Analytical Studies Branch Research Paper Series
Update on the Entry into and Exit from Self-employment and Business Ownership in Canada

Acknowledgements

The authors would like to acknowledge helpful comments and suggestions from Wulong Gu (Statistics Canada), Danny Leung (Finance Canada), and colleagues from Employment and Social Development Canada: Ian Barrett, Christopher Chevrier, Sarah Bleiwas and Antoine Verret Bertrand.

Abstract

Using data from the Canadian Employer–Employee Dynamics Database, this paper provides an update on the dynamics of entry into and exit from (unincorporated) self-employment and (incorporated) business ownership in Canada from 2005 to 2020. 

This paper finds the following:

• Both the entry and exit rates for unincorporated self-employment were significantly higher than those for incorporated business ownership over this period, indicating higher turnover among unincorporated self-employed individuals. Meanwhile, the entry and exit rates for business ownership continuously decreased for most of the period of study, manifesting declining business dynamism.
• There was substantial heterogeneity in the turnover of unincorporated self-employed individuals and business owners along several dimensions, such as the following:
  • Entry and exit rates were higher among women, young people (15 to 34 years), new and recent immigrants, and owners with fewer employees. 
  • Geographic variation in the entry and exit rates was much larger for unincorporated self-employment than business ownership, with the three territories registering the highest entry and exit rates for unincorporated self-employment and Manitoba and Saskatchewan registering the lowest.
• The dynamics of unincorporated self-employment and business ownership were also affected by major economic changes and challenges, such as the following:
  • The mining, quarrying, and oil and gas extraction sector experienced a large decline in entry rates and an increase in exit rates because of the drop in oil prices starting in 2014.
  • The entry rate into unincorporated self-employment in the transportation and warehousing sector increased continuously from 2014 to 2020, consistent with the growing gig economy in Canada during the same period.
  • Distinct impacts were observed for unincorporated self-employment and business ownership during the first year of the COVID-19 pandemic:
    • Net self-employment income was reduced except for the top 10% of self-employed individual, while business income increased for more than half of business owners.
    • The entry rate into unincorporated self-employment declined, and the exit rate increased. In contrast, both the entry and exit rates for business ownership increased, and the increase in the entry rate was larger than that in the exit rate.

1 Introduction

This paper aims to provide up-to-date information on the trends of unincorporated self-employment (hereafter, self-employment) and incorporated business ownership (hereafter, business ownership) in Canada. Since the publication of the previous study (Grekou and Liu, 2018) that documented the trends up to 2013, the Canadian economy has experienced significant shifts and challenges, which could have profound impacts on the dynamics of self-employment and business ownership.

First, the global price of oil dropped sharply by 70% from mid-2014 to early 2016, which was one of the largest oil price declines in modern history (Stocker et al., 2018). Since Canada is a net oil exporter, this sharp decline in oil prices had a significant impact on the Canadian economy. Canadian gross domestic product fell for two consecutive quarters: the first (-0.6%) and second (-0.3%) quarters of 2015 (Statistics Canada, n.d.a). As a result, self-employment and business ownership activities  likely affected not only in the oil sector, but also in the broader economy.

Second, the gig economy is growing in Canada. Burgeoning online platforms and crowdsourcing marketplaces, such as Uber, Lyft, TaskRabbit, Upwork, Guru, Fiverr and Freelancer, have contributed to the fast growth Canada has seen in the number of gig workers. In Canada, independent contractors, freelancers and on-demand workers are required to report their income using Form T2125 Statement of Business or Professional Activities. This form records income from business, professional or commission-based self-employment activities. According to Jeon et al. (2021), based on administrative data, the share of gig workers^Note  among all workers in Canada rose from less than 6% in 2005 to more than 8% in 2016. Some of this increase coincided with the introduction and proliferation of online platforms. Recently, Statistics Canada updated its gig economy definition using Labour Force Survey supplement data to include three forms of work: gig work, digital platform employment and dependent self-employment.^Note  According to Hardy (2024), an average of 624,000 people, or 27% of mainly self-employed working-age Canadians, had gig work as a main job from October to December 2022. During the 12 months ending in December 2023, 135,000 Canadian workers reported digital platform employment as their main job or business. From July to September 2022, an average of 588,000 people, or 34% of self-employed workers, were dependent self-employed.

Third, the COVID-19 pandemic had a significant impact on Canadians and the Canadian economy. To slow down the spread of the virus at the onset of the pandemic, workers were asked to stay and work at home. Businesses were forced to close initially and subsequently adopted strict physical distancing measures to mitigate health risks. The Government of Canada also provided massive financial aid to businesses to help them survive the crisis by offering wage and rent subsidies, as well as interest-free and partially forgivable loans.^Note  The rapid advances in technology enabled many employees to work from home and businesses to offer virtual services and no-contact delivery as much as possible. Therefore, there were both challenges and opportunities facing self-employment and business ownership. Beland et al. (2020) documented an important decrease in self-employment from February to May 2020, of 15% for incorporated self-employment and 10% for unincorporated self-employment, based on data from the Labour Force Survey. In the United States, Fairlie (2020) found that the number of active business owners declined by 3.3 million, or 22%, from February to April 2020, based on data from the Current Population Survey. Haltiwanger (2021) also found that new business applications fell substantially in the early stages of the pandemic but then increased in the second half of 2020, based on the U.S. Census Bureau’s administrative data on business formation. Bahaj et al. (2022) found that firm entry increased during 2020 in the United Kingdom, and this surge was mainly driven by online retail. Many Organisation for Economic Co-operation and Development (OECD) countries, such as Australia, Belgium, France, Norway, Singapore, the United Kingdom and the United States, experienced V-shaped recoveries in firm creation, with strong firm creation throughout 2021 (OECD, 2021).

While largely following the methodology of Grekou and Liu (2018), this paper makes a few changes. First, unlike the previous study, rental income is excluded from self-employment income in the current paper. Rental income is a type of passive income earned by renting one’s property or space and providing basic services, which is different from other types of self-employment income, such as business, professional and commission income. Second, the definition of entry rate is different from the previous study. For example, the entry rate into self-employment is measured by the share of new entrants among the number of active self-employed workers, while it was previously measured as the share of new entrants among the adult population of interest. Essentially, the current entry rate measures the extent to which self-employment is replaced each year, while that of the previous study measured the likelihood of entering self-employment for a specific population. Therefore, the new results are not directly comparable to the previous study.

With the availability of more recent individual and corporate tax data and the slightly modified methodology, this paper documents the latest dynamics of self-employment and business ownership in Canada up to 2020. This paper finds that entry into and exit from self-employment and business ownership were indeed affected by the aforementioned major economic changes and challenges. The drop in oil prices starting in 2014 had a large impact on the dynamics of self-employment and business ownership in the mining, quarrying, and oil and gas extraction sector and resource-rich Prairie provinces. The rising gig economy manifested itself through an increase of more than 70% in the entry rate into self-employment in the transportation and warehousing sector since 2014. This increase is even more remarkable given that self-employment is based on the main income source and hence excludes many workers who engage in self-employment on a secondary basis. Finally, the pandemic had contrasting impacts on self-employment and business ownership in 2020. It caused a decrease of the entry rate into self-employment but an increase of that into business ownership. It also led to a much larger increase in the exit rate from self-employment. The impact of the pandemic was larger for women, young people, immigrants and business owners with fewer employees. Net self-employment income was negatively affected by the pandemic, except for the top 10% of self-employed individuals s, while business income increased for more than half of business owners.

