A significant economic opportunity lies in Canada's self-employed workforce, according to a new report from the Business Development Bank of Canada. The study suggests that if solo operators transition into employers by hiring paid help, it could inject approximately $24 billion into the nation's gross domestic product.
Potential for Massive Economic Impact
The BDC report, based on a survey of 851 self-employed workers, found that 11% plan to hire employees within the next year. When scaled across the entire self-employed population, this transition could potentially create 213,000 new businesses and boost Canada's GDP by 0.8%.
"If we are able to support more self-employed people to become small businesses, we'll have an impact on the Canadian economy," said Pierre Cléroux, BDC's chief economist and vice-president of research.
Current Self-Employment Landscape
Currently, approximately two million Canadians work for themselves without any paid assistance. Small- and medium-sized businesses already play a crucial role in the economy, generating about half of Canada's total GDP.
The COVID-19 pandemic initially caused a sharp decline in self-employment as many workers sought traditional employment during 2021-22, benefiting from favorable work conditions in a tight labor market. However, since 2023, self-employment numbers have been increasing again.
Why Self-Employment is Growing Again
The report identifies several factors driving the renewed interest in self-employment:
- A challenging job market that makes traditional employment less attractive
- Return-to-office mandates that reduce workplace flexibility
- Growing desire for greater control over work-life balance
"While the ratio of self-employment to total employment remains below historical averages, this increase signifies a notable trend toward self-employment," the report stated.
Three Categories of Self-Employed Workers
BDC's survey classified respondents into three distinct groups based on their growth intentions:
- Stable (35%): No plans to hire employees or make significant investments
- Agile (27%): Open to opportunities under favorable conditions but not actively planning growth
- Ambitious (38%): Eager to grow with concrete plans to hire or invest within the next 12 months
Critical Window for Business Growth
The first five years of operation represent a vital period for self-employed individuals who aspire to become employers. According to Cléroux, ambitious self-employed people are most likely to hire workers during this timeframe.
The survey revealed specific hiring intentions across different business stages:
- 15% of those in business for less than one year intend to hire within 12 months
- Hiring intentions peak at 20% for businesses one to two years old
- 17% of businesses three to four years old plan to hire
"After this time, the likelihood of becoming an employer drops, and after 15 years, only a few choose to hire employees," the report noted.
Common Challenges Facing Growth-Oriented Businesses
The report highlighted similar obstacles faced by both ambitious self-employed individuals and micro-businesses (those with one to four employees). Key concerns include:
- Client acquisition and business development
- Maintaining work-life balance
- Cash flow management
- Administrative tasks and paperwork
- Effective time management
These findings underscore the importance of targeted support for self-employed Canadians who wish to expand their operations. With proper resources and guidance, the transition from solo operator to employer could unlock significant economic potential for the country.
