The headline on Friday’s labour force survey was about overall employment rebounding to prepandemic levels. But for one part of the labour force, the self-employed, that is far from true.
For those workers, the employment picture is bad and getting worse. In September, the number of self-employed workers actually fell to its lowest level during the pandemic.
That’s right – the self-employed sector is weaker now than it was in the spring of 2020 amid the initial coronavirus lockdowns that sent the economy into a (mercifully brief) tailspin.
However, there are diverging trends within the self-employed group, depending on whether the worker is incorporated, or has paid help. The comparisons are a bit tricky, since Statistics Canada doesn’t provide seasonally adjusted data for the subcategories of self-employed workers. But one can compare the most recent data for September to the same month in 2020 and 2019.
Once that comparison is made, it’s clear that self-employed workers who have incorporated and have paid help – in other words, a small business with employees – have fared relatively well over the past year. Employment in that group fell 17 per cent between September, 2019, and September, 2020. But over the past year, employment has rebounded slightly, although still below prepandemic levels.
The pattern is similar for self-employed workers who are incorporated, but do not have paid help. There was a big dip between 2019 and 2020, but a partial rebound over the past year. The story is much the same for unincorporated self-employed workers with paid help.
There’s just one slice of the self-employed where the number of workers contracted between September, 2020, and September, 2021: the unincorporated self-employed without paid help. Gig work contractors and personal-care service providers would both be examples. For this group, the number of workers actually rose between September, 2019, and September, 2020.
But their ranks thinned out over the past year, with the number of workers dropping 9 per cent. That’s what is driving the drop in self-employment.
As to what is behind the drop among that slice of the self-employed, there’s no definitive explanation yet. In an e-mail, University of Waterloo economist Mikal Skuterud said the the pandemic clearly would have diminished demand for customer-facing services such as massage therapists and nail beauticians working out of their homes. But he also thinks income-support benefits could be playing a role, since many of these self-employed workers are not high earners; payments under the Canada Recovery Benefit could replace a large chunk of their earnings. Prof. Skuterud also wonders if falling response rates to the labour force survey could be a factor. If that is the case, then Statistics Canada data would not be accurately reflecting reality.
Lastly, Brendon Bernard, senior economist at the job-listing site Indeed, had a different perspective. In a Twitter thread, he pointed out that the proportion of self-employed workers who aren’t working at all in their business has fallen by half between April and September, declining to 5 per cent from 11 per cent. That means that the number of hours worked by the self-employed rose, despite the decline in the overall number of such workers.
Taxing questions
French Finance Minister Bruno Le Maire calls the deal on a minimum corporate tax reached by members of the Organization for Co-operation and Economic Development a “tax revolution” that will force large digital companies to finally pay their fair share.
But Toby Sanger, executive director of Canadians for Tax Fairness, says the opposite may well end up being true in Canada. An analysis by his organization indicates that companies such as Amazon, Google, Facebook, eBay and Uber would pay much less under the terms of the OECD deal than they would under Canada’s proposed digital services tax. (That tax was essentially designed as a backstop in case the talks at the OECD fell flat.)
The biggest difference is that the digital services tax would be based on revenue, while the OECD deal would tax profits. So large companies such as Amazon and Uber with relatively small profits would fare much better under the OECD rules, Mr. Sanger argues. However, he adds that the OECD deal is a very positive development – it just needs to go further.
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Fiscal fall chill: Capital Economics is warning of a fiscal chill this fall as pandemic benefits start to wind down. There has been talk of extending some supports for individuals and businesses, acknowledges senior Canada economist Stephen Brown in a research note issued Friday. But any such extensions are likely to be less generous than the current incarnations of such programs as the Canada Recovery Benefit for individuals and the Canada Emergency Wage Subsidy for businesses. As a result, Mr. Brown writes, “the economy faces a large fiscal contraction this quarter.”
Previously, Capital Economics had believed that rising private-sector spending would offset the winding-down of government support. But supply chain issues have resulted in shortages of goods, making that scenario less likely. Mr. Brown notes that, barring an extension of government support programs, his firm will be reducing projections for fourth-quarter GDP growth.
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Patrick Brethour