Study: Financial well-being of the self-employed

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Self-employed households in Canada had more than twice the 'wealth,' or household net worth, of paid workers in 2009, and were also more knowledgeable about finances.

Accumulated wealth is an important aspect of the financial situation of the self-employed, notably because their incomes fluctuate more and they are less likely to have pensions or health insurance.

One measure of financial wealth is the household net worth — the difference between household assets and liabilities. The median net worth of the self-employed was $520,000 in 2009, 2.7 times the median of $195,000 for paid employees.

The self-employed reported not only higher levels of business and financial assets, but also higher levels of tangible assets, which include housing-related items and equipment.

The higher median wealth of the self-employed corresponds to their greater concentration near the top of the overall net worth distribution. More than one-half of the self-employed were located in the wealthiest 25% of households, compared with about one-fifth of paid employees.

With greater wealth to manage and less access to employer pension plans than paid workers, the self-employed have greater incentives to become knowledgeable about finances. Accordingly, the self-employed had more correct answers, on average, to a series of questions used to gauge financial capability.

Other indicators of financial well-being suggested fewer differences between paid employees and the self-employed.

As a group, the self-employed had a household median income that amounted to 81% that of paid employees. However, household income may not be the optimal financial indicator for the self-employed since they can leave funds in their businesses for reinvestment purposes or as a reserve fund.

About 74% of the self-employed reported that they were preparing for retirement, compared to 85% of paid employees. Nevertheless, the self-employed were just as likely as paid employees to report that their retirement income would suffice to maintain their current living standard.

Finally, at equal income levels, household spending differed little between paid workers and the self-employed.

In 2010, about 2.7 million Canadians were self-employed in their main job. They accounted for 16% of the workforce. The self-employed range from working owners of large incorporated businesses to part-time service providers.

Note: This article examines differences in income, wealth, retirement preparation, financial knowledge and spending between the self-employed and paid employees. Data are from the Survey of Labour and Income Dynamics, the Survey of Household Spending and the Canadian Financial Capability Survey.

Income, net worth and consumption statistics are reported at the household level.

Self-employed individuals are defined as those working for themselves or working without pay for a family business. In contrast, paid workers can be defined as working for 'others' as they are employed by businesses, governments, organizations, or other people.

Definitions, data sources and methods: survey numbers, including related surveys, 3508, 3889 and 5159.

The article "The Financial well-being of the self-employed" is now available in the September 2011 online edition of Perspectives on Labour and Income, Vol. 23, no. 4 (75-001-X, free), from the Publications module of our website, under the Key resource tab.

For more information, or to enquire about the concepts, methods or data quality of this article, contact Sharanjit Uppal (613-951-3887;, Labour Statistics Division.

Also available in this edition of Perspectives on Labour and Income is "Gambling 2011," which presents the latest facts and figures on gambling in Canada.

For more information on this article, or to enquire about the concepts, methods or data quality of this release, contact Katherine Marshall (613-951-6890;, Labour Statistics Division.

For more information on Perspectives on Labour and Income, contact Ted Wannell (613-951-3546;, Labour Statistics Division.