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Research Paper

The Legal Concept of Employment: Marginalizing Workers

I. International Developments
A. Trends

Self-employment has been a significant source of job growth in many OECD countries since the mid-1970s. In the last two economic cycles (1979-1990 and 1990-1997), it grew faster than paid employment in 15 out of 24 OECD countries. This growth contrasts sharply with the early 1970s when self-employment fell in a majority of OECD countries. But despite the growth in self-employment across the OECD, the differences between countries are profound. Self-employment as a share of total employment varies across the OECD – in 1997, from 5% in Norway to almost 30% in Mexico and Greece. At 16% Canada has a relatively high proportion of self-employed (OECD 2000, 157).

The growth of self-employment as a share of employment in OECD countries has generated an international and interdisciplinary debate over its significance and its causes. Many commentators emphasize the positive features of self-employment, especially its relationship with entrepreneurship, suggesting that the growth of employer self-employment, in particular, leads to job growth, more autonomy, and higher incomes (Loufti 1991). By contrast, other commentators stress the diversity within the ranks of the self-employed, pointing out that for many self-employed entrepreneurship and self-employment do not coincide (Bögenhold and Staber 1993, 471; Bögenhold and Staber 1991, 224; Dale 1991; Felstead 1991; Rainbird 1991). A large proportion of the self-employed are in very precarious economic situations, receiving low remuneration and enjoying little in the way of employment security or employment-related benefits (Dale 1991,44). The OECD (2000, 187) noted that several countries, including Canada, “have seen growing numbers of self-employed people who work for just one company, and whose self-employment status may be little more than a device to reduce total taxes paid by the firms and the workers involved.”

It is important to distinguish between different types of self-employment when examining the international trends. Self-employed people can be employers who hire other paid employees or they can be own account, which means that they do not hire anyone else. Generally, countries with high proportions of employers among the self-employed population have experienced greater job growth than those with high proportions of own-account self-employment. In the 1990s, however, employer self-employment only rose in about half of OECD countries. In Canada and Germany, the two OECD countries where self-employment grew most, employer self-employment fell sharply (OECD 2000, 159).

Flow analysis, examining changes from one employment status to another, provides insights into the characteristics of self-employment since it illustrates patterns of inflow into self-employment over time and comparisons of the degree of stability in various states of self-employment. In its Employment Outlook, 2000 the OECD found that very few own-account self-employed workers become employers and very few unemployed people turn to self-employment as a means of labour market re-entry. These findings indicate the importance of paying attention to different types of self-employment and suggest that self-employment is not necessarily linked to entrepreneurship (Lin, Yates and Picot 1999b; OECD 2000, 166).[3]

Not only is it possible to use the statistics to distinguish between the self-employed in terms of whether or not they hire paid employees, it is also possible and, indeed, useful to use them to distinguish four broad categories of self-employed persons: professionals, skilled crafts-people, petit bourgeoisie, and disguised employees (ILO 1990). Since the 1970s, there has been a change in the nature of self-employment away from the petit bourgeoisie who owned small shops and restaurants to consultants, professionals, and contractors (Eardley and Corden 1996; Jurik 1998). By industry, over the 1990s, the sectors contributing most to the rise in self-employment across OECD countries were finance, insurance real estate, renting and business, and services including community, social, and personal services. By occupation, across the OECD, professionals contributed significantly to self-employment growth (OECD 2000, 162). Recently the OECD observed that the borders between self-employment and paid employment are blurring (OECD 1992, 155).

Reflecting the feminization of the labour force, the proportion of the self-employed that are women grew markedly in the post-1979 period, outstripping growth rates for men in a majority of countries. Yet it was primarily in the 1980s that the growth rate in female self-employment forged ahead of women in total non-agricultural employment. Across the OECD, the proportion of self-employed people tends to increase with age and in most countries, “both the better-educated and the less-educated have above-average probabilities of being self-employed” (OECD 2000, 159).