2 Data and methods

The data used for this paper’s analysis are from the Canadian Employer–Employee Dynamics Database (CEEDD). The CEEDD is a matched database between Canadian firms and workers created by linking several administrative tax files, including individual tax files (T1 Income Tax and Benefit Return), individual employment remuneration files (T4 Statement of Remuneration Paid), the Longitudinal Immigration Database, and corporate (T2 Corporation Income Tax Return) and unincorporated business (T1 business declaration) tax files. The CEEDD covers the universe of individual tax filers (including unincorporated businesses) and corporate tax filers in Canada for every year from 2001 to 2020.^Note  The CEEDD provides information pertaining to three main areas: paid workers, the self-employed and businesses. On the one hand, it contains detailed information about individual paid workers and the self-employed, such as age, gender, marital status, immigrant status (country of origin, immigrant class, education level at landing, landing year), earnings from paid jobs, self-employment income and income from owned corporations. On the other hand, information about individuals is augmented with information on their workplace, such as industry, number of employees, payroll, revenues and profit.

Four employment states

To better understand the transitions to and from self-employment and business ownership, the paper defines four exclusive employment states for each individual in every year, including (unincorporated) self-employment, (incorporated) business ownership, paid employment and non-employment, based on the primary source of income, using the CEEDD.

1. Self-employment: Recognizing the important differences between unincorporated and incorporated self-employment (Grekou and Liu, 2018; Levine and Rubinstein, 2017), this paper continues to distinguish between these two types of self-employment. Unincorporated self-employment is referred to as self-employment, while incorporated self-employment is referred to as business ownership. Self-employment includes only those individuals whose net self-employment income is their primary source of income. That is, the absolute value of net self-employment income for these individuals is the highest among the absolute values of their net self-employment income, business income and T4 paid employment income. Net self-employment income includes net business, professional, commission, farming and fishing income derived from the T2125 Statement of Business or Professional Activities, where self-employed individuals have to report detailed financial information about their businesses. This analysis excludes net rental income from net self-employment income, unlike the previous study (Grekou and Liu, 2018).^Note 
2. Business ownership: This category includes owners of private corporations whose business income is their primary income source. In Canada, all private corporations (not public corporations, which are publicly traded on the stock exchange, and not controlled by one or more public corporations or prescribed federal Crown corporations) need to file information for their shareholders who own at least 10% of shares. Individual shareholders are then linked back to individual tax files and employment remuneration files to get employment earnings from owned corporations and other demographic and income information. It should be noted that owners’ business income from incorporation may include employment earnings (T4), dividend payments and income reinvested in the business (net change in retained earnings).^Note 
3. Paid employment: A person is said to be in a state of paid employment if they are not self-employed or a business owner (i.e., their net self-employment or business income is not the primary source of income) and their earnings from all paid jobs account for 50% or more of the total before-tax income reported on their T1 Income Tax and Benefit Return.
4. Non-employment: A person is said to be in a state of non-employment if they are not self-employed, a business owner or a paid employee. Therefore, non-employment may include those weakly attached to the labour market, such as primarily unemployed individuals whose employment insurance benefits were their main income source, discouraged job searchers, retired individuals, temporary workers or recipients of government income assistance.

Note that the classification of the four employment states follows a two-step approach because of inconsistency between business income for incorporated owners and total before-tax income reported on T1 tax returns (i.e., dividend payments from owned corporations and retained earnings are not included in total before-tax income for incorporated business owners).

2.1 Transitions

The entry into and exit from self-employment and business ownership can be studied following the definition of four employment states. Entry and exit are defined by comparing the employment states in two adjacent years. That is, entrants into self-employment or business ownership in this paper are defined as those who are self-employed or business owners in the current year (t) but not in the previous year (t-1). Exits, on the other hand, are those who are self-employed or business owners in the previous year (t-1) but not in the current year (t). 

The (short-term) entry and exit rates for self-employment (SE) and business ownership (BO) are defined as follows:

$$Entry rat{e}_{SE} =\frac{{{\displaystyle \sum }}_{i=1}^{P}entran{t}_{i,t,SE}}{(S{E}_t+S{E}_{t-1})*0.5} , Entry rat{e}_{BO} =\frac{{{\displaystyle \sum }}_{i=1}^{P}entran{t}_{i,t,BO}}{(B{O}_t+B{O}_{t-1})*0.5}$$

$$Exit rat{e}_{SE} =\frac{{{\displaystyle \sum }}_{i=1}^{P}exi{t}_{i,t, SE}}{(S{E}_t+S{E}_{t-1})*0.5} , Exit rat{e}_{BO} =\frac{{{\displaystyle \sum }}_{i=1}^{P}exi{t}_{i,t,BO}}{(B{O}_t+B{O}_{t-1})*0.5}$$

For example, the entry rate into self-employment is equal to the sum of entrants i into self-employment in population P at year t divided by the average number of active self-employed people in years t-1 and t. In the previous study (Grekou and Liu, 2018), the entry rate was defined as the number of entrants in year t divided by the adult population of interest in year $t-1$ , while the exit rate was defined as the number of exits from self-employment divided by the population of self-employed people in year $t-1$ . By comparison, the entry rate into self-employment in the previous study measured the likelihood of entering self-employment among the adult population of interest, while the new entry rate in this paper measures the share of new entrants in active self-employment. Therefore, direct comparison of the entry results of this paper with those of the previous study is not appropriate.

Moreover, the new entry and exit rates capture the turnover rates in self-employment and business ownership, reflecting the extent to which self-employed individuals and business owners are replaced each year. These measures are also used in Statistics Canada’s official estimates of the business dynamics measure (Statistics Canada, n.d.b.) and by the U.S. Census Bureau (Cunningham et al., 2021). Because the two rates are defined in a similar way, it is easier to calculate the net entry rate (entry rate minus exit rate), which essentially measures the growth rate of self-employment and business ownership over time.

In Section 5, long-term entry and exit are also defined by comparing employment states in four consecutive years. That is, long-term entry into self-employment or business ownership includes those who are not self-employed or business owners in year t-1, but are in year t and remain so for at least the next two years, t+1 and t+2. A long-term exit from self-employment or business ownership includes those who are self-employed or business owners in year t-1, but are not in any of the next three years, t, t+1 and t+2.  

3 Comparisons of self-employment and business ownership between 2019 and 2020

Table 1 documents the main characteristics of self-employment and business ownership for 2019 and 2020. The compositions of self-employment and business ownership changed little during the first year of the pandemic. The total number of self-employed individuals decreased by about 47,000 in 2020 compared with 2019. While the number of both employer and non-employer self-employed individuals decreased in 2020, their relative shares did not change. Compared with 2019, those in a self-employment state in 2020 were, on average, about four months older, and the share of men decreased by 0.5%. The employment assigned to self-employed individuals barely changed in 2020.^Note  Meanwhile, the number of business owners increased by 31,000 in 2020. Both employer and non-employer business ownership grew, while they maintained stable relative shares. The average age of business owners increased by 0.1 years, and the proportion of men decreased by 0.1%. The employment assigned to individual owner barely changed in 2020.

However, the pandemic had a larger impact on the income of self-employed individuals and business owners. For the self-employed, net self-employment income generally declined in 2020 (Chart 1). Average net self-employment income declined by 7% in 2020, from $19,570 to $18,210.^Note  Meanwhile, this adverse impact was more pronounced for the lower end of the income distribution. For example, at the 50th percentile, net self-employment income declined by 30%, while it increased slightly at the 90th and 95th percentiles.

