More Government Workers, Fewer Self-Employed: What That Means for Canada’s Economy

A florist and business owner makes bouquets on the sidewalk in front of her shop in Toronto on May 29, 2021. The Canadian Press/Frank Gunn

The percentage of self-employed Canadians is the lowest it’s been in almost 35 years, while public sector employment is at its highest percentage in nearly 30—and neither trend bodes well for the economy.

Just 2.6 million Canadians identified as self-employed in October, according to Statistics Canada. This is an 11 percent drop from the peak level of around 2.92 million in September 2019. Self-employed workers’ current share of 13.6 percent of total employment (19.16 million) has not been this low since July 1987.

Those statistics come as no surprise to Canadian Federation of Independent Business (CFIB) senior vice president Corinne Pohlmann.

“It’s not surprising at all. We also know that over half of our members, 53 percent in a survey we’ve done quite recently, said that they would not recommend other people start a business right now. So that can give you some sense of how hard it is,” Pohlman said in an interview.

“Small businesses have accumulated about $170,000 just in COVID-related debt over the last 20 months. For a small company, that’s a lot of money. And a good chunk of them are saying it’s going to take more [time], at least two years, to get out from under that.”

Waves of business failures followed the waves of the pandemic, and Pohlmann said that may continue because many businesses feel they’re “being left on their own” as government withdraws its supports.

“It all can really add up to pretty challenging times. You’re also dealing with higher costs to the business because [of] supply chain issues, wage issues, because there’s a shortage of labour. There’s also issues around implementing the vaccine passport system or making sure you have all the safety precautions in place.”

In October, the number of public sector employees held at its all-time high of 4,149,100, according to Statistics Canada. This represents roughly 21.7 percent of the total workforce of 19.16 million. November 1993 was the last time prior to the pandemic that this percentage was so high. Pohlmann doesn’t like the trend.

“One of the biggest costs of government is the staffing, and so keeping a handle on that staffing is always going to be important,” she said.

“We want to have an economy that is run by businesses that create wealth and not by government. And if it’s going the other direction, that necessarily doesn’t bode well for the economy’s future.”

A 2015 Cambridge University analysis found that self-employment was too underrated by most economists. “Contrary to these perceptions, recent studies suggest that self-employment has tangible positive economic impacts not only on wage and salary employment but also on per capita income growth and poverty reduction,” the authors wrote.

Impact at the Ballot Box

William Gairdner, an academic and author of “The Trouble With Canada...Still!,” said in an interview that unless democracies have high numbers of private sector workers, these workers’ interests get overwhelmed at the ballot box.

“All democracies in the Western world have been mutating in the direction of the tripartite state ... in which one-third of the people are producing the wealth, and one-third of the people are working for government, and another third are receiving significant income ... from the government,” said Gairdner, who is also an Epoch Times contributor.

“It’s like two wolves and a sheep debating what to have for dinner. The sheep goes ‘baa-aaa’ but he can’t do anything about it. It’s game over for the sheep.”

And governments don’t contract, they expand, according to Gairdner.

“No one has ever heard of a government manager walking into his boss and saying that he wants fewer employees in a smaller budget for his department next year,” he said.

“It just doesn’t happen. So here you’re talking about the structural difficulty of government in itself. I’m not saying there’s anything malicious going on there. It’s just what governments do. They want to grow, and they equate growth and more people in their department and bigger budgets with better government.”

Wage Gap

Another issue is the wage gap between the public and private sectors. A 2015 CFIB analysis found that compared to private sector employees doing similar jobs, federal employees were paid 13 percent more, municipal workers 9 percent more, and provincial workers 6 percent more. If benefits were included, these percentages grew to 33, 22, and 21 respectively.

Gairdner, who entered university in 1959, said that in his youth, people had “a bit of pity” for a government worker.

“Everybody knew that the pay was lower, everything else being equal, but you got the security. So that was the deal with the devil that you made. But now it’s quite the other way around,” he said.

“The highest ambition for the young man or young woman coming out of university is to get a government job. If you can just get a government job, you’ve got it made.”