There is a wide range of income and working conditions across the self-employed. Relative to the earnings of employees, the income distributions of the self-employed tend to be less equal than paid employees in most OECD countries, including Canada (Robson 1997, 502). The working conditions of many self-employed workers are also inferior to paid employees. Specifically, the self-employed are less likely to have access to training, earn overtime pay or receive maternity, parental or sick leave, (OECD 2000, 170) and they report longer working hours than paid employees (Delage 2002; HRDC 1998; OECD 1992, 2000, 170). But despite what would be characterized as low income and poor working conditions, self-employed people across the OECD report greater autonomy than employees along the dimensions of control, pace, and duration of work (OECD 1992, 156; OECD 2000, 169).

Analysts offer a range of theories for what the OECD characterizes as a “partial renaissance” in self-employment, including new opportunities for entrepreneurship, unemployment, changes in industrial organization, and efforts to avoid regulation. Studies on the determinants of self-employment tend to focus either on “pull factors”, such as the desire for flexibility and independence by workers, or “push factors”, including downsizing and subcontracting (Moore and Muller 2002). Some researchers argue that technological changes and shifting employment norms promote an “entrepreneurial culture” and “entrepreneurial goals”, defined as the desire to “grow your own business” and work autonomously, amongst a large segment of the employed population. From the “pull” vantage point, self-employment is viewed as an especially viable option for those people with financial resources and work experience in small organizations (OECD 1992; Delage 2002). At the same time, the “push” strand of research posits a connection between high rates of unemployment and the growth of self-employment, suggesting that the particularly rapid growth of self-employment is a symptom of labour market deficiencies. Dieter Bögenhold and Udo Staber argue, for example, that while individual motives to become self-employed are diverse, self-employed persons at the fringes of the economy are resorting to self-employment because of persisting labour market problems, including high unemployment. They observe:

what is remarkable about recent developments is that the resurgence of self-employment [began] in all countries at the same time. The revival of self-employment roughly coincides with a period of economic stress beginning in the mid-1970s, characterized by slow economic growth (relative to post-World War II standards), rising levels of unemployment and part-time employment, and the spread of various forms of contingent and substandard employment ( Bögenhold and Staber 1991, 227.).

However, flow analysis of employment states reveals that the absence of a significant correlation between the unemployment rate and inflows into self-employment fails to support the “unemployment push” hypothesis (OECD 2000, 166). Moreover, recent research has failed to find any evidence that strict employment-protection legislation leads to a growth in self-employment (Robson 2000). Analyzing the Canadian data, researchers found it to be weakly consistent with the push hypothesis, but emphasized the heterogeneity of circumstances surrounding self-employment (Moore and Mueller 2002).

To counter overly simplistic arguments about the relationship between self-employment and entrepreneurship, on the one hand, and between self-employment and unemployment, and employment protection legislation, on the other, it is important to attend to the diversity or heterogeneity of forms of self-employment and to use data that looks at changes in employment status. There is no generic category of self-employment and this militates against any single, simple explanation of self-employment growth. As Nigel Meager notes (1991, 66)

There is not such thing as a “typical“ self-employed person. The self-employed may include, for example, everyone from highly skilled professional workers such as doctors, lawyers and accountants, to entrepreneurial small business owners, to taxi-drivers, and many low-skilled workers in a variety of trades and occupations. Such people may have little in common other than the fact of their self-employment, and the influences of government policies and of economic and structural forces are likely to be very different between these different “segments” of self-employment.

The overall policy framework and institutions in a national economy extend a decisive influence on the extent of self-employment, its quality, and its prospects for growth.

In 2000 both the ILO (2000a, 7) and the OECD (2000, 163, 177) suggested that the borders between paid employment and self-employment are becoming more blurred and pointed to the growth of “false” self-employment (disguised employment). This Part provides a textured description of the structure and patterns of growth of self-employment in Canada and a detailed portrait of the self-employed to determine whether these trends hold true for Canada.

The two main axes of differentiation among the self-employed captured in the statistics are employer status and incorporation status. The significance of the distinction between the own-account and employer self-employed is the presence or absence of paid help. Incorporation status is important for two reasons. First, it tends to indicate a degree of planning and business acumen that is associated with entrepreneurship. Second, the incorporated self-employed fall into the category of paid workers in Canada’s national account system since their incomes come from both wages and profits and since incorporation protects individuals from a range of business risks (Statistics Canada 1997, 5). As Figure I.1 demonstrates, the over-whelming majority of own-account self-employed persons are unincorporated (85%) and most employers are unincorporated (60%). Among the self-employed, those who are own account, a majority of whom are unincorporated, are most likely to experience low income and economic insecurity.

