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While there is no doubt that self-employment has contributed significantly to the quantity of new jobs, what about the quality of self-employed jobs? In considering this, it is important to recognize a fundamental division within the ranks of the self-employed. That division may help to explain the dichotomy that exists in our findings on many of the qualitative aspects of self-employment.

Among the self-employed, it has been observed that there are two major groups, each with different intentions and needs. One group consists of those whose aim is merely to earn a 'decent' wage and typically not to expand their businesses. Another group expects to 'grow' their businesses into larger enterprises. The former could be characterized as the truly own-account self-employed and the latter as employers. Research has shown that the own-account self-employed individuals are less likely to be driven by a desire for independence than employers. Because they do not expect to expand their businesses, they have less significant capital requirements.

At first glance, the general data would suggest the job quality of the self-employed is lower than that of the paid employed. Evidence suggests that self-employed individuals work longer hours than paid workers, that the self-employed earn only about two-thirds of what paid workers earn on a mean annual basis (a gap that has closed since the mid-1980s) and that the self-employed have lower benefits coverage than the paid employed. People with higher education are better paid when they are employed by an employer than when they are own-account self-employed. The data also suggest, however, that own-account self-employed women have closed the earnings gap with their male counterparts faster than paid employed women (see Table 1 below).

Source: Calculations by Ekos based on unpublished Survey of Consumer Finances data from Statistics Canada.

With respect to total income, self-employed unattached individuals earn much less and have a more polarized income distribution than families whose main wage earner is a self-employed worker. Reliance on self-employment rises with income level. But since at least 1987, dependence on self-employment income has diminished at all income levels - and particularly at the bottom and top quintiles. This has occurred despite the growing incidence of self-employment in Canada's economy.

These findings are open to question because of methodological and conceptual concerns with the underlying data. First, with regard to hours, it is not clear what hours worked really means for the self-employed. Does time spent on activities benefiting the business and not contracts per se constitute work hours? Second, with respect to earnings, the self-employed are able to write off expenses, which means that self-employment earnings may in reality be higher than they appear. Third, while some note that income is considerably lower for the self-employed, others point out that commuting and clothing costs are lower for those who work at home. Fourth, the self-employed may realize capital gains through their efforts, a possibility not open to paid employees. These issues point to an inability to draw firm conclusions about the relative job quality, in financial terms, of the self-employed and the need for better data and further research.

Other aspects of job quality are the irregular income flow of self-employment and the nature of job security for the self-employed. Some experience a great deal of anxiety over the irregular income flow ('feast or famine') which makes credit and purchases of supplies and equipment difficult. Focus group participants complained about the long hours they have to put in to protect themselves against downtime. Others, despite the uneven income flow, enjoy the fact that their income is directly tied to their work effort. Those individuals are also more likely to believe that they have greater control over their job security. They feel that they can increase work effort to make up for downturns. Also, by having many clients they are not 'putting all their eggs in one basket', and do not have to depend on the good fortunes of one employer.

Many self-employed people view the lack of employment benefits as a serious drawback. Few of the self-employed consulted realized there are private companies selling benefits at group rates to individuals. Also, many have the incorrect impression that few individuals have access to employer-provided pensions. Few of the self-employed consulted feel they put enough aside towards their own retirement in the previous year.

Other disadvantages of self-employment that people cited are isolation from fellow employees, a lack of training opportunities, negative attitudes of family and friends, and having to perform all tasks required of a business, including accounting, purchasing, debt collecting, researching and marketing. Contradictions over the advantages of self-employment may be also attributable to the fact that many of the perceived benefits linked to 'independence' and 'control' are often more apparent than real. The self-employed often operate in situations where the client in effect becomes the boss, a state of quasi-employment.