By contrast, impacts on business income for business owners were much smaller, with positive impacts observed through much of the distribution. For example, business income declined in 2020 only for those below the 40th percentile (Chart 1). At the median, business income increased by 5%, and, at the 95th percentile, it increased by 10% to almost $420,000. On average, business income increased by 44% to $134,000 in 2020.

Data table for Chart 1

Data table for Chart 1
Table summary
This table displays the results of Data table for Chart 1 Percentile , Mean, 5th , 10th, 20th, 30th, 40th, 50th, 60th, 70th, 80th, 90th and 95th, calculated using dollars units of measure (appearing as column headers).

	Percentile
	Mean	5th	10th	20th	30th	40th	50th	60th	70th	80th	90th	95th
	dollars
Source: Statistics Canada, Canadian Employer–Employee Dynamics Database.
Net self-employment income of unincorporated self-employed individuals
2019	19,566	-2,795	-38	2,275	4,302	6,441	8,922	12,165	16,946	25,138	44,790	72,176
2020	18,212	-4,622	-1,413	638	2,301	3,996	6,270	9,650	14,935	24,089	45,408	75,093
Total business income of incorporated business owners
2019	93,142	-17,387	-3,178	3,574	13,699	24,151	36,260	52,032	75,579	117,713	222,630	383,410
2020	134,346	-14,115	-2,732	3,299	13,004	24,419	38,069	55,940	82,311	129,233	243,731	419,873

4 Entry into and exit from self-employment and business ownership

This section presents and contrasts patterns of entry and exit for self-employment and business ownership in Canada overall, and by gender, age, region, employment size and sector.

4.1 Overall entry and exit in Canada

During the period from 2006 to 2020, the rates of both entering and exiting self-employment were significantly higher than those for business ownership, indicating higher turnover among self-employed individuals compared with business owners.^Note  Entry rates for self-employment and business ownership diverged over time (Chart 2).

From 2008 to 2018, the entry rate into self-employment remained steady at approximately 18% annually, with a marginal increase of less than 1 percentage point. In 2019, entrants into self-employment spiked at 21%, then dropped slightly to 20% in 2020. By contrast, a constantly declining entry rate into business ownership was observed, from 15% in 2006 to 11% in 2018, consistent with the declining business dynamism observed since the 1980s in Canada and other countries (Macdonald, 2014; Decker et al., 2014). In 2019, entry rates into business ownership were flat, then they rose slightly to 12% in 2020. The increase in the entry rate into business ownership in 2020 suggested a strong V-shaped recovery in new business creation, as found in other studies (Haltiwanger, 2021; OECD, 2021).

Meanwhile, the exit rate from self-employment stayed slightly lower than the entry rate of around 18% from 2006 to 2010. In 2011, the exit rate increased to slightly above the entry rate, resulting in a negative net entry rate (exit rate higher than entry rate), which continued until 2015. After a slight drop in 2019, the exit rate from self-employment spiked at 22% in 2020, resulting in a net entry rate of 3%.

In contrast, business ownership showed little change in its exit rate, except for a drop between 2009 and 2010 and a slow upward trend since 2018. The exit rate from business ownership was consistently below the entry rate during the same period. The gap between the entry and exit rates shrank, indicating a continuously decreasing net entry rate from over 5% in 2006 to below 2% in 2019, except for a slight increase in 2020 to above 2%.

The observed declines in entry rates into self-employment in 2008 and 2020, along with the increases in exit rates from self-employment in 2020, are likely attributable to the economic downturn caused by the 2008 global financial crisis and the COVID-19 pandemic in 2020. However, given that the data used are sourced from administrative tax data, it is important to note that fluctuations in entry and exit rates, particularly notable spikes, may also reflect shifts in tax reporting policies. Of relevance are two major policy changes introduced in 2018:

§ The government introduced new income sprinkling rules, also known as the tax on split income (TOSI) rules, to prevent high-income individuals from unfairly splitting their income with family members subject to lower tax rates (Canada Revenue Agency [CRA], 2019a). These rules imposed restrictions on income splitting among family members who do not substantially contribute to the business in question.

§ The government also announced changes to passive investment income rules for Canadian-controlled private corporations (CCPCs) to limit their deferral advantage in the tax treatment of passive investment income exceeding specified thresholds (CRA, 2021; CRA, 2019b).

The introduction of the TOSI rules, alongside amendments to passive investment income regulations for CCPCs, may have discouraged entry into business ownership or prompted CCPCs to exit or pursue more lucrative business avenues. This is consistent with the accelerated fall in the entry rates and the increase in the exit rates of business ownership observed in 2018.

Also notable are the evolving efforts to ensure that digital services are subject to appropriate taxation in recent years. For example, since 2017, self-employed commercial ride-sharing drivers have been required to register for the goods and services tax or harmonized sales tax, regardless of total annual revenues. In 2019, the CRA settled with Uber, suggesting an affirmation that drivers are not employees of Uber, but self-employed contractors. The legislation changes and affirmation of the contractor role of gig workers likely prompted digital service providers to report their income from this source even if they had not done so previously.  

Data table for Chart 2

Data table for Chart 2
Table summary
The information is grouped by Year (appearing as row headers), Self-employment, Business ownership, Entry, Exit, Net entry , Entry, Exit and Net entry , calculated using percent units of measure (appearing as column headers).

Year	Self-employment			Business ownership
	Entry	Exit	Net entry	Entry	Exit	Net entry
	percent
Source: Statistics Canada, Canadian Employer–Employee Dynamics Database.
2006	17.83	-17.50	0.33	15.42	-9.91	5.51
2007	18.94	-17.53	1.42	14.96	-9.73	5.23
2008	18.14	-17.89	0.26	14.48	-9.71	4.77
2009	18.29	-17.73	0.57	13.26	-9.82	3.44
2010	18.33	-17.61	0.72	13.28	-9.08	4.19
2011	18.01	-18.61	-0.60	13.20	-8.90	4.30
2012	18.19	-18.40	-0.21	13.00	-8.60	4.40
2013	18.11	-18.42	-0.31	12.47	-8.44	4.03
2014	18.20	-18.61	-0.41	12.17	-8.57	3.60
2015	18.17	-18.39	-0.22	12.00	-8.50	3.51
2016	18.57	-18.40	0.18	11.69	-8.72	2.97
2017	18.76	-18.59	0.17	11.74	-8.61	3.13
2018	18.79	-18.92	-0.13	11.14	-8.96	2.19
2019	21.05	-18.06	2.99	11.21	-9.41	1.81
2020	20.32	-22.17	-1.85	12.02	-9.66	2.37

4.2 Entry and exit by gender

The analysis by gender shows that, for both self-employment and business ownership, women had higher entry rates and higher exit rates than men over the period from 2006 to 2020 (charts 3 and 4), although the number of women entrants was smaller than that of men. This indicates higher turnover among women entrepreneurs compared with their male counterparts.

From 2008 to 2018, the entry rate into self-employment of men increased slightly, while that of women remained steady. Meanwhile, the entry rates into business ownership declined consistently for both men and women, but the decline was more pronounced for women. As a result, the gender difference in entry rates for both self-employment and business ownership shrank: from 5 percentage points in 2008 to 3 percentage points in 2018 for self-employment, and from above 2 percentage points in 2008 to 1.5 percentage points in 2018 for business ownership. However, the gender gap widened again for self-employment in 2019 (Chart 3). While both men and women experienced increase in entry rates into self-employment in 2019, the increase was larger for women.

