As the Canadian labour market heals from the pandemic, a key segment of workers is disappearing rapidly by the month: the self-employed.
Around 280,000 fewer people are self-employed than when the pandemic started, a decline of 9.7 per cent, according to Statistics Canada figures through October. The share of those who work for themselves (13.6 per cent) is the lowest in nearly four decades.
It’s an unusual outcome in an economic downturn. Self-employment typically increases in a recession as laid-off employees look for alternative work arrangements. Furthermore, the self-employed do not fire themselves, hanging on if their business remains viable.
This economic cycle is different. After huge layoffs to start the pandemic, the number of employees snapped back quickly and now exceeds pre-crisis levels. A massive influx of federal support for companies helped them rehire, and drove business insolvencies to record lows – again, bucking the recessionary trend.
Self-employment, by contrast, has been in a near-perpetual decline. And the losses are widespread, whether the self-employed are incorporated or not, or have paid help or work alone.
The slide is somewhat tough to explain. Canada’s main labour report doesn’t explicitly track employment transitions for individuals over a prolonged period.
Regardless, several analysts said the swoon may partly reflect a shift from people working for themselves to working for others, rather than abandoning the job market. Labour participation rates are back to prepandemic levels, a positive sign for Canada’s economic recovery. Moreover, companies are recruiting for a record number of positions in a tight market, which is starting to push up wages and make that a more attractive work option.
“What seems to make the most sense is that people have had job opportunities elsewhere,” said Mikal Skuterud, an economics professor at the University of Waterloo. “Which means it’s not necessarily a negative story.”
That is exactly what happened with Maggie Barton Baird. She had run her own Edmonton-based event-planning company for eight years when the pandemic hit. Although travel restrictions and limits on public gatherings had caused live events to grind to a halt, Ms. Barton Baird quickly moved to planning virtual events.
One of her clients was Jobber, a rapidly expanding software company in Edmonton that is building a Shopify-like online platform for home-services businesses. It raised US$60-million in equity financing earlier this year.
Ms. Barton Baird consulted on a virtual conference for the tech company’s small-business clients held in March, 2021, and was tapped to manage a second iteration of the event. Later in the year, Jobber approached her to lead its in-house events team, and she accepted.
“They made me an offer that I was like, if I don’t take this, if I don’t try this out, I’m really going to regret it,” she said.
Her story is likely part of a wider trend. Tech companies are awash in cash and quickly increasing their head counts. At the same time, self-employment in the sector is dwindling.
“An increase in the number of permanent employees in professional, scientific and technical services may suggest a COVID-related shift from freelance or consulting work to more standard forms of employment,” Statscan said in its latest Labour Force Survey.
A similar dynamic – more employees, fewer self-employed – is found in health care and social assistance, where about half the jobs are publicly funded. More broadly, public-sector employment is up 6.6 per cent, or about 257,000 people, since the pandemic started.
Given the tightness in the labour market, it looks as if the self-employed have “gone to do something else,” Prof. Skuterud said. “What could it be? Well, it seems like the most obvious explanation is some public-sector work.”
Benjamin Tal, deputy chief economist at CIBC Capital Markets, also said the self-employment decline is not inherently a bad thing, particularly if people can earn more.
Still, he said the self-employed are important job creators. (Around 30 per cent of Canada’s 2.6 million self-employed have paid help.)
“Self-employment is a source of demand for workers, not just a supply of workers,” he said. “It’s a very important part of the economy.”
Mr. Tal also suggested that a lower intake of immigrants over much of the pandemic has likely weighed on self-employment. “The propensity to become self-employed among new immigrants is much higher,” he said.
The labour data present some complications. Notably, Statscan’s Labour Force Survey measures employment at a main job, where the most hours were worked. Thus, if a full-time employee occasionally drove for Uber Technologies Inc. – which is considered self-employment – they would be counted only as an employee. Even so, the number of people with multiple jobs is lower than two years ago, which suggests gig work hasn’t exploded.
A key question is how the expiry of the Canada Recovery Benefit in late October will affect the numbers. CRB was designed to provide jobless benefits to those who didn’t qualify for employment insurance, such as the self-employed. To qualify for CRB, people needed to show at least a 50-per-cent drop in average weekly income or not be working for reasons related to COVID-19.
For most of its existence, CRB paid $500 a week before tax. Recipients could earn money while receiving the benefit, although payments were subject to a clawback when annual net income exceeded $38,000.
Mr. Tal suspects that CRB skewed incentives for the self-employed, particularly those who were tenuously working for little money. However, as pandemic programs fade and the economy continues its recovery, Mr. Tal projects that self-employment will bounce back forcefully.
“I suggest that self-employment will go back to where it was and it will actually grow in importance over the next decade,” he said.
For Ms. Barton Baird, it was a tough decision to give up being an entrepreneur, but she felt compelled to join Jobber for professional reasons. And although being an employee may not give her the same sense of control over her schedule as before, she is enjoying the sense of being part of a larger group again.
“I felt a sense of team I hadn’t felt in a long time,” she said.
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