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April 1999, Vol. 122, No. 4
The role of self-employment in U.S. and Canadian job growth
Marilyn E. Manser and Garnett Picot
Although the economies of Canada and the United States are closely linked, their labor markets have diverged in some respects during the 1990s. A striking difference has been in the contribution of self-employment to net job creation.1 In particular, self-employment accounted for the majority of the net employment growth that took place in Canada in the 1990s, whereas it accounted for effectively none of the net growth in the United States over the same period. During the 1980s, the role of self-employment had been fairly similar in the two countries.
Not surprisingly, considerable attention has been paid to self-employment in Canada in recent years. Popular concern exists regarding whether workers are "pushed" into self-employment due to lack of full-time paid jobs, or "pulled" in by the positive benefits of self-employment.
Views of self-employment also have been mixed in the research literature. On the one hand, self-employment is a type of entrepreneurship, something that is encouraged by various government policies around the world. Small businesses are sometimes thought to have particularly desirable impacts, such as higher economic growth.2 On the other hand, it is sometimes thought that individuals are driven into self-employment by poor opportunities in the wage and salary sector.3
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1 For comparisons of net and gross job creation, job security, and job stability between Canada and the United States over the past two decades, see Marilyn E. Manser and Garnett Picot, "Job Creation in Canada and the United States: What Do We Know and Where Are the Data Gaps?" Paper presented at the Voorburg Meetings on Service Sector Statistics, Copenhagen, Denmark, September 1997; and Garnett Picot and Marilyn E. Manser, "Job Stability in Canada and the United States: What We Know and the Data Gaps," Paper presented at the Voorburg Meetings on Service Sector Statistics, Copenhagen, Denmark, September 1997.
2 Interestingly, one analyst, using U.S. Survey of Consumer Finances data, has found that the self-employed were substantially overrepresented in the ranks of the rich in 1983, and that they gained share at the top of the distribution between 1983 and 1995. See Edward N. Wolff, "Recent Trends in the Size Distribution of Household Wealth," Journal of Economic Perspectives, Summer 1998, pp. 131–50.
3 For a discussion of the determinants and consequences of self-employment, see, for example, D.B. Blanchflower and A.J. Oswald, "What Makes an Entrepreneur?" Journal of Labor Economics, vol. 16, no. 1, 1998, pp. 26–60, and references therein.
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