Study: Unincorporated self-employment in Canada, 1989 to 2010
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Canadians aged 55 to 64 are almost twice as likely as their 25-to-44-year-old counterparts to work in unincorporated self-employment. A new study looking at the period from 1989 to 2010 found that 1 in 10 Canadian workers—more than 1.7 million people on average—over this period received their primary source of income from employment from an unincorporated business.
The unincorporated self-employed are a pool of entrepreneurial individuals who play a critical role in the early life cycle of firms, but also consist of those who pursue alternative forms of employment—for example, when paid job opportunities decline during downturns in the economy. The study, using administrative data from the Canada Revenue Agency, examines changes in the importance of the unincorporated self-employed over the period from 1989 to 2010.
While averaging about 10% of the total employment for much of the study period, the unincorporated self-employment rate has varied. For example, it increased from 8.4% in 1989 to peak at 10.9% in 1998. Over the 1989-to-1998 period, the average annual unemployment rate was 9.5%. As the unemployment rate declined in the subsequent decade, the self-employment rate decreased as well.
The aging of the labour force also had an important affect on the evolution of unincorporated self-employment. Between 1989 and 2010, the employment share of the older groups (aged 45 to 54, 55 to 64, and 65 and older) in total employment increased, while that of younger groups fell. From 1989 to 1998, the increase was largest among individuals aged 45 to 54. From 1998 to 2010, the largest increase came from those aged 55 to 64. Over the entire study period, the share of employment among those aged 25 to 44 fell from 54.5% of total employment in 1989 to 39.7% by 2010.
Given that the incidence of unincorporated self-employment for older Canadians remained considerably higher than for their 25-to-44-year-old counterparts over the entire study period, the shift of employment to older age groups led to an increase in the overall unincorporated self-employment rate. If these demographic changes had not occurred, the post-1998 decline in the self-employment rate would have been even greater.
Unincorporated self-employment is characterized by a high annual turnover rate (the sum of entry and exit) of around 70% on average over the study period. Generally, this kind of self-employment is regarded as having lower entry and exit costs than the incorporated type, hence, the greater opportunity for turnover.
The growth patterns among different categories of unincorporated self-employment also differ. From 1989 to 2010, the fastest rate of growth was in the business category, followed by the rental and professional categories. In contrast, self-employment in the fishing and agriculture categories declined.
The research paper "Unincorporated Self-employment in Canada, 1989 to 2010" part of The Canadian Economy in Transition series (11-622-M), is now available from the Browse by key resource module of our website under Publications.
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