Exit rates showed similar trends when comparing men and women from 2006 to 2020 for both self-employment and business ownership. In general, gender gaps in self-employment for both entry and exit rates declined over the period of study, while the gender gaps in business ownership remained relatively stable (Chart 4).

Data table for Chart 3

Data table for Chart 3
Table summary
The information is grouped by Year (appearing as row headers), Men , Women, Self-employment, Business ownership, Self-employment and Business ownership, calculated using percent units of measure (appearing as column headers).

Year	Men		Women
	Self-employment	Business ownership	Self-employment	Business ownership
	percent
Source: Statistics Canada, Canadian Employer–Employee Dynamics Database.
2006	15.94	20.65	14.64	16.96
2007	16.94	21.94	14.20	16.47
2008	16.22	20.99	13.72	15.98
2009	16.48	20.88	12.56	14.63
2010	16.39	20.98	12.39	15.00
2011	16.05	20.64	12.32	14.87
2012	16.25	20.72	12.22	14.48
2013	16.25	20.48	11.69	13.94
2014	16.43	20.43	11.37	13.67
2015	16.54	20.19	11.32	13.28
2016	17.07	20.42	10.96	13.04
2017	17.22	20.64	11.04	13.04
2018	17.46	20.39	10.61	12.12
2019	19.31	23.12	10.77	12.04
2020	18.63	22.29	11.44	13.09

Data table for Chart 4

Data table for Chart 4
Table summary
The information is grouped by Year (appearing as row headers), Men , Women, Self-employment, Business ownership, Self-employment and Business ownership, calculated using percent units of measure (appearing as column headers).

Year	Men		Women
	Self-employment	Business ownership	Self-employment	Business ownership
	percent
Source: Statistics Canada, Canadian Employer–Employee Dynamics Database.
2006	16.10	9.28	19.63	11.15
2007	16.15	9.09	19.62	10.99
2008	16.57	9.06	19.87	10.96
2009	16.03	9.13	19.49	11.17
2010	16.44	8.54	19.20	10.13
2011	17.45	8.34	20.16	9.97
2012	17.30	8.01	19.83	9.73
2013	17.35	7.85	19.80	9.56
2014	17.43	8.05	20.10	9.54
2015	17.18	7.85	19.88	9.71
2016	17.16	8.08	19.91	9.89
2017	17.49	8.08	19.93	9.60
2018	17.75	8.32	20.32	10.13
2019	17.32	8.78	18.94	10.57
2020	21.21	9.18	23.30	10.53

4.3 Entry and exit by age group

The analysis by age group shows that the entry rates for self-employment and business ownership were highest among the youngest age group (15 to 34 years) and lowest among the oldest age group (55 years and older) (Chart 5).^Note  By contrast, while the exit rates were still highest among the youngest age group, they were similar among the prime-working-age group (35 to 54 years) and the oldest age group (Chart 6). However, the entry and exit rates of the youngest age group were more volatile and prone to changes in macroeconomic conditions, as manifested by a larger decline in the entry rate into business ownership in 2008 (Chart 5) and a larger spike in the exit rate from self-employment in 2020 (Chart 6). The youngest group also experienced a larger increase in the entry rate into self-employment in 2019 than their older counterparts (Chart 5).

The age gaps in entry rates were significantly larger than the gap in exit rates for business ownership, leading to significantly higher net entry rates among the youngest age group compared with other age groups. The youngest age group recorded a net entry rate of 20% for business ownership in 2006, compared with 6% among the prime-working-age group and less than 1% among the oldest age group (Chart 7). Net entry rates declined over the period of study. In 2019, the net entry rates for these three age groups had dropped to 14% for the youngest age group, 3% for the prime-working-age group and -2% (exit rate higher than entry rate) for the oldest age group.

The net entry rates for self-employment were considerably smaller across all three age groups. The youngest group consistently recorded positive net entry rates into self-employment, while the oldest group registered negative net entry rates throughout the observed period. For the prime-working-aged group, net entry rates fluctuated around 0 over the period of study.

Data table for Chart 5

Data table for Chart 5
Table summary
The information is grouped by Year (appearing as row headers), Self-employment entry, Business ownership entry, 15 to 34 years, 35 to 54 years, 55 years and older, 15 to 34 years, 35 to 54 years and 55 years and older, calculated using percent units of measure (appearing as column headers).

Year	Self-employment entry			Business ownership entry
	15 to 34 years	35 to 54 years	55 years and older	15 to 34 years	35 to 54 years	55 years and older
	percent
Source: Statistics Canada, Canadian Employer–Employee Dynamics Database.
2006	31.39	15.99	13.76	32.80	15.85	10.43
2007	33.63	17.07	14.35	31.93	15.41	10.07
2008	31.92	16.25	13.95	30.51	15.02	9.73
2009	32.51	16.50	13.75	27.34	13.76	9.16
2010	32.26	16.51	13.92	27.82	13.77	9.22
2011	32.06	16.30	13.39	28.70	13.80	8.85
2012	32.00	16.42	13.74	29.13	13.50	8.66
2013	31.77	16.29	13.85	27.92	13.05	8.23
2014	32.05	16.41	13.87	27.73	12.75	7.96
2015	32.47	16.58	13.43	27.16	12.76	7.76
2016	32.91	17.22	13.57	26.77	12.47	7.54
2017	33.05	17.41	13.79	27.32	12.71	7.38
2018	32.34	17.35	14.26	25.94	12.28	6.89
2019	36.40	20.14	15.01	26.23	12.45	6.96
2020	35.54	19.21	14.33	27.59	13.27	7.72

Data table for Chart 6

Data table for Chart 6
Table summary
The information is grouped by Year (appearing as row headers), Self-employment exit , Business ownership exit, 15 to 34 years, 35 to 54 years, 55 years and older, 15 to 34 years, 35 to 54 years and 55 years and older, calculated using percent units of measure (appearing as column headers).

Year	Self-employment exit			Business ownership exit
	15 to 34 years	35 to 54 years	55 years and older	15 to 34 years	35 to 54 years	55 years and older
	percent
Source: Statistics Canada, Canadian Employer–Employee Dynamics Database.
2006	23.73	16.00	16.53	12.47	9.60	9.69
2007	23.57	15.89	16.79	12.20	9.48	9.44
2008	24.41	16.31	16.78	12.04	9.50	9.38
2009	23.93	15.99	16.92	12.29	9.65	9.42
2010	24.54	15.88	16.40	11.43	8.94	8.69
2011	25.85	16.67	17.44	11.46	8.68	8.55
2012	26.30	16.61	16.71	10.88	8.44	8.25
2013	26.36	16.64	16.71	10.73	8.28	8.09
2014	26.56	16.57	17.15	11.13	8.45	8.10
2015	26.02	16.35	17.02	11.36	8.29	8.05
2016	26.23	16.40	16.86	11.69	8.64	8.13
2017	26.79	16.85	16.63	11.37	8.49	8.12
2018	27.07	17.37	16.80	12.14	8.84	8.36
2019	24.26	16.53	16.64	12.69	9.35	8.76
2020	30.54	21.07	19.31	12.37	9.60	9.14

Data table for Chart 7

Data table for Chart 7
Table summary
The information is grouped by Year (appearing as row headers), Self-employment net entry, Business ownership net entry, 15 to 34 years, 35 to 54 years, 55 years and older, 15 to 34 years, 35 to 54 years and 55 years and older, calculated using percent units of measure (appearing as column headers).

