Self-employment will continue to grow strongly in Canada

10 January 2001 - bizSmart, a division of CIBC, reports that the recent dip in self-employment is temporary. And self-employment will continue growing strongly over the next decade, according to Benjamin Tal, CIBC's senior economist and author of the report.

Between 1989 and 1999 the number of self-employed in Canada reached 2.4 million, largely due to a significant increase in one-person businesses. But last year the number fell by nearly 150,000. The report concludes that these were mainly low-skilled people forced into self-employment by the poor state of the job market. These people were able to find paid jobs again when the situation improved.

Benjamin Tal says that: "The dramatic growth in self-employment over the past decade is not a temporary phenomenon. In the next 10 years, self-employment will become even more dominant in the Canadian labour market."

Pointing out that the recent drop in the number of self-employed people represents the late stages of the economic cycle: "Most of these formerly self-employed people who have taken on paid-employment are young and less educated. At the same time, self-employment among older and more skilled workers has continued to rise as many of these workers are less tempted by the increased availability of paid employment."

16 per cent of the Canadian workforce is now self-employed - up from 13 per cent in 1989. Most of the difference is accounted for by one-person operations, a big change from the 1980s when just 30 per cent of growth in self-employment came from these solo firms. The greatest increase was seen in IT fields such as computer system analysis and computer programming. But this followed by human resources and business services. There was also a big jump in traditional personal service occupations such as drivers and hairstylists. But clerical, farming and contracting segments showed a drop in numbers.

Regionally, the fastest growth has been in western provinces and Ontario: increasing by 60 per cent in British Columbia, with Ontario and Alberta close behind.

"Manitoba and Saskatchewan have seen a more moderate rate of growth, largely reflecting the reliance of these provinces on the agricultural sector," Tal said.

Two-thirds of all self-employed are males, compared with their 52 per cent share of the paid labour force. But the growth in one person operations has been led by women. And they have also done better than men in taking on paid employees of their own."Of the 630,000 self-employment jobs created since 1989, more than 320,000 were created by women -- and 250,000 of those were one-person operations," said Tal.

Tal points to the main factors responsible for growth in self-employment over the next 10 years.

An aging labour force: The older you are, the more likely it is that you will choose self-employment and a growing number of baby boomers are now reaching their 50s. In fact, the self-employed tend to be older than paid employees. Just 20 per cent of self-employed people are under 35, compared with 43 per cent in paid employment.

Increasing demand for personalized products: Small-scale businesses can meet the increasingly specialized for niche products and services.

Immigration: Over 20 per cent of self-employed are immigrants, nearly twice the rate of the 1980s. And since 1991 a third of immigrants have possessed university degrees, again increasing the likelihood of self-employment.

Increased interest in self-employment among young Canadians: Self-employment is increasingly fashionable among younger people. And US research shows a trend for self- employment to reinforce itself through the generations. If your parents are self-employed, you are also likely to choose this career path.

Increased availability and lower cost of technology: Making it easier and cheaper to start a business and develop the connections that allow an operation to succeed in non- traditional locations.

Government and corporate outsourcing: Encouraging the self-employed to provide the services previously done in-house.

But there are some obstacles ahead: shortages of skilled staff and the increasing problem of balancing work and family responsibilities. Self-employed people with employees work 48 hours a week on average. This compares with 39 hours for one-person operations and just 36 hours for paid employees.

The complete report is available at: www.cibc.com.