More Canadians turning to self-employment in shaky job market

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More Canadians are joining the ranks of the self-employed, reflecting a reluctance among employers to make permanent hires, as well as the desire for some older workers to be their own bosses.

Self-employment has climbed 3.6 per cent in the past year, outstripping an increase of 1.5 per cent among private-sector workers and a drop of 0.4 per cent in the public sector. The number of self-employed people grew by 95,600 between August and the same month last year – accounting for almost 40 per cent of new jobs created in that time.

Self-employment can spur innovation and entrepreneurship, and pave the way for the creation of many small businesses that eventually turn into bigger ones.

But the growing trend also reflects an aversion by many Canadian firms to expand payrolls amid uncertainty about the economy.

"I think that many of them are forced self-employed," said Benjamin Tal, deputy chief economist at CIBC World Markets Inc., adding that this is the fastest year-over-year pace of growth in self-employment since the last recession.

Over the past half year, average job gains have eased to 12,000 a month, less than half the pace of the previous six months. And economic growth in Canada "has slowed," Tiff Macklem, senior deputy governor of the Bank of Canada, said last week. "In an uncertain world, firms need to see demand pick up before they will commit."

Self-employment can offer workers more flexibility and creativity – but many such jobs also come without retirement or health benefits and with lower financial returns, especially as people start out.

For the broader economy, more people without a steady paycheque could dent consumer spending and the ability to save.

A more detailed breakdown on self-employment growth shows much of the increase is in Alberta and Ontario, and among people over the age of 45, Statistics Canada data show. And the majority are women, who account for three quarters or 70,800 of the newly self employed.

Andrea Zanetti is one of them. The 51-year-old is now a self-employed HR consultant, working out of her home in Caledon, Ont., after a restructuring at her large company left her without work. She wasn't prepared for self-employment and now earns less – but says it's worth the trade-off for more fulfilling work, less stress and no more commutes.

"The employment deal was supposed to be that the economy will take care of you – you will be employed til you're 65 and then you retire. Well, I don't think that's true any more," says Ms. Zanetti, adding that boomers, and women in particular, are seeing self-employment as better for work-life balance particularly as eroded pensions and benefits make paid work less attractive.

"I talk to lots of people in transition, they're 45-plus and they start to question... whether running around like a lunatic is so great. They want a better pace."

The likelihood of success is the same regardless of whether the individual was forced or not into self-employment, Mr. Tal says. That women with experience are accounting for the growth is "actually a good combination."

The move toward self-employment and contract work is a permanent shift, says Jim Geraghty, president of Happen, a network for job-searching managers and executives.

"It's expensive to hire someone, especially in a more senior role … whereas with a contract they're getting a chance to test drive someone," he says. "With uncertainty in the marketplace, employers are getting people to come in, solve their problem and move on in a short period of time."

In Calgary, baby boomers "who have had a good careers and are not ready to stop working" are starting their own businesses, says Ray DePaul, director for Innovation and Entrepreneurships at Mount Royal University. Common options include starting a retail business, serving the energy sector and developing new apps or websites.

Statscan releases the labour force survey for September on Friday. Economists are expecting the jobless rate to hold at 7.1 per cent with 10,000 new jobs created.