Why entrepreneurs are the key to growing Canadian jobs again

Employment growth doesn’t just happen. In order to create jobs, we need to encourage more Canadians to start businesses

Business owner putting up an “open” sign

(Betsie Van Der Meer/Getty)

A record number of self-employed Canadians ran incorporated businesses and employed other people in 2015: some 651,000, a 4.8% increase from the previous year, according to Statistics Canada. These men and women are the heroes of the post-crisis years. Industries are dying; central bankers are dabbling with negative interest rates; China is shifting to a “more sustainable growth path,” whatever that means; and Donald Trump and a socialist are being taken seriously as U.S. presidential candidates. Only a crazy person would start a business right now. Fortunately, several thousand Canadians did anyway.

I’m not sure we appreciate these people enough. In December, Canada added 23,000 jobs, all of them “self-employed”—mostly newly minted consultants, contractors and the like. Bay Street dismissed the report, as it always does when the gains are driven by entrepreneurs. I get it: Hiring and firing at big private firms is a better indicator of the overall health of the economy. But there is also no acknowledgement that someone who is self-employed one month could be the employer of dozens or hundreds of people six months later. Canadian economic thought is biased toward the steady job. So, for that matter, are Canadians; only about 9% of us were self-employed in 2013, according to the World Bank. (Compare that with 11% in Germany, 15% in the U.K. and 27% in South Korea.)

Canada needs more self-starters because steady jobs are getting rarer. The Bank of Canada reckons the economy is likely to grow at an annual rate of 2% without sparking inflation. That will require some adjustment, especially for those of us who got used to growth rates closer to 3% during the late 1990s and the first half of the current millennium. The retirement of the baby boomers will leave the country with fewer economic actors, and the workers who remain aren’t productive enough to make up for the lost output.

Demography is a global headwind. There are other rich countries that also are aging and unproductive. Developing economies find themselves in need of new growth models now that there is less demand for imports, no matter how cheap they might be. Many countries, rich and poor, are trying to inspire their citizens to create companies rather than wait to be hired by one. In the United States, entrepreneurs are already revered by the political class; they are the fabled “job creators” of Republican lore. But President Barack Obama, too, has a soft spot for entrepreneurs and is doing what he can from the White House to make it easier to start a business. In January, Indian Prime Minister Narendra Modi summoned Uber founder Travis Kalanick and other technology titans to help him launch a major campaign to encourage startups. Australia’s prime minister, Malcolm Turnbull, who got rich as a technology investor, has called for an “ideas boom” to alleviate the pain of the resource bust. To prove his seriousness, Turnbull’s government put down $1 billion worth of incentives for entrepreneurs and investors

Canada is making no such attempt to encourage entrepreneurship. Some will say that is because there is no need; Canada’s rates of self-employment are similar to those of the U.S., and there are already lots of government-assistance schemes available for startups. But no matter what the statistics say, there is an obvious qualitative difference between the startup cultures of the U.S. and Canada. When Bank of Canada governor Stephen Poloz took up his post in the spring of 2013, he assumed “animal spirits” would soon spur the founders who lost companies during the Great Recession to start new ones. It didn’t happen. Exports languished. That suggests Canada isn’t quite as resourceful as Prime Minister Justin Trudeau made it out to be when he addressed the global elite in Davos, Switzerland, in January. The vast majority of Canada’s self-employed work alone. Trudeau and other policy-makers must think seriously about why that is so. The country needs more of them to become job creators.