The ensuing discussion focuses principally on the own-account/employer distinction, subdividing, where appropriate, the own account and employers by whether or not they are incorporated. Limited attention is devoted to unpaid family workers, who represent just 0.3% of total employment and the majority of whom are confined to one industry – agriculture (Statistics Canada Labour Force Survey Public Use Microdata 2001, Custom Tabulation). Agriculture is excluded in the industry and occupational analysis since including it risks masking important trends in other categories given the high rates of self-employment in this sector, especially unpaid family work[4] and the majority of the self-employed in agriculture engage in self-employment because it is the only option for conducting a family business (Cohen 1997, 106).

Self-employment is a significant source of job growth in Canada. It grew at a faster rate than paid employment between 1979 and 1990, a period in which average annual growth rates in self-employment and paid employment were 4.1% and 2.0% respectively (OECD 2000, 157). This trend continued into the 1990s such that the number of business owners in their main job grew by 25% (to 2.3 million) while the number of employees increased by only 1% (133,000) between 1989 and 1996 (Statistics Canada 1997, 1). The growth in self-employment began to level off in 1998. Thus, in 2000 the self-employed represented 16% of all workers, down from a high of 19% in 1998 but up from 11% in 1976 (Chart II.1). While self-employment accounts for a significant proportion of total employment, women and men have been affected differently by this trend. Whereas nearly 14% percent of men were self-employed in 1976, this was the case for just 6% of women. By 2000, 19% of men and 12% of women were self-employed.

The majority of the increase in self-employment in the 1990s was in the own account category, which grew from 6% to 10% of total employment between 1976 and 2000 (Chart II.3). In contrast, the employer category grew from 5% to 6% of total employment yet it declined every year from 1995 to 2000 (Chart II.3). About 35 of every 100 business owners had employees in 2000, down from 45% in 1989 (Chart II.3). Chart II.4 shows that own-account self-employment has grown dramatically for both sexes – from 4% to nearly 9% of total female employment and from 7% to 12% of total male employment between 1976 and 2000. The sharp upward trend in own-account self-employment affected women and men in the 1990s but sex differences remain apparent among employers – the proportion of female employers has grown steadily since 1976 (rising to 3% of total female employment in 2000) while the proportion of male employers rose to a high of 10% of total male employment in the mid-1990s but declined to 8% in 2000 (Chart II.4). Women have made gains in self-employment, yet women’s rising employment rates exaggerate these gains. When men’s and women’s shares of self-employment relative to their share of total employment are compared, women are still under-represented in self-employment. Only women in the own-account category are nearing their representation in the employed population (Chart II.5). Like their counterparts in paid employment, self-employed women are also confined to a very limited number of industries and occupations. Evidence indicates that women use self-employment as a way to accommodate the demands of balancing the need for remuneration with family, especially child care, responsibilities (Arai 2000; Hughes 1999; Vosko 2002).

Much of the recent growth in self-employment has come from various service industries. In the last 25 years, men in own-account and employer self-employment have shifted to services, reflecting expansion in this sector, while the concentration of women employers has declined in services and increased in construction and manufacturing. In 1976, nearly 80% of women employers were in three industries – retail trade, personal services, and community services – while men were spread more evenly across industries with significant proportions in construction and manufacturing. At the same time, trade, accommodation/food services, and other services remain critical industries for women employers, with health and social assistance and finance, insurance, and real estate growing in importance. The intense concentration among own-account self-employed women in the mid-1970s, 63% of whom were in personal services in 1976, has also changed. Although 20% of own-account women were in other services and 9% were in retail trade in 2000, the distribution of own-account self-employed women across industries has widened. Yet men are still spread across a much broader set of industries. Like their employer counterparts, own-account men have experienced a shift towards services while own-account women are gradually becoming more evenly distributed across industries, albeit at a slower pace than their employer counterparts (Statistics Canada Labour Force Survey Public Use Microdata 2001, Custom Tabulation).

