the two misleading.
