Self-employment in the downturn

By Sébastien LaRochelle-Côté

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During the recent employment downturn, self-employment grew significantly in contrast to widespread losses of paid jobs. In the year that followed the employment peak of October 2008, the number of paid employees declined by nearly half a million (-480,000), while the number of self-employed individuals increased by more than 100,000.

Self-employment growth was driven by 'own account' workers as the increase was largely concentrated among the unincorporated self-employed without paid help.

While two-thirds of the self-employed at the onset of the downturn were men, women accounted for the majority of the increase (58%) over the period. Increases were also concentrated among older workers, workers living in Quebec, and those who did not have a working spouse. The increase in the number of the self-employed was limited to several industries, namely the finance and real estate sector and the wholesale trade sector.

Net changes in self-employment over the period concealed a substantial degree of churning. Between October 2008 and October 2009, job tenure data indicate that 285,000 individuals entered self-employment while 170,000 exited.

Most of the decline in paid employment (82%) took place in the first five months of the downturn—that is, between October 2008 and March 2009. In contrast, the increase in self-employment took place in the subsequent seven months.

Although the decrease in paid employment predated the increase in self-employment, historical data indicate that the transition rate from paid employment to self-employment is generally low.

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