Trends by occupation mirror what has happened regarding industry. In 2000, the largest segment of the self-employed were in managerial/professional occupations (42%), followed by service occupations (25%), blue-collar occupations (21%), and occupations unique to the primary sector, which includes forestry, logging, mining, fishing, and trapping (12%). Compared to paid employees, a higher proportion of the self-employed are in managerial/professional occupations and a lower percentage are in service occupations. By sex, fully 92% of the self-employed in blue collar occupations and 84% in occupations unique to primary are men. The only occupational grouping where women constitute a larger share (56%) of the self-employed than men is services. Women in self-employment are concentrated in two groups of occupations: management/professional occupations and services. It is not surprising, therefore, that own-account self-employment, which is much more common among women than men and where incorporation is relatively uncommon, is most prevalent in service occupations, where fully 72% of the self-employed work (Delage 2002, A. 1 - A.3).

Occupational patterns among the self-employed reflect continuity and change. While women employers remain concentrated in sales, service, and clerical occupations, the importance of these occupations has fallen for all self-employed women and paid employees. Still, a striking continuity is that own-account women remain concentrated in a few areas – 21% of own-account women are child- and home-support workers (versus 0.8% of men) and women’s share of this occupational group was 95% compared to 5% for men in 2000 (Statistics Canada Labour Force Survey Public Use Microdata 2001, Custom Tabulation).

Self-employment is more prevalent among men than women even though the rate of growth has been stronger for women over the last two decades. Men’s and women’s occupational and industrial distribution differ significantly in both employer and own-account self-employment. Self-employment differs along a range of dimensions, and tends to be polarized in terms of its distribution, quality, and rewards.

Both self-employed men and women, especially employers, tend to be older than paid employees.[5] The likelihood of being self-employed increases with age, a result of the absence of mandatory retirement policies for the self-employed (there is a high incidence of self-employment after age 64) as well as the capital requirements and the risks associated with self-employment. Relative to their percentage of total employment, the proportion of young workers who are self-employed is small.[6]

The incidence of self-employment, for both sexes, is higher among those with either very high or very low levels of education. Based on 2000 figures, 5 % of employers and 6% of the own-account self-employed have 0-8 years of education as compared with 3% of paid employees; on the flipside, 12% of employers and 8% of the own-account self-employed versus 6% of paid employees have graduate degrees (Statistics Canada Labour Force Survey Public Use Microdata 2001, Custom Tabulation). According to Benjamin Tal (2000, 16), “among the more educated self-employed, the number of women has been rising much faster than the number of men. Since 1989, the number of [own-account] women with a university degree rose by an annual average of 10%, significantly higher than the 3.5% for men.” The high percentage of the self-employed with graduate degrees reflects the growing resort to self-employment among professionals. Consistent with this trend, fully 85% of incorporated employers and 65% of the unincorporated own-account self-employed in health occupations have university degrees. In contrast, 28% of incorporated employers and 40% of the unincorporated own-account self-employed in occupations unique to primary have some secondary education or less (Statistics Canada Labour Force Survey Public Use Microdata 2001, Custom Tabulation).

Immigrants, especially immigrant men, have high rates of self-employment. In 1999, for example, 20% of men in the employer category and 19% of those in the own-account category were born abroad. While data for immigrant women employers are unavailable, that year 20% of women in the own-account category were born abroad (Statistics Canada Survey of Labour and Income Dynamics Public Use Microdata 2001, Custom Tabulation). The increasing likelihood of immigrants to turn to self-employment is a recent labour market trend, which researchers have attributed to the declining success of recent immigrants in the paid workforce (Frenette 2002, 13).

Somewhat similar trends apply to members of visible minority groups, although they are less sharp. In 1999, 13% of self-employed people were members of visible-minority groups, fully 16% of self-employed men and 9% of self-employed women. When the self-employed category is broken down, data show that own-account self-employment is more common than employer self-employment among members of visible-minority groups; this is especially true of visible-minority women, 69% of whom fall into the own-account category (Statistics Canada Survey of Labour and Income Dynamics Public Use Microdata 2001, Custom Tabulation).

