While self-employment in the US has been weak during the recession, in Canada self-employment has risen significantly as more Canadians start their own businesses instead of relying on larger corporations for jobs. Self-employment in Canada has nearly doubled since the 1980s and shows no signs of slowing, as both the government and banks have increased support programs for entrepreneurs. However, some economists worry that increased self-employment may negatively impact productivity and economic growth in Canada.

1. Canada is the home of the fearless entrepreneur Page 1 of 3
Friday, February 19, 2010
Canada is the home of the fearless entrepreneur
Peter Koven, Financial Post
While the United States is usually the country hailed for its can-do business
spirit, Canada is proving to be the home of the fearless entrepreneur.
Recession-weary Canadians have gone into business for themselves in near-
record numbers in the past couple of years, and the trend shows no signs of
slowing as hiring by larger corporations remains slow. The trend to self-
Brett Gundlock/National Post employment goes against activities south of the border, where small-business
growth has been weak.
A flip through any Yellow Pages reveals start-up businesses of endless variety, and while there are countless failures
to go with every success, they are becoming an increasingly strong economic force.
Economists and policymakers are generally pleased with this development - after all, it shows that Canadians are
nimble and entrepreneurial. Self-employment also brings a level of job satisfaction that is usually far superior than
in bigger corporations. And small businesses, which make up almost 98% of all businesses in Canada, are always
key to emerging out of a recession.
But self-employment brings potential negative economic implications as well. They are not as high-profile as the
unemployment rate, but just as important.
The fact that self-employment has risen in the past couple of years is not surprising. It goes without saying that
when people lose their jobs, at least some of them will go to work for themselves. Total Canadian self-employment
rose about 8% from 2006 to 2009, according to Statistics Canada.
But the fact is that it has been an upward trend for much longer. Self-employment in Canada, which currently
stands at about 2.7 million people, has nearly doubled since the early 1980s. And the growth among women is even
more impressive, up nearly 150% in that time.
Economists are finally talking about self-employment as less of a recessionary blip and more of a permanent
structural shift in the labour force.
This remains a truly Canadian phenomenon.
http://www.financialpost.com/story-printer.html?id=2588510 2/22/2010

2. Canada is the home of the fearless entrepreneur Page 2 of 3
"We've had a recession here and we're seeing the usual response of self-employment increasing month-over month.
But in the States we're not seeing that," says Alec Morley, senior vice president of small business banking at TD
Canada Trust.
That too is not new - during the tech bubble of the 1990s, studies showed that Canada had about 10 times more
growth in self-employment than the United States. There is no consensus on why that is, but experts suggest that
health costs in the United States are one very expensive barrier that prevents many start-ups from growing (but the
ones that do expand in the U.S. tend to make more money than their Canadian counterparts).
Canadian governments at all levels are very aware of the growth in self-employment, and efforts have been made to
reduce and streamline taxes for fledgling businesses. But there is always room for more. Catherine Swift, head of
the Canadian Federation of Independent Business (CFIB), is working with the federal government on many
initiatives, for example, changing legislation to allow multi-employer pension plans, a measure that would reduce
paperwork for start-up businesses.
Banks are also paying more attention to the small business sector. Mr. Morley, who used to work on the
commercial banking side, says he and his colleagues used to "look down our nose a bit" at the small business sector.
These days, they are pulling out all the stops to gain their business. "It's important not just for the bank's own
success, but also because it's such a huge contributor to wealth and job creation," he says.
The start-up entrepreneurs who deal with government and banks provide mixed reviews about how it went. A
popular complaint about the banks, for example, is that they seem a lot more eager to lend money in their
television commercials than they are in reality. And there are always complaints about government taxation and
other barriers.
Then there are people like Susan Ho, who might be the posterchild for positive government co-operation.
Ms. Ho, a 34-year-old nutrition expert, found herself out of a job in 2007 when a hospital research project came to
an end. The Toronto native eventually decided to start her own business making tea-infused cookies. Her company,
Tea Aura Inc., is now churning out around 43,000 cookies a week, which are sold to a vast number of specialty food
and coffee shops.
Ms. Ho went to government agencies for help when she started out, and she found it. She got coaching from
Enterprise Toronto, a public-private aid service for entrepreneurs, and from there she got a referral to the Toronto
Food Business Incubator, a facility she still uses to make her cookies.
"If you don't research it, you wouldn't know how much help there is from the government. We've been able to do it
because of the guidance and mentoring we've had," she says.
Still, many experts criticize government for not understanding how start-up business works or doing enough to
help them.
"Large government knows how to deal with large bureaucracies, because that's what they are," says Joseph Paradi,
http://www.financialpost.com/story-printer.html?id=2588510 2/22/2010

3. Canada is the home of the fearless entrepreneur Page 3 of 3
director of the Centre for Management Technology and Entrepreneurship at the University of Toronto. "They have
no idea how to deal with an outfit of five people where everybody's doing everything."
He says the best thing government could do is take a stronger role in subsidizing training costs for small business
employees, a practice that used to be much more common (and one the CFIB is trying to re-emphasize).
Economists, meanwhile, are worried about the implications of a workforce increasingly willing to be its own boss.
A lot of their concerns are obvious: lower wages, nonexistent pensions and benefits, slower take-up of technology.
But the big issue is productivity. Economists have long complained about Canada's dismal labour productivity, and
the general perception is that self-employment makes it worse. If a company comes up with a brilliant idea and it
only has a handful of employees, it goes without saying that it will not translate to a larger scale very quickly.
Ms. Swift is not convinced by this argument. She calls productivity a "mixed bag" that still depends entirely on the
kind of business you're running. A service sector business is always going to have lower productivity because it is
just people, while other small businesses utilize more technology.
"RIM was a member of our organization until it went public," she happily reminds people.
Financial Post
pkoven@nationalpost.com
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http://www.financialpost.com/story-printer.html?id=2588510 2/22/2010