Year	Self-employment net entry			Business ownership net entry
	15 to 34 years	35 to 54 years	55 years and older	15 to 34 years	35 to 54 years	55 years and older
	percent
Source: Statistics Canada, Canadian Employer–Employee Dynamics Database.
2006	7.66	-0.01	-2.77	20.33	6.25	0.75
2007	10.05	1.18	-2.44	19.73	5.93	0.63
2008	7.52	-0.06	-2.83	18.47	5.52	0.35
2009	8.59	0.51	-3.18	15.04	4.11	-0.26
2010	7.72	0.63	-2.48	16.39	4.82	0.53
2011	6.21	-0.37	-4.05	17.24	5.13	0.30
2012	5.71	-0.19	-2.97	18.25	5.06	0.42
2013	5.42	-0.35	-2.87	17.19	4.78	0.14
2014	5.49	-0.16	-3.28	16.60	4.30	-0.15
2015	6.45	0.23	-3.59	15.80	4.48	-0.28
2016	6.68	0.82	-3.29	15.09	3.83	-0.59
2017	6.26	0.56	-2.84	15.96	4.22	-0.73
2018	5.27	-0.02	-2.54	13.80	3.45	-1.47
2019	12.13	3.61	-1.63	13.53	3.10	-1.81
2020	5.00	-1.86	-4.98	15.22	3.67	-1.42

4.4 Entry and exit by region

The entry rates and exit rates for self-employment and business ownership show important regional variations (Tables 2 to 5).

In terms of self-employment, the three territories exhibited the highest entry rates, followed by Alberta, British Columbia and Ontario (Table 2). Conversely, Quebec, the Atlantic provinces and the central provinces of Manitoba and Saskatchewan consistently recorded the lowest entry rates. Interestingly, exit rates for self-employment had a similar order of magnitude across provinces and territories (Table 4).

The regional variation of business ownership was much smaller than that of self-employment and showed different patterns. Ontario consistently had the highest entry rates into business ownership throughout the observed period (Table 3). Alberta and the other Prairie provinces of Manitoba and Saskatchewan initially recorded entry rates at similar levels to Ontario until 2014, when oil prices dropped, after which their rates fell significantly below that of Ontario and aligned with those of British Columbia, Quebec and the three territories. In general, the Atlantic provinces consistently registered the lowest entry rates into business ownership.

For business ownership, the exit rate in Ontario was the highest in Canada until 2011, and the exit rate in Alberta became the highest from 2015 to 2019 (Table 5). The exit rate in the three territories was notably more volatile than in the provinces. There were minimal regional differences observed across the rest of the provinces.

All provinces and regions showed a decline in the entry rates into business ownership (Table 3) similar to that observed at the national level (Chart 2), highlighting a widespread decline of business dynamism in Canada. As for the exit rate from self-employment, while it remained flat in most provinces, Quebec saw a steady increase, from 15% in 2006 to 19% in 2018 (Table 4). Ontario saw the largest increase in entry rates into both self-employment and business ownership in 2019, as well as in the exit rate from self-employment in 2020.

4.5 Entry and exit by employment size

The entry and exit rates of employers by employment size are shown in Chart 8. The employers herein include entrepreneurs with paid help, regardless of whether they were incorporated or unincorporated (although the vast majority were incorporated). The employment size is measured by the number of employees assigned to each individual owner,^Note  which is grouped into four size categories: 5 or fewer, 6 to 20, 21 to 50 and more than 50.

Owners with fewer employees had higher entry and exit rates than owners with more employees. Both entry and exit rates were highest among businesses with 5 employees or fewer and lowest among those with more than 50 employees. Over the period of study, while owners of businesses of all employment sizes showed a decline in entry rates (Chart 8), similar to what was observed at the national level (Chart 2), the decline was more significant among those with 21 to 50 employees. From 2006 to 2020, the entry rate declined by 32% for the business owners in this group, compared with 23% to 26% for other groups.

Entry rates were generally higher than exit rates, indicating positive net entry rates across all employment size groups. The net entry rate was noticeably higher among the smallest group (more than 5%) than the larger ones (2% or less) in 2006. While the net entry rates for employers of all sizes showed a decline from 2006 to 2020, the decrease in net entry rates was larger among the two largest groups of employers. In fact, the net entry rates were negative, meaning there were more exits than entrants in 2020 for the two largest groups of employers in terms of the number of paid employees.

Data table for Chart 8

Data table for Chart 8
Table summary
The information is grouped by Year (appearing as row headers), Entry rate, Exit rate, Net entry rate, 5 employees or fewer, 6 to 20 employees, 21 to 50 employees, Over 50 employees, 5 employees or fewer, 6 to 20 employees, 21 to 50 employees, Over 50 employees, 5 employees or fewer, 6 to 20 employees, 21 to 50 employees and Over 50 employees, calculated using percent units of measure (appearing as column headers).

Year	Entry rate				Exit rate				Net entry rate
	5 employees or fewer	6 to 20 employees	21 to 50 employees	Over 50 employees	5 employees or fewer	6 to 20 employees	21 to 50 employees	Over 50 employees	5 employees or fewer	6 to 20 employees	21 to 50 employees	Over 50 employees
	percent
Source: Statistics Canada, Canadian Employer–Employee Dynamics Database.
2006	19.42	10.09	8.35	6.49	14.07	7.83	6.41	5.91	5.36	2.26	1.94	0.58
2007	19.14	9.44	7.18	6.71	13.69	7.63	6.46	5.47	5.45	1.82	0.72	1.24
2008	18.43	9.23	7.46	6.02	13.93	7.52	6.40	6.20	4.50	1.72	1.06	-0.18
2009	16.90	8.65	6.87	5.96	14.10	7.58	6.49	5.59	2.80	1.07	0.38	0.37
2010	16.72	8.61	6.93	5.83	12.87	6.56	5.52	4.74	3.85	2.05	1.41	1.09
2011	16.47	8.23	6.58	5.59	12.90	6.72	5.86	4.72	3.56	1.51	0.72	0.86
2012	16.41	8.08	6.22	5.21	12.64	6.61	5.38	4.54	3.77	1.47	0.85	0.67
2013	15.43	7.65	5.90	4.60	13.14	6.86	5.53	4.15	2.29	0.79	0.38	0.45
2014	15.31	7.47	5.87	4.26	12.30	6.67	5.96	4.73	3.02	0.80	-0.08	-0.48
2015	14.85	7.39	5.86	5.03	12.21	6.24	5.24	4.14	2.64	1.15	0.62	0.89
2016	14.26	7.29	6.40	5.15	13.07	6.34	5.20	4.21	1.20	0.95	1.20	0.94
2017	15.08	7.68	5.80	4.40	12.38	6.23	5.64	4.34	2.70	1.45	0.16	0.07
2018	14.95	7.11	5.83	4.73	12.43	6.35	5.42	4.52	2.52	0.76	0.42	0.21
2019	15.51	7.26	5.70	5.02	12.75	6.91	6.10	4.82	2.75	0.35	-0.40	0.20
2020	14.88	7.60	5.65	4.79	14.08	7.39	6.37	5.07	0.80	0.21	-0.71	-0.28

4.6 Entry and exit by sector

Charts 9 and 10 and Tables 6-9 show the entry and exit rates for self-employment and business ownership by sector. In the goods sectors (Chart 9), the entry rates into self-employment were relatively stable except in the mining, quarrying, and oil and gas extraction sector (North American Industry Classification System [NAICS], 21).^Note  Compared with other goods sectors, the entry rate into self-employment in the mining, quarrying, and oil and gas extraction sector was more volatile and affected by the fluctuation of materials and energy prices. For example, the entry rate into self-employment in the mining, quarrying, and oil and gas extraction sector dropped from 38% in 2013 to 21% in 2014, when oil prices started to drop. For business ownership, the entry rates in the goods sectors all declined over time, consistent with the broad trend observed in Chart 3. However, the entry rate in the mining, quarrying, and oil and gas extraction sector saw a sharper decline in 2015 and 2016 compared with other goods sectors, driven by the sharp drop in oil prices. Interestingly, compared with other sectors, the entry rate in manufacturing [NAICS] 31-33) was the lowest over the period of study.

