Rural and Small Town Canada Analysis Bulletin

    A profile of self-employment in rural and small town Canada: Is there an impending retirement of self-employed business operators?

    Data and definitions

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    Box 1
    Definition of self-employment

    The self-employed include 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 in 2011 about 1% of the self-employed.

    Note that self-employment is a legal or contractual form – specifically, one is working for one's self. On the other hand, entrepreneurship generally implies innovation and the creation and development of new ventures – typically, with a plan to grow the business. Given this perspective, the creation of a mom-and-pop business would not e viewed as "entrepreneurship". As noted in the text, according to Hurst and Pugsley (2010), the majority of the self-employed do not innovate or intend to innovate, nor do they grow or intend to grow their business (Hurst and Pugsley, 2010). Thus, not all self-employed are "entrepreneurs" (Sanandaji, 2010).

    This definition also implies that a focus on the self-employed is not a focus on small businesses, unless "small business" is defined as the self-employed. For example, Industry Canada (2010) defines a small business as having fewer than 100 employees. Rothwell notes that 97% of all firms in rural and small town Canada (Box 2) have fewer than 50 employees (Rothwell, 2010).

    The self-employed can be identified on the Labour Force Survey and the Census of Population. However, these data sources do not allow us to identify the owners or the operators of incorporated business, except those who classify themselves as "self-employed with an incorporated business."

    The relative magnitudes are:

    1. the 2010 Labour Force Survey identified 2.7 million individuals as being self-employed (both unincorporated and incorporated);
    2. the 2006 Census of Population enumerated 2.0 million individuals as being self-employed (both unincorporated and incorporated):
      1. 1.2 million self-employed without paid help; and
      2. 0.8 million self-employed with paid help.

    As noted by du Plessis (2004a, 2004b), the number of self-employed on the Census of Population is under-enumerated compared with the Labour Force Survey. In 2006, the Labour Force Survey estimated 2.5 million being self-employed compared with the 2.0 million enumerated on the Census of Population. We will use Census of Population data to document the age distribution for detailed industry groups (where the sample size of the Labour Force Survey is too small for this purpose).

    As a point of comparison, in 2009, Statistics Canada's Business Register counted:

    • c. 1.2 million establishments with no paid employees;
    • d. 0.6 million establishments with 1 to 4 employees; and
    • e. 0.2 million establishments with 5 to 9 employees.

    The starting point for building the Business Register is the list of legal entities produced by the Canada Revenue Agency (CRA). As part of the registration process, CRA collects information such as the legal name, business address and the major activity of the business. The Business Register identifies statistical "establishments" that are, in most cases, equivalent to a profit centre and which provide data on the value of output, the cost of inputs and labour. This supplies sufficient data to calculate value added (profit and salary & wages). There may be more than one establishment within an enterprise or within a company. Importantly for our analysis, the Business Register is focussed on the nature of the establishment, but not on the characteristics of the owners or the operators (Statistics Canada, 2010).

    The number of "establishments" in the Business Register without paid help (1.2 million) is similar to the number of self-employed without paid help reported in the 2006 census (1.2 million). The number of establishments in the Business Register with 1 to 9 employees (0.8 million) is similar to the number of self-employed with paid help.

    However, the numeric similarity does not imply they are the same business entities. Many self-employed businesses are not included in the Business Register because they do not have a business number or a GST/HST number. Also, many self-employed individuals could be a partner in a given Business Register establishment. Nevertheless, these numeric counts are similar.

    The Business Register does not provide any information on the owners or operators of the business. Thus, to get to the issue of the impending retirement of owners, we are restricted to a discussion of the self-employed using data from the Labour Force Survey or the Census of Population.

    End of text box 1

    Box 2
    Geographic definitions

    Larger urban centres (LUCs) are Census Metropolitan Areas (CMAs) and Census Agglomerations (CAs):

    • Census Metropolitan Areas (CMAs) have a built-up core population of 50,000 or more with a total population of 100,000 or more (prior to 2006, the built-up core threshold was 100,000).
    • Census Agglomerations (CAs) have a built-up core population of 10,000 or more with a total population of less than 100,000 (prior to 2006, a few CAs had a total population over 100,000 if they had fewer than 100,000 in the built-up core – due to the different definition of a CMA prior to 2006).
    • Both CMAs and CAs include the total population of neighbouring census subdivisions (CSDs) (i.e., incorporated towns and municipalities) where more than 50% of the employed residents commute (i.e., a measure of social-economic integration) to the built-up core of a specific CMA or CA. More details of the delineation are available from Statistics Canada (2007c).

    Rural and small town (RST) areas are non-CMA/CA areas. RST areas are divided into five zones based on the degree of influence (i.e., commuting) to any larger urban centre (LUC). These zones are Census Metropolitan and Census Agglomerated Influenced Zones (MIZs) (Statistics Canada, 2007c). They are defined as follows:

    • Strong MIZincludes CSDs where at least 30% of the employed residents commute to any CMA or CA;
    • Moderate MIZ includes CSDs where 5% to less than 30% of the employed residents commute to any CMA or CA;
    • Weak MIZ includes CSDs where more than zero but less than 5% of the employed residents commute to any CMA or CA;
    • No MIZ includes CSDs where none of the employed residents commute to any CMA or CA (or the number of employed residents is less than 40); and

    RST Territories refers to the non-CMA/CA parts of the Yukon, the Northwest Territories and Nunavut (i.e. the areas outside the CAs of Whitehorse and Yellowknife).

    Within each of larger urban centres and rural and small town areas, the population may be classified as living within population centres or outside population centres.

    A population centre is a locality with a minimum population concentration of 1,000 persons and a population density of at least 400 persons per square kilometre, based on the current census population count. All territory outside population centres is classified as rural areas and in this report, these rural areas are termed census rural areas. Residents in population centres include all individuals living in the built-up core, in secondary built-up cores, in population centres in fringes of census metropolitan areas (CMAs) and census agglomerations (CAs), as well as the residents of centres outside CMAs and CAs.

    Within census rural areas, population densities and living conditions can vary greatly. Included in census rural areas are:

    • small towns, villages and other populated places with a population of fewer than 1,000 according to the current census;
    • rural fringes of census metropolitan areas and census agglomerations that may contain estate lots, as well as agricultural, undeveloped and non-developable lands;
    • agricultural lands; and
    • remote and wilderness areas.

    Note that both population centres and census rural areas may exist within each of the "higher" geographical groups. Thus, population centres and census rural areas may be used as variables to cross-classify census data within any standard geographic area such as census subdivisions, census divisions, census metropolitan areas, census agglomerations or census Metropolitan area and census agglomeration Influenced Zones (MIZ).

    The Labour Force Survey (in CANSIM Table 282-0121) uses the following terminology:

    The Labour Force Survey (in CANSIM Table 282-0121) uses the following terminology
    Labour Force Survey terminology Terminology used in this report
    Census Metropolitan Areas and Census Agglomerations (CMA/CA) Larger urban centres
    Urban core Population centres in the built-up core
    Urban fringe Population centres that are not contiguous with the built-up core
    Rural fringe Census rural within CMA/CA
    Non-CMA/CA areas Rural and small town (RST) areas
    Small towns RST population centres
    Rural areas RST census rural areas

    End of text box 2

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