Self-employment rises with joblessness, StatsCan study shows

More than 500,000 Canadians enter the ranks of the self-employed every year, with even more opting for self-employment when joblessness is high, a new study by Statistics Canada shows.

1.5 million Canadians are self-employed, many of them workers over age 45

About half a million Canadians start incorporated businesses every year and just as many stop being 'self-employed.' (iStock)

More than half a million Canadians enter the ranks of the self-employed every year, with even more opting for self-employment when joblessness is high, a new study by Statistics Canada shows.

The study attempts to examine the issue of how many Canadian workers are self-employed, not by choice, but because there aren't jobs available.

Authors Sumaya Bahar and Huju Liu conclude that up to one third of the self-employed are not drawn to creating their own job, but pushed into it.

"In the early to mid-1990s, entry to self-employment far exceeded exits when unemployment was high, but was more or less the same in the post-1998 period when labour markets strengthened," they wrote in their report.

Self-employment goes up with unemployment

"The weaker labour markets of the 1990s were associated with more individuals experimenting with new businesses."

Many people spend only a short time self-employed. While about half a million Canadians enter the ranks of the self-employed every year, an equal number abandon their unincorporated business.

Self-employed people might run their own businesses, follow professional careers, run farms or fishing operations or  provide housing services to others through rental accommodation and many undoubtedly have entrepreneurial skills and will stay self-employed for the long run.

However, that high turnover rate suggests that many people spend a period self-employed to avoid joblessness, but when a job comes along, they take it.

The study, which examined individual tax filings over a period from 1989 to 2010, found an average of 10 per cent of the workforce or 1.7 million people a year reported having an unincorporated business for tax purposes.

The percentage of the workforce who were self-employed ranged from 8.4 per cent in 1989 to a peak of 10.9 per cent in 1998. The authors noted a trend toward rising self-employment after 2000, with a spike emerging in 2009 and 2010 as the impact of the financial crisis led to job cuts in the Canadian economy.

Older workers hit harder

The number of unincorporated self-employed people still remains high, with more than 1.5 million Canadians or nine per cent of the total workforce in 2014 registered as unincorporated self-employed people.

Private sector economists have questioned Canada's continued high level of self-employment, saying that the numbers reflect weakness in labour markets or hidden unemployment.

A higher proportion of older workers opt for self-employment or are forced into it. Among workers aged 45 to 64, anywhere from 16 to 22 per cent of people were self-employed.

This may reflect the undue impact of layoffs on older workers, who have greater difficulty finding work, the report said.

But it also may be the result of these people having the skills and experience needed to begin a business on their own. 

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