In the services sectors (Table 6), the entry rates into self-employment were highest in educational services (NAICS 61) and information and cultural industries (NAICS 51), about 25% on average over the period of study for both sectors, while rates were lowest in the transportation and warehousing (NAICS 48-49) and health care and social assistance (NAICS 62) sectors, about 17% to 18% on average. However, the entry rate in the transportation and warehousing sector consistently rose from about 15% in 2014 to about 26% in 2020. This significant increase may be related to the arrival and proliferation of online platforms in Canada, especially growth in ride-sharing and on-demand delivery services.^Note  The entry rates into self-employment decreased in 2020 compared with 2019 among educational services; health care and social assistance; administrative and support, waste management and remediation services, and other services (except public administration) (NAICS 56 and 81); and arts, entertainment and recreation, and accommodation and food services (NAICS 71 and 72) where the pandemic had a larger impact.

The entry rates into business ownership (Table 7) were higher among transportation and warehousing (NAICS 48-49); educational services; information and cultural industries; and professional, scientific and technical services (NAICS 54). They were lowest among the wholesale trade sector (NAICS 41). While all services sectors experienced declining entry rates, the decrease was largest among the health care and social assistance sector, dropping from about 18% in 2007 to about 7% in 2020. Interestingly, entry rates for the transportation and warehousing sector did not increase for business ownership as they did for self-employment. This reinforces the theory that gig workers drove the increase in entry into self-employment for transportation and warehousing.

Data table for Chart 9

Data table for Chart 9
Table summary
The information is grouped by Year (appearing as row headers), Self-employment entry rate, Business ownership entry rate, Agriculture, forestry, fishing and hunting, Mining, quarrying, and oil and gas extraction and utilities , Construction, Manufacturing, Agriculture, forestry, fishing and hunting, Mining, quarrying, and oil and gas extraction and utilities , Construction and Manufacturing, calculated using percent units of measure (appearing as column headers).

Year	Self-employment entry rate				Business ownership entry rate
	Agriculture, forestry, fishing and hunting	Mining, quarrying, and oil and gas extraction and utilities	Construction	Manufacturing	Agriculture, forestry, fishing and hunting	Mining, quarrying, and oil and gas extraction and utilities	Construction	Manufacturing
	percent
Source: Statistics Canada, Canadian Employer–Employee Dynamics Database.
2006	10.91	25.37	18.00	17.31	12.13	13.75	12.82	9.61
2007	12.11	26.05	19.65	19.46	12.26	12.34	12.76	9.10
2008	11.25	25.85	18.56	18.03	10.71	11.97	11.20	8.34
2009	11.75	21.96	17.72	18.04	9.70	10.30	10.23	7.94
2010	11.23	23.88	17.20	18.18	11.06	9.80	9.61	7.31
2011	11.11	30.33	15.63	20.44	10.17	9.89	9.39	7.15
2012	11.81	25.74	15.74	19.33	9.67	10.29	9.89	7.07
2013	11.21	38.29	15.67	19.44	9.72	9.90	10.76	7.69
2014	11.99	21.38	15.63	18.64	9.99	10.00	10.32	7.64
2015	12.39	23.03	15.75	19.60	9.69	9.35	10.04	7.80
2016	12.30	25.00	15.94	18.76	9.25	8.17	9.54	7.39
2017	11.98	26.55	15.68	19.32	8.78	9.71	9.40	7.54
2018	11.98	23.98	15.11	18.54	8.54	8.27	9.44	7.71
2019	12.57	22.18	16.89	20.91	8.41	7.33	8.75	7.22
2020	12.87	22.94	16.13	22.00	9.52	7.67	9.50	8.14

Data table for Chart 10

Data table for Chart 10
Table summary
The information is grouped by Year (appearing as row headers), Self-employment exit rate , Business ownership exit rate, Agriculture, forestry, fishing and hunting, Mining, quarrying, and oil and gas extraction and utilities , Construction, Manufacturing, Agriculture, forestry, fishing and hunting, Mining, quarrying, and oil and gas extraction and utilities , Construction and Manufacturing, calculated using percent units of measure (appearing as column headers).

Year	Self-employment exit rate				Business ownership exit rate
	Agriculture, forestry, fishing and hunting	Mining, quarrying, and oil and gas extraction and utilities	Construction	Manufacturing	Agriculture, forestry, fishing and hunting	Mining, quarrying, and oil and gas extraction and utilities	Construction	Manufacturing
	percent
Source: Statistics Canada, Canadian Employer–Employee Dynamics Database.
2006	13.79	22.32	15.74	19.84	10.02	8.66	8.31	8.20
2007	12.71	21.68	15.41	18.57	8.87	9.12	7.97	8.20
2008	13.14	23.31	16.37	20.17	9.07	9.46	8.34	8.47
2009	13.63	26.59	16.49	19.34	10.23	9.91	8.64	8.15
2010	13.10	21.69	16.70	18.96	8.42	8.98	7.81	7.72
2011	12.87	23.39	17.94	20.05	7.20	8.62	7.92	7.51
2012	12.35	23.14	17.14	20.48	7.26	8.66	7.50	7.21
2013	12.83	22.16	17.21	18.97	7.45	8.40	7.06	6.56
2014	12.53	38.41	17.29	20.71	7.67	8.78	7.97	7.40
2015	12.05	24.48	16.46	19.26	7.26	10.43	7.77	7.33
2016	12.50	23.11	16.63	19.50	6.94	11.95	8.18	7.27
2017	12.53	21.96	16.94	19.29	7.20	10.40	8.14	7.28
2018	13.14	21.67	17.31	19.72	7.35	10.18	8.20	7.45
2019	12.63	20.25	16.51	19.00	7.76	10.69	8.82	7.99
2020	12.24	17.96	19.77	21.92	6.84	11.77	8.82	8.43

In terms of exit rates in the goods sectors (Chart 10), the exit rate from self-employment was highest in the mining, quarrying, and oil and gas extraction sector and lowest in the agriculture, forestry, fishing and hunting sector (NAICS 11). Similar to entry rates, exit rates from self-employment in the goods sectors were also relatively stable except in the mining, quarrying, and oil and gas extraction sector, where the exit rate increased sharply from 22% in 2013 to 38% in 2014, when global oil prices started to drop. For business ownership, the exit rate was also highest in the mining, quarrying, and oil and gas extraction sector, spiking from 2015 to 2016, later than that of self-employment, because of the drop in oil prices. Moreover, the exit rate from business ownership in the mining, quarrying, and oil and gas extraction sector experienced another spike in 2020 when the pandemic coincided with another drop in oil prices (Wang, 2020). The exit rates from business ownership in both the manufacturing sector and the construction sector (NAICS 23) declined until 2013 and rebounded thereafter.

