The rate of Canadians entering business ownership declined steadily from 2006 to 2020, suggesting reduced entrepreneurial dynamism and potential long-term implications for productivity growth, according to new data from Statistics Canada.
The study, released April 1, examined entry and exit trends in both unincorporated self-employment and incorporated business ownership. It found that entry and exit rates were higher among the unincorporated self-employed than among business owners, with a gradual drop in business formation over the 14-year period. The entry rate for incorporated businesses fell from more than 15 per cent in 2006 to 12 per cent in 2020.
That pattern is often linked to broader economic trends. “This declining business dynamism is often thought to be associated with Canada’s slowing productivity growth,” the agency said.
Pandemic disruption prompts temporary rebound
Although business ownership rates declined overall, there was a brief reversal in 2020, when entry rates into incorporated business ownership rose compared to 2019. This was attributed in part to government business support programs introduced during the COVID-19 pandemic, which helped owners manage payroll and fixed costs.
While incorporated businesses saw a net increase in entry rates during the first year of the pandemic, the same was not true for unincorporated self-employment. That segment saw a drop in entries and a rise in exits, reflecting the vulnerability of individuals without employees or formal business structures.
Demographic divides in entrepreneurial activity
The study also highlighted stark differences in self-employment and business ownership rates across demographic groups. From 2006 to 2020, women, youth, recent immigrants, and owners of very small businesses were more likely to enter—and exit—self-employment.
The entry rate into self-employment averaged 21 per cent for women, compared to 17 per cent for men. Young people aged 15 to 34 had an entry rate of 33 per cent, more than double the 14 per cent rate among those aged 55 and older. For recent immigrants, the entry rate was 37 per cent—also more than double the 17 per cent seen among Canadian-born individuals.
Sectoral shifts reflect economic pressures
Sector-specific disruptions also played a role in shaping the trends. Following the global oil price drop in 2014, entry into the mining, quarrying, and oil and gas sector declined sharply, while exits increased.
At the same time, self-employment in the transportation and warehousing sector grew, with the entry rate rising from 15 per cent in 2014 to 26 per cent in 2020. That increase likely reflects the rise of gig economy platforms that provide short-term contract work and delivery services.
Productivity implications for employers and policymakers
The report points to a long-term shift in Canada’s entrepreneurial landscape and its connection to broader productivity trends. Understanding who is starting businesses—and why others are leaving—can help shape support programs and policies to encourage business formation and sustainability.
These findings are relevant to employers and HR professionals considering workforce planning, talent retention, and the rise of gig and contract-based labour. They also provide insight into how economic shocks—like a pandemic or commodity crash—can reshape the profile of who chooses self-employment and what sectors see growth or decline.
