While employment in Canada is up since the pandemic what is
disturbing is the shift towards public sector employment combined with a trend away
from self-employment over the longer term. As has
been noted, since January 2014, public sector employment in Canada has
expanded from 3.5 to 4.4 million workers—a 27 percent increase—private sector
employment grew from 11.6 to 13.4 million—a 15 percent increase—and
self-employment shrank by approximately half a percent. From January 2020 to the present,
public-sector employment has expanded nearly 17 percent going from 3.8 to 4.4
million. Private sector employment grew from 12.6 to 13.4 million, an increase
of 6 percent. Self-employment fell from 2.8 to 2.6 million—a drop of 7 percent. Self-employment has been in decline for some time but the pace picked up with the pandemic.
Of course, a regionally diverse economy like Canada has
provincial differences across all kinds of economic and fiscal indicators and
self-employment is no exception. While
all provinces have seen a long-term decline in their self-employment share of
employment, there are some interesting provincial differences. Figure 1 uses Statistics Canada data on
employment by class of worker to plot monthly self-employment shares of
employment from 1976 to the present. Up until the late 1990s, the
self-employment share was actually rising in all the provinces with the
exception of Saskatchewan and Prince Edward Island. The declines there are likely a reflection of
farm consolidation in the agricultural sector as family farms are businesses and both these provinces have large agricultural sectors.
However, starting in the late 1990s, self-employment declines also commenced in the other provinces and the decline has picked up steam since the pandemic. Self-employment peaked in Canada at just over 17 percent in the late 1990s and then declined to just under 15 percent by 2019 and has now reached approximately 13 percent. Self-employment as an employment share actually spiked upwards during the early months of the pandemic as layoffs hit other sectors but then begins to decline rapidly. One suspects the length of the pandemic with its restrictions was a contributing factor to many small businesses winding up their activity.
The decline of self-employment is disturbing because small business are in many respects a backbone for entrepreneurship and innovation. New ideas are often translated into reality via the creation of a small businesses and while businesses are always being created or destroyed, if on net more small businesses are being wound up than created, then the long-term result is a smaller field for the development of entrepreneurial skills. Small businesses provide opportunities for financial independence outside of traditional large employers and many small businesses being locally owned and based are also active in communities providing support for an assortment of charities and community activities. And while self-employment as the owner of a small business may only account for 13 percent of total employment, these businesses in turn further employ a lot of private sector workers.
If one accepts the self-employment share of employment as a metric for entrepreneurship in Canada, then a provincial ranking does provide one measure of where entrepreneurship is most important. Figures 2 to 4 provide a provincial ranking at three points in time and when combined they illustrate two types of trends. First, there is an overall decline in self-employment particularly after 2000 and second, there is a shift across provinces.
If one starts in 1976, the self-employment shares are highest in Saskatchewan and Prince Edward Island at 29 and 21 percent respectively. At the bottom are Ontario, Quebec, and New Brunswick. By 2000, Saskatchewan is still on top, but its self-employment share has diminished to 25 percent. Meanwhile, British Columbia moved into second place from fifth in 1976. Ontario and Quebec moved up to sixth and seventh spot respectively while at the bottom are Newfoundland and New Brunswick. However, in the 2000 ranking, with the exception of Saskatchewan and PEI, the other provinces all saw some fairly hefty increases in their self-employment shares from 1976 to 2000. Moving to 2024, all the provinces have seen a decline in self-employment shares over the 2000 to 2024. However, the ranking now places British Columbia, Ontario and Alberta at the top and Nova Scotia, New Brunswick, and Newfoundland at the bottom.
So, self-employment as a share of total employment in Canada has been in decline for nearly a quarter century. However, there are variations across provinces. The takeaway from this is not that BC, Ontario and Alberta are the most entrepreneurial provinces. The takeaway is that since 2000, all the provinces have become less entrepreneurial as measured by self-employment shares of total employment but in this diminished state of entrepreneurship some remain somewhat more entrepreneurial than others.