In the services sectors, the exit rate from self-employment was highest in information and cultural industries, while it was lowest in the transportation and warehousing sector (Table 8). Exit rates across the services sectors spiked in the first year of the pandemic. For business ownership (Table 9), all services sectors experienced a trough in the exit rate in 2013 and bounced back in 2014 when oil prices started to drop. However, the change in the exit rates in the services sectors were more subdued in 2015 and 2016 when oil prices continued to drop, compared with that in the mining, quarrying, and oil and gas extraction sector. Exit rates from business ownership also increased in 2020 in certain sectors, such as educational services; transportation and warehousing; and arts, entertainment and recreation, and accommodation and food services. However, the increase was not as large as in 2014. For example, the exit rate from business ownership in the arts, entertainment and recreation, and accommodation and food services sector increased by 12% in 2014 on a year-over-year basis, while it rose by about 6% in 2020, likely attributable to government support programs aimed at combating the pandemic. Over the entire period, the exit rate from business ownership was lowest in the health care and social assistance sector. For both self-employed individuals and business owners, the net entry rate in the health care and social assistance sector has steadily declined over the period of study. For example, the net entry rate into business ownership declined from 10% in 2006 to about 1% in 2020, while that into self-employment declined from less than 1% to -4% over the same period. This trend suggests a stagnant growth or decline of health care providers in Canada.  

4.7 Entry and exit by immigrant status

Charts 11, 12 and 13 show the entry and exit rates by immigrant status. In this paper, a person can be classified into one of four groups based on immigrant status each year: new immigrants (in Canada for 5 years or less), recent immigrants (in Canada for 6 to 10 years), long-term immigrants (in Canada for over 10 years) and Canadian-born individuals (including people born in Canada and immigrants who arrived before 1980).^Note 

Immigrants made up less than one-third of all entrepreneurs (including both unincorporated and incorporated entrepreneurs), with their share ranging from 14% to 25% over the period of study. However, immigrants experienced higher turnover in unincorporated self-employment than Canadian-born individuals. This turnover was highest among new immigrants and decreased the longer they stayed in Canada. For example, the entry rate into unincorporated self-employment was 37% on average over the period of study for new immigrants and 26% for recent immigrants. In contrast, it was 19% for long-term immigrants, slightly higher than for Canadian-born individuals (17%) (Chart 11). Similar patterns are observed for the entry rate into business ownership (incorporated business owners), where the entry rate was 35% on average for new immigrants and 15% for long-term immigrants (Chart 11).

Not only was the turnover in self-employment higher among immigrants, especially new and recent immigrants, they were also more sensitive to the business cycle. For example, in 2008, the entry rate into self-employment dropped by more than 5 percentage points for new immigrants, 4 for recent immigrants and 2 for long-term immigrants, while it dropped by less than half percentage points for Canadian-born individuals (Chart 11). In 2020, early in the pandemic, the exit rate from self-employment increased by more than 7 percentage points for all three types of immigrants, while it increased by less than 3 percentage points for Canadian-born individuals (Chart 12).

The net entry rates into self-employment and business ownership were also much higher among new and recent immigrants compared with Canadian-born individuals, implying a much higher growth rate in self-employment among new and recent immigrants. For example, the net entry rate into self-employment among new immigrants was 11% on average over the period of study, while it was 2% for recent immigrants and negative for long-term immigrants, whose rate was similar to that of Canadian-born individuals (Chart 13). Similarly, for incorporated business ownership, the average net entry rate was 23% for new immigrants and 4% for long-term immigrants, compared with less than 3% for Canadian-born individuals.

These results suggest that immigrants may face challenging labour market conditions upon their arrival in Canada, possibly because of a lack of Canadian background, experience or sufficient language skills. New and recent immigrants often experience much higher unemployment rates than Canadian-born individuals, while long-term immigrants have no significant difference in unemployment rates from those born in Canada (Kavcic, 2024). As a result, new and recent immigrants often turn to self-employment as a way to secure income and gain Canadian experience. Over time, as immigrants gain more experience, their labour market outcomes improve. For example, their employment rates and earnings gaps compared with Canadian-born individuals narrow over time (Hou, 2024; Crossman et al., 2021). Therefore, their turnover in self-employment converges with that of Canadian-born individuals over time.

Data table for Chart 11

Data table for Chart 11
Table summary
The information is grouped by Year (appearing as row headers), Self-employment entry rate, Business ownership entry rate, Canadian-born, New immigrants, Recent immigrants, Long-term immigrants, Canadian-born, New immigrants, Recent immigrants and Long-term immigrants, calculated using percent units of measure (appearing as column headers).

Year	Self-employment entry rate				Business ownership entry rate
	Canadian-born	New immigrants	Recent immigrants	Long-term immigrants	Canadian-born	New immigrants	Recent immigrants	Long-term immigrants
	percent
Source: Statistics Canada, Canadian Employer–Employee Dynamics Database.
2006	16.51	36.23	25.83	18.80	14.18	37.83	27.06	19.67
2007	17.11	40.62	29.57	20.95	13.65	38.51	27.85	18.85
2008	16.76	35.26	25.37	18.93	13.23	36.34	25.98	18.01
2009	16.78	35.49	26.28	19.10	12.08	33.04	23.79	16.39
2010	16.80	34.96	26.18	18.80	12.06	34.43	23.34	16.17
2011	16.52	34.15	25.61	18.27	11.91	35.10	23.80	15.98
2012	16.85	34.00	24.63	18.04	11.67	35.70	23.60	15.65
2013	16.76	35.03	25.15	17.54	11.18	34.98	22.67	14.60
2014	16.88	35.74	25.17	17.36	10.89	34.87	21.21	14.18
2015	16.93	35.40	24.64	17.11	10.61	35.41	21.67	14.07
2016	17.18	36.87	25.79	17.64	10.25	35.15	20.92	13.61
2017	17.30	37.96	26.41	17.62	10.25	35.54	20.98	13.49
2018	17.34	36.91	25.98	17.54	9.57	34.72	20.56	12.82
2019	18.45	42.40	31.85	21.97	9.53	33.82	20.52	13.01
2020	18.31	38.47	27.26	19.20	10.25	32.53	20.73	14.23

Data table for Chart 12

Data table for Chart 12
Table summary
The information is grouped by Year (appearing as row headers), Self-employment exit rate , Business ownership exit rate, Canadian-born, New immigrants, Recent immigrants, Long-term immigrants, Canadian-born, New immigrants, Recent immigrants and Long-term immigrants, calculated using percent units of measure (appearing as column headers).

