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Assuming the figures are still valid as you read this, Statistics Canada's August 2014 Labour Force Survey (LFS) release finally drew attention to Canada's increasingly DIY labour market.

It took no less than a record monthly self-employment bump of 86,900 to do so – nearly 1.5 times the previous (post-1976) record of 62,000 (revised up from 56,000) that was reported in the May, 2007, release. Which is unfortunate, since self-employment has had a far greater impact on the Canadian labour market in recent years than the headline figures suggest.

Statscan defines the self-employed as: "Working owners of an incorporated business, farm or professional practice, or working owners of an unincorporated business, farm or professional practice. The latter group also includes self-employed workers who do not own a business (such as babysitters and newspaper carriers). Self-employed workers are further subdivided by those with or without paid help. Also included among the self-employed are unpaid family workers. They are persons who work without pay on a farm or in a business or professional practice owned and operated by another family member living in the same dwelling. They represented 1 per cent of the self-employed in 2008."

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While it collects several labour market indicators for the self-employed, such as type of work (full, part-time), industry and occupation, Statscan's LFS doesn't collect two key pieces of information that render those indicators meaningless: self-employment earnings and job permanence.

Without earnings information, the number of hours a respondent indicates spending on self-employment is meaningless, as only the hours that generate revenue or are billable matter. Ditto for self-reported industry and occupation. What's more, it's not only "unpaid family workers" who don't earn a living. According to other Statscan surveys, between a quarter and a third of the self-employed either report no earnings or losses.

The lack of a job permanence question prompt for the self-employed highlights how out of step the LFS questionnaire is with the contemporary labour market. Many so-called self-employed are, for lack of a better term, perma-temps. Temp agencies typically give their contractors two compensation options, offering workers who self-incorporate slightly higher pay (in exchange for cutting the agency out as a payroll intermediary).

It seems no one noticed the peculiar way the May, 2007, LFS release reported self-employment. The monthly LFS release usually refers to month-to-month and year-over-year changes, occasionally throwing in near-term (five-year) trends and longer-term historical context. The May, 2007, LFS release, reported in The Daily on June 8, 2007, noted: "May saw a large increase in the number of self-employed, up an estimated 56,000 … Since October, 2006, the number of self-employed has jumped 6.5 per cent."

Had Statscan instead drawn attention to the jump between May, 2006, and May, 2007, it would have reported a 161,000 year-over-year self-employment gain, more than half the 306,000 total employment gain over the same period. Had it selected another reasonable reporting period, like June, 2006-May, 2007 trough-peak over the preceding year, the agency would have reported a 200,000 self-employment gain, two-thirds of the 302,000 total employment gain over the same period.

The way the employment figures were framed, de-emphasising the fact gains made weren't actual (payroll) jobs, had profound implications. Federal government politicians at the time were jumping over one another to take credit for the remarkable economic performance. After all, "the unemployment rate held steady for the fourth straight month at 6.1 per cent, a 33-year low." Headlines read, "Today's boom, unlike the eighties, expected to last".

Although the headline LFS figures didn't reflect it until late 2008, one could argue that the Great Recession hit Canadian employment almost immediately after the 2007 labour market news. The next self-employment run began in January, 2008, and would continue through October, 2009; over that period, self-employment would rise 138,000 as overall employment fell 179,000. Far from being good news, the 2006-07 self-employment run was an early warning of the recession ahead. Or rather it would have been, had it been properly reported.

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As for self-employment "job" quality, the LFS provides little to go on, given its lack of self-employment earnings info. One rough proxy that can be used is "paid help"; a professional private practice is more likely to hire administrative/clerical help. That job quality proxy paints a grim picture: The share of self-employed with hired help has steadily declined over the past decade, from as high as 35.5 per cent in 2004 to as low as 28.5 per cent in 2013 ( 30.3 per cent for August, 2014, all figures seasonally unadjusted).

Self-employment is also a factor in the recent general job quality concern, specifically the rise in part-time employment. While it's not readily apparent, half (49.2 per cent) of the rise in part-time employment over the past two years (August, 2012, to August, 2014, seasonally unadjusted) is actually part-time self-employment, much of which may not be employment at all.

The August, 2014, LFS release explicitly noted that "the number of private sector employees declined by 112,000 in August … At the same time, self-employment increased by 87,000." The release didn't explicitly mention the change in average hourly earnings, which improved markedly year-over-year – $23.50 2012, $23.86 2013, $24.45 2014. However, given the loss of payroll jobs, for which Statscan actually collects earnings information, and the gain in self-employment, for which it doesn't, that's more a case of addition by subtraction. Not that the earnings information is terribly meaningful otherwise, given nearly 1 in 6 (15.4 per cent) Canadians classified as employed are self-employed.

Likely the most egregious (ab)use of the self-employment data is in determining Employment Insurance (EI) eligibility. Not only do the suspect self-employment figures go toward reducing the unemployment rate, hence raising minimum EI qualifying hours and reducing EI entitlement weeks, the self-employed generally don't qualify to receive EI benefits.

Hopefully the preceding demonstrates the problem with Statscan's poor accounting for and reporting of self-employment over the years. The agency does have other surveys and administrative data sets that contain self-employment info; unfortunately those efforts have been rather poor. While there are a number of issues and challenges specific to measuring self-employment, the solution's fairly obvious: either figure it out and do a better job going forward, or stick to reporting only payroll employment, as the U.S. does.

Sam Boshra is an independent Montreal-based economist and editor for EconomicJustice.ca.

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