Increase can't be entirely explained by layoffs
While self-employment rose substantially during the recent economic downturn and paid employment declined, layoffs alone don't account for the entire rise in self-employment, according to a study from Statistics Canada.
Between October 2008 and October 2009, self-employment in Canada increased by more than 100,000, or 4.3 per cent. At the same time, paid employment fell by 480,000, or 3.3 per cent.
The decrease in paid employment largely predated the increase in self-employment. This raises the possibility a large portion of the newly self-employed could have been paid employees who lost their jobs in the first few months of the downturn.
However, Self-Employment in the Downturn found several reasons why this was unlikely to have been the case.
The study found the characteristics of those who lost their jobs bore little resemblance to those who became self-employed after the first five months of the downturn.
For example, five months after the beginning of the downturn, 28 per cent of recently laid-off paid employees were employed by manufacturing industries. In contrast, many of those who became self-employed in the ensuing months were in services.
Although most laid-off employees become re-employed in a relatively short time span, only a small proportion become self-employed in the months that follow the loss of a paid job. Even if the transition rate of recently laid-off workers reached the maximum observed in the previous 14 years, laid-off workers would account for just over one-third of those who became self-employed over the period.
The study also pointed out the growth in self-employment between October 2008 and October 2009 wasn't evenly distributed across demographic groups. For example, women accounted for the majority (58 per cent) of the increase over the period even though men comprised the vast majority of the self-employed at the onset of the downturn.
Furthermore, the increase was also entirely concentrated among older workers, especially those at least 55 years of age.
Net changes in self-employment also concealed a substantial degree of entries and exits over the period. Between October 2008 and October 2009, 285,000 individuals entered self-employment while 170,000 exited.