Year	Self-employment exit rate				Business ownership exit rate
	Canadian-born	New immigrants	Recent immigrants	Long-term immigrants	Canadian-born	New immigrants	Recent immigrants	Long-term immigrants
	percent
Source: Statistics Canada, Canadian Employer–Employee Dynamics Database.
2006	17.05	22.39	21.92	17.96	9.38	14.97	16.30	12.66
2007	17.03	22.35	22.13	18.03	9.18	13.82	16.20	12.59
2008	17.20	24.04	23.02	18.87	9.19	13.39	15.35	12.21
2009	17.18	22.72	22.48	17.92	9.33	12.82	15.05	12.09
2010	16.93	23.08	22.94	18.13	8.58	12.25	13.99	11.30
2011	17.81	25.17	24.42	19.14	8.44	11.33	13.15	10.89
2012	17.35	26.41	24.94	19.58	8.12	11.22	12.67	10.61
2013	17.53	26.42	24.59	18.78	7.98	11.10	12.45	10.19
2014	17.79	26.82	24.28	18.61	8.06	11.80	12.65	10.31
2015	17.48	26.64	24.45	18.65	8.08	10.55	11.91	9.89
2016	17.38	27.29	25.07	18.72	8.28	11.01	12.24	10.04
2017	17.55	28.35	25.27	18.88	8.13	11.74	11.79	9.96
2018	17.85	27.70	26.14	19.13	8.43	11.92	12.64	10.29
2019	17.38	24.41	23.07	17.47	8.73	13.70	13.09	11.07
2020	19.93	32.25	30.75	24.81	8.86	13.90	13.87	11.56

Data table for Chart 13

Data table for Chart 13
Table summary
The information is grouped by Year (appearing as row headers), Self-employment entry rate, Business ownership entry rate, Canadian-born, New immigrants, Recent immigrants, Long-term immigrants, Canadian-born, New immigrants, Recent immigrants and Long-term immigrants, calculated using percent units of measure (appearing as column headers).

Year	Self-employment entry rate				Business ownership entry rate
	Canadian-born	New immigrants	Recent immigrants	Long-term immigrants	Canadian-born	New immigrants	Recent immigrants	Long-term immigrants
	percent
Source: Statistics Canada, Canadian Employer–Employee Dynamics Database.
2006	-0.54	13.84	3.91	0.84	4.80	22.86	10.76	7.01
2007	0.08	18.27	7.44	2.92	4.47	24.69	11.65	6.26
2008	-0.43	11.22	2.36	0.05	4.04	22.95	10.63	5.80
2009	-0.40	12.77	3.80	1.18	2.75	20.22	8.73	4.31
2010	-0.12	11.88	3.24	0.68	3.48	22.18	9.35	4.87
2011	-1.30	8.98	1.18	-0.87	3.47	23.77	10.65	5.09
2012	-0.50	7.59	-0.31	-1.54	3.55	24.49	10.94	5.04
2013	-0.77	8.60	0.57	-1.25	3.20	23.88	10.22	4.41
2014	-0.91	8.92	0.89	-1.25	2.82	23.07	8.56	3.88
2015	-0.55	8.75	0.18	-1.54	2.53	24.86	9.75	4.18
2016	-0.20	9.58	0.72	-1.08	1.97	24.14	8.68	3.58
2017	-0.25	9.61	1.15	-1.26	2.12	23.81	9.19	3.54
2018	-0.51	9.20	-0.16	-1.59	1.14	22.80	7.92	2.53
2019	1.07	17.99	8.79	4.50	0.80	20.12	7.43	1.94
2020	-1.63	6.22	-3.48	-5.61	1.38	18.62	6.85	2.68

5 Conclusion

This paper provides information on the trends of unincorporated self-employment and incorporated business ownership in Canada from 2005 to 2020 using the latest data from the CEEDD. Several findings are noteworthy.

First, on the one hand, the entry and exit rates for unincorporated self-employment were much higher and generally more stable than those for incorporated business ownership. On the other hand, the entry and exit rates for incorporated business ownership experienced a constant decline for most of this period of study, underscoring declining business dynamism in Canada, especially for incorporated business owners.

Second, there were substantial variations in the dynamics of unincorporated self-employment and incorporated business ownership along many dimensions. For example, the entry and exit rates were higher among women, younger people (aged 15 to 34 years), new and recent immigrants, and those with fewer employees. The entry and exit rates for self-employment were highest in the three territories and lowest in Manitoba and Saskatchewan.

Third, the drop in oil prices starting in 2014 had a significant impact on the mining, quarrying, and oil and gas extraction sector and oil-rich provinces, such as Alberta, as manifested by the large decline in the entry rate into incorporated business ownership and the increase in the exit rate from incorporated business ownership.

Fourth, the entry rate into unincorporated self-employment in the transportation and warehousing sector increased continuously from 2014 to 2020, and this is consistent with the growing gig economy, which has been brought by the arrival and proliferation of online platforms in Canada. However, this increase was not evident in incorporated business ownership.

Fifth, the COVID-19 pandemic affected unincorporated self-employment and incorporated business ownership differently. Net self-employment income declined in 2020 compared with 2019 across almost the entire income distribution, except for the top 10% of earners. Moreover, the negative impact was more pronounced for the lower end of the distribution. By contrast, the income of business owners increased in 2020 for the top 60% of earners, and average income rose by more than 40%. In addition, the increase in exit rates among the self-employed outpaced the decline in entry rates in 2020, resulting in a negative net entry rate, while incorporated business ownership experienced a positive net entry rate. These differences may be attributed to varying responses to the COVID-19 pandemic by self-employed individuals and business owners. Most self-employed individuals are own-account workers, meaning they do not hire employees. When the pandemic hit, many simply found themselves out of work, relying on Employment Insurance (EI) or other government COVID-19 support programs for individuals. In contrast, business owners faced high costs associated with closing their businesses. Government support programs for business (such as the Canada Emergency Wage Subsidy, Canada Emergency Business Account and Canada Emergency Rent Subsidy ) helped them cover payroll expenses and other business costs, reducing their risk of closure (Leung and Liu, 2022).

Finally, unincorporated self-employment and incorporated business ownership exhibit significant differences in both their dynamics and characteristics. These differences underscore the importance of developing support mechanisms tailored to the unique needs of self-employed people and business owners to enhance business dynamism and drive productivity growth in Canada.

Appendix

Data table for Chart A.1

Data table for Appendix Chart A.1
Table summary
The information is grouped by Year (appearing as row headers), Self-employment, Business ownership, Entry, Exit, Net entry , Entry, Exit and Net entry , calculated using number of entrants and exits, number of net entrants (entrants-exits), number of entrants and exits and number of net entrants (entrants-exits) units of measure (appearing as column headers).

Year	Self-employment			Business ownership
	Entry	Exit	Net entry	Entry	Exit	Net entry
	number of entrants and exits		number of net entrants (entrants-exits)	number of entrants and exits		number of net entrants (entrants-exits)
Source: Statistics Canada, Canadian Employer–Employee Dynamics Database.
2006	295,950	290,460	5,490	145,410	93,460	51,950
2007	317,860	294,060	23,800	148,400	96,530	51,870
2008	307,830	303,460	4,370	150,560	100,900	49,660
2009	312,880	303,150	9,730	143,100	105,980	37,120
2010	316,210	303,750	12,460	148,100	101,300	46,800
2011	312,670	323,080	-10,410	153,280	103,380	49,900
2012	316,000	319,640	-3,640	157,320	104,060	53,260
2013	314,490	319,940	-5,450	156,750	106,170	50,580
2014	317,610	324,680	-7,070	158,610	111,680	46,930
2015	317,500	321,300	-3,800	161,510	114,310	47,200
2016	324,950	321,890	3,060	161,590	120,470	41,120
2017	330,170	327,120	3,050	166,520	122,120	44,400
2018	332,550	334,810	-2,260	161,550	129,820	31,730
2019	381,480	327,310	54,170	164,520	138,010	26,510
2020	370,980	404,800	-33,820	178,750	143,600	35,150

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