Does the transition to self-employment benefit mental health? Evidence from the UK

There is limited research evidence on the mental health consequences of self-employment transitions from wage employment. This study fills this gap by investigating this issue using a difference-in-differences design with matching methods employing data from the UK Household Longitudinal Study (2009–2021). The results suggest that transitions to self-employment are associated with a small but significant decrease in psychological distress, signalling improvements in mental health. These effects are stronger among workers with poorer initial mental health when compared to their non-self-employed counterparts. Along with the self-employment transitions, workers also experience declines in socio-economic status but improvements in job autonomy, job satisfaction and satisfaction with leisure time. Overall, these findings highlight the potential protective effects of self-employment on workers’ mental health; however, caution is needed in considering the mental health premium of self-employment transitions.