The impact of financial insecurity on the self-employed’s short-term psychological distress: Evidence from the COVID-19 pandemic

The earnings of the self-employed are relatively low and volatile, a risk that exacerbated during the recent COVID-19 pandemic. Using three two-weeks-apart waves of data from the Understanding America Study, we show that relative to wage workers, the self-employed experience greater psychological distress through self-reported financial insecurity (the chance of running out of money). Using additional cross-sectional data from the COVID-19 Household Impact Survey, we show that the self-reported chance of job loss disproportionally impacts the psychological distress of the self-employed. Together, these results underscore that the economic uncertainties induced by the COVID-19 pandemic hit the self-employed particularly harsh by deteriorating short-term psychological distress. Moreover, our study is informative about the impact of income uncertainty on psychological distress.