Two aspects of self-employment affecting job quality are the extent to which self-employment is pursued on a part- or full-time basis, voluntarily or involuntarily, or in conjunction with other forms of employment and hours of work. In the 1990s, alongside women’s increasing participation in self-employment and paid work more generally, there was a rise in part-time self-employment, especially among the own-account self-employed, such that one in four workers in this category worked part time by 2000 (Statistics Canada Labour Survey Public Use Microdata 2001, Custom Tabulation). In 2000, fully 42% of women and 16% of men in the own-account category were part time, rates almost double those of women and men in paid employment.[7] Much of part-time self-employment is involuntary; 24% of those working part time report wanting more hours (Tal 2000, 19). Multiple jobholding is also growing amongst the self-employed. In 1976, 2.6% of women employers and 2.6% of women in the own-account category were multiple jobholders. By 2000, the figures changed to 6.1% and 7.6% respectively (Statistics Canada Labour Force Survey Public Use Microdata 2001, Custom Tabulation).

Despite the desire for more hours of work among the part-time self-employed and the high rates of multiple jobholding among the self-employed, workers who are self-employed in their main job spend more hours per week working for pay than paid employees. The self-employed work on average 45 hours per week while employees work on average 37 hours. Among the full-time self-employed, the average work week is 49 hours. Men employers work the longest average weekly hours (50 hours), followed by men in the own-account category (43 hours), women employers (42 hours) and, finally, women in the own-account grouping (31 hours) (Delage 2002, B. 1 and B. 2). Analysts often claim that the self-employed “see their business as an integral part of their life and will reject the use of the term ‘time at work’”; however, insecurity, income variation, and other risks associated with self-employment help to explain why the self-employed spend 20% more time spent at work per week than paid employees (Tal 2000, 10).

There are concerns about the reliability of income data for the self-employed because of the belief that under-reporting of income is prevalent (MacKinnon 1999; Miras, Smith and Karoliff 1994). But even with this caveat, income data tell an important story. The most significant income differences among the self-employed are evident by type of self-employment – in 1999, the average annual incomes of employers and the own-account self-employed were $46,825 and $16,918 respectively.[8] Income differences also prevail by sex – in the same year, women and men employers had average annual incomes of $39,920 and $49,470 respectively and women and men in the own-account category had average annual incomes of $13,032 and $19,769 respectively. The comparable figures for all female and male paid employees were $26,015 and $40,183 respectively, indicating that the average annual incomes of men and women in paid employment tend to be less than those of their counterparts working as self-employed employers but significantly more than their counterparts in own-account self-employment. When income is examined by immigration status, sex, and type of employment, among the own-account self-employed, where insecurity is most pronounced, the average annual incomes of men born in Canada are highest ($20,188) followed by men born abroad ($18,476), women born in Canada ($12,918), and women born abroad ($11,929).

When income is examined by visible minority status, sex, and type of employment, among the unincorporated own-account self-employed the average annual incomes of non-visible minority men are highest ($23,882) followed by visible minority men ($19, 941), visible minority women ($15,641), and non-visible minority women ($15,314). Similar findings emerge when income is examined by mother tongue. In 1999, men in unincorporated own-account self-employment whose mother tongues were English, French, and “other” had average annual incomes of $24,719, $24,187, and only $18,748 respectively, while their female counterparts had incomes of $15,482, $14,504, and $15,934. Broadly speaking, the average annual incomes of the self-employed (both the own-account self-employed and self-employed employers) differ less between immigrants and non-immigrants, visible minorities and non-visible minorities, and language groups, than those of paid employees. Consistent with other work on nonstandard, atypical, or contingent employment, there is greater equality -- by language group, immigration status, and visible/non-visible minority status – in nonstandard or precarious jobs than in standard employment situations. Still, along all three axes of differentiation, men’s and women’s incomes differ significantly, and differences are sharpest among men and women in unincorporated own-account self-employment.

The income data also reveal polarization: based on 2000 figures, 25% of the self-employed have incomes of $20,000 or less and 22% have incomes above $60,000 (Delage 2002, B. 4). The largest percent of self-employed women (47%) have incomes of $20,000 or less, while self-employed men are much more evenly distributed across income groups (Statistics Canada Survey of Self-Employment Public Use Microdata 2001, Custom Tabulation). This polarization reflects earnings differences between employers and the own-account self-employed. A sizeable proportion of the own-account self-employed have incomes under $20,000 (35%) but only a small percentage have incomes greater than $90,000 (around 3%). In contrast, 18% of employers have incomes over $90,000 (Delage 2002, A. 4).

