Self-employment swelled last year as the labour market softened, but a study Monday suggests it wasn't solely due to layoffs in the private sector.
The number of self-employed in Canada grew by more than 100,000, or 4.3 per cent between October, 2008 and October, 2009. At the same time, paid employment tumbled by 480,000, or 3.3 per cent.
The obvious conclusion is that droves of laid-off workers were forced into self-employment because they had few other choices. But that isn't entirely the case, the Statistics Canada paper said.
"Layoffs likely explained some, but not all, of the recent increase in self-employment," it concluded.
After the first five months of the downturn, beginning in October, 2008, the characteristics of those who lost their jobs bore little resemblance to those who became self-employed. Twenty-eight per cent of recently laid-off paid employees were employed by manufacturing firms. In contrast, many of those who became self-employed in the ensuing months were in services such as finance and real estate.
Secondly, history suggests most laid-off workers typically become re-employed in a relatively short time span, while only a small portion become self-employed in the months that follow the loss of a paid job, the study said. Even if the rate of recently laid-off workers hit the high end of what's been observed in the past 14 years, laid-off workers would account for just over one-third of those who became self-employed.
Demographics also suggest not everyone starting their own business was a laid-off worker. Women accounted for the majority of the increase over the one-year period, at 58 per cent, though men lost more jobs.
And the self-employment increase was entirely concentrated among older workers -- particularly those at least 55 years of age.
Despite last year's growth, the self-employment rate among older workers remained lower than in the late 1990s. Much of the increase was in Quebec, followed by Ontario and British Columbia.
Factors that may be driving the move into self-employment include the desire for more flexible working hours, and potential earnings, along with economic factors such as the layoff of a spouse, the study said.
Net numbers hide huge movements that occurred in the self-employment category. About 285,000 individuals entered self-employment in the one-year period, while 170,000 exited.
About 2.7 million Canadians are currently self-employed. Levels of these workers were relatively flat in the 2000s, after constant growth in the two decades up to 1999.
Self-employment accelerated during recessionary periods in the early 1980s and 1990s and most of those increases were retained in subsequent recoveries, the paper said.
Statscan defines self employment as employed people who work for themselves or work without pay for a family business. Many work alone, but others may be small business owners and employ paid workers.