The Impact of Self-Employment on Labour-Productivity Growth: A Canada and United States Comparison

Abstract

This paper examines the influence of the self-employed on the growth in labour productivity in the business sector. There has been a dramatic expansion of self-employment in the Canadian economy over the 1987 to 1998 period. In addition, a comparison is made of Canadian and United States experiences in this area over the 1987 to 1998 reference period. This paper argues that the expansion of the self-employed sector in Canada and the weak growth in Canadian selfemployment net income over the decade has resulted in downward pressure being put on the growth in aggregate labour productivity in the business sector. In contrast, the growth in the net income of the self-employment group in the United States has outpaced overall productivity growth in the business sector throughout the 1990s. Almost all of the difference in labourproductivity growth between Canada and the United States in the 1990s can be attributed to the greater growth of self-employment in Canada and the poorer income performance of this group.