The significance of incorporation status is also apparent with respect to income. Low income is most evident among the unincorporated own-account self-employed and high income is most evident among unincorporated employers, followed by incorporated employers. When sex is factored in, 60% of unincorporated own-account self-employed women had incomes less than $20,000, a finding magnified by the fact that a majority of self-employed women fall into this category (62%). Unincorporated own-account self-employed men also have relatively low incomes – the largest group (36%) have incomes of $20,000--$40,000. In sharp contrast, the largest group of men incorporated employers (32%) earn over $60,000 and the largest group of women (40%) earn $20,000-$40,000. As Chart II.7 illustrates, the unincorporated own-account self-employed, especially women, are in the poorest income situation while incorporated and unincorporated employers (men and women) have higher incomes.

Instability in the extended benefits package, which includes hospital, dental, and vision coverage for example, as well as the source of benefits, is also a common feature of self-employment. Many self-employed people must either purchase, or acquire through a spouse, extended benefits that paid employees normally obtain through their employer. Since the self-employed tend to be older than paid employees, the likelihood of living alone is fairly small for the self-employed; in 1996, 75% of business owners lived with a spouse, making access to spousal benefits possible for many self-employed people, especially the 35% whose spouses are paid employees (Statistics Canada 1997, 15-16). Analysts speculate that self-employment is more common among couples than singles because a spouse with steady paid employment provides economic support for household members. Data from the Survey of Self-Employment substantiate this hypothesis for women, many of whom obtain their benefits from a spouse. Yet, based on 1996 figures, 25% of the self-employed have a spouse who is self-employed, 78% of whom are partners in the same business (Statistics Canada 1997, 15-16). In such instances, spousal coverage is not an option. Where one spouse is an employee, especially where the employee spouse is a man, self-employment may be a household strategy designed to give women “care-giving flexibility”. For men and women, independence, freedom, and the ability to be one’s own boss is the foremost reason for becoming self-employed, yet 42% of men and only 24% of women specify this reason. The other main reasons that women and men commonly cite indicate that control over time is key to women’s participation in self-employment – 23% of women refer either to flexible hours or “balancing work and family” as their main reason for becoming self-employed. Spouses in business together may gain control over time at the expense of security in compensation (Delage 2002, 27).[9]

Paid employees have higher levels of benefits coverage than the self-employed. In the case of extended health coverage, 58% of paid employees are entitled to these benefits versus 42% of the self-employed. Unincorporated own-account men and women are worst off in this respect.[10] Paid employees are also more likely to have dental coverage – 54% of paid workers as compared with 35% of self-employed. Unincorporated employers of both sexes fare the worst when it comes to dental coverage – only 27% of men and 31% of women in this category have access to this type of coverage.[11]

It is impossible to compare the retirement preparation of paid employees and the self-employed since paid employees automatically pay into a government-administered pension scheme (CPP/QPP) while the self-employed tend to rely on registered retirement savings plans (RRSPs). A higher percent of the self-employed have RRSP coverage than paid employees; however, coverage rates vary among the self-employed. In contrast to the 52% of paid employees with either an employer-sponsored pension plan or a group RRSP other than CPP/QPP, fully 85% of incorporated male employers have RRSPs while only 57% of men and 58% of women in the unincorporated own-account category have RRSPs. It is also difficult to assess the retirement preparation rates of the self-employed and paid employees since there is no data on the level of retirement savings of these distinct groups. There is some evidence, however, that the level of retirement preparation of the self-employed, which includes RRSPs and other assets, is inferior to employees; asset diversification is low among the self-employed such that many hold two or fewer types of assets (fully 51% of women) and only 15% have public pensions.[12]

The self-employed are often depicted as choosing flexibility and autonomy over security, yet data on the desirability of extended benefits as well as access to income insurance, such as Employment Insurance, calls the accuracy of this picture into question. In 2000, 40% of the self-employed (36% of employers and 43% of the own-account self-employed) reported a desire for income insurance (Delage 2002, E. 5). The self-employed with short job tenure desire income insurance most and the self-employed in service and blue-collar work are especially interested in it. Among those who want income insurance, 81% report security and stress as their main reasons for being interested in such programs (Delage 2002, E. 6). Among those that do not want it, the reasons for lack of interest in rank order are: “low probability of using it,” “don’t believe in it,” “insufficient earnings to pay for it” and, finally, “probably won’t help enough.”

A majority of the self-employed without a spouse desire income insurance, a notable finding given that spousal coverage is a principal source of income insurance coverage for the self-employed with access to such coverage, especially among women.[13] Fully 77% of self-employed women and only 44% of men with extended benefits obtain them through a spouse[14] and twice as many men (14%) as women (7%) acquire benefits through an association.[15] Men’s higher rates of benefits through an association reflect the higher percentage of self-employed men in professional and managerial occupations, in the employer category, and in higher income earning groups.

Analysts increasingly recognize the overlap between paid employees and the self-employed, prompting organizations like the OECD and the ILO to call on countries to scrutinize the growth of “nominal” or “disguised” self-employment and devise policies designed to extend social protections and benefits to this segment of the self-employed. Such scrutiny is particularly apt in the Canadian context, since the greatest growth in self-employment since 1976 has been in the unincorporated own-account category, where the overlap with paid employees is most apparent.

Moreover, the statistical problem of blurred categories is not limited to the overlap between paid employees and the unincorporated own account self-employed. It extends to common distinctions between employers and the own-account self-employed.

Data show that the distinction between self-employed who are own account and employers is more porous than conventionally understood. Those self-employed with paid help in a given reference year are classified as employers while self-employed who do not hire others are considered own account. Based on this definition, in 2000, 46% of the self-employed in Canada were employers. Yet, when the same group was asked whether they had paid help during a particular reference week, only 38% fell into this category. The difference between these figures points to significant movement between own-account and employer self-employed (Delage 2002, 12).

The absence of a clear distinction between paid employees and self-employed individuals is apparent from an examination of the work arrangements of the self-employed. In 2000, a considerable proportion of the self-employed worked in either client locations (20%) or locations supplied by clients (4%); fully 30% of the own-account self-employed worked in such situations (Delage 2002, Appendix B. 6). Furthermore, 37% of the self-employed (35% of men and 46% of women) received support from their clients; 24% (20% of men and 37% of women) received equipment, tools or supplies from their clients; and another 21% received support in the form of other office equipment such as a fax or photocopier. The day-to-day business operations of many self-employed mirror those of paid employees.

Data on the proportion of the self-employed with a former employer as a client, and on the importance of the revenue obtained from this client, illustrate the difficulty in distinguishing between the self-employed and paid employees. In 2000, 15% of the self-employed (18% of the own-account self-employed) reported that their last employer was one of their clients of whom 51% obtain more than half of their annual revenue from work done for their last employer.[16]

The Survey of Self-Employment makes it possible to distinguish between two groups of self-employed, those deriving 50% or more of their present income from a former employer and those drawing less than 50% from a former employer. Regarding control over work, in 2000 the majority of the self-employed with strong ties to former employers reported the same degree of control over the content of their work that they had as employees (67%) and only 48% reported having greater control over their work schedule. In contrast, those with weak or no ties to their former employer reported having more control over their work schedule and the work itself; among the self-employed as a whole, 72% reported having more control over their work schedule (77% of the own-account self-employed and 66% of employers) than in the past and 70% reported having more control over the content of their work. Along these indicators, too, those self-employed with strong ties to their former employer resemble paid employees. While control over work schedule improves for some former employees,[17] the level of control over work remains the same for the majority.

The data reveal that on a number of dimensions many own-account self-employed, some of whom occasionally employ others (and, hence, fall into the employer category), resemble paid employees. This finding is particularly important, since the own-account self-employed are by far the majority (65.9%) of the self-employed in Canada (see Figure V.2 infra at pp.102-2). The data indicates that the distinction between employment and self-employment is not a good basis for drawing the boundary between employment and commercial law.