by Sylvain Schetagne

When the federal government tabled its budget on February 28, it announced that it would extend Employment Insurance (EI) benefits to 35 weeks for parental leave (in addition to the 15 weeks allotted for maternity leave), thus allowing parents to spend more time caring for their newborn or adopted children. This was welcome news, as this measure will markedly improve the level of assistance currently available to Canadian parents. It might be asked, however, why this particular measure should be considered to be a priority, when fundamental social and economic changes would seem to call for not only the extension of leave periods, but for improved access to parental leave in general.

Self-employed workers in Canada

One of the most striking changes in the Canadian workplace over the last few years has been the proliferation of non-standard jobs, notably self-employment. In 1998, there were more than 2,525,000 self-employed workers in Canada, including incorporated and non-incorporated workers, those with and without paid employees, and unpaid workers in family businesses. From 1990 to 1998, the self-employed portion of the total workforce increased substantially, from 14.4% to 17.6% (see Figure 1).

Self-employment has changed considerably in the last few years. The popular notion of a businessperson - typically a man - at the peak of his career making use of years of workplace experience to launch his own enterprise and employ others no longer describes conditions for many. Self-employed labor is becoming increasingly diverse. The proportion of female workers in this category is increasing. From 1990 to 1998, the number of self-employed women rose by more than 50%, from 591,000 to 891,000. In 1998, 13.7% of women in the labour market in Canada were self-employed, and more than 35% of self-employed people were women. The majority of these (59%) were between the ages of 20 and 45.

The types of work done by those who are self-employed are also changing. The vast majority of self-employed jobs created from 1990 to 1998 (75%) were non-incorporated businesses without paid employees. In 1998, 55% of self-employed jobs fell within this category, and more than three out of four self-employed women had a job of this type.

The quality of self-employment jobs can leave much to be desired. While self-employment can potentially result in a good job, a significant portion of the self-employed, particularly women without employees, are at the low end of the scale in the job market. In 1995, the before-tax average revenue of persons whose main source of income was self-employment was $30,800, or 91% of the average income of salaried employees. Those without employees earned even less, about 68% of the average income of salaried employees. Nearly half of the self-employed made less than $20,000 in 1995, while the proportion of salaried workers with similar low earnings stood at only 25%. Among the self-employed without employees, 55% earned less than $20,000. In addition, the gap between the earnings of men and women was greater among the self-employed than among other employees. For full-time work, self-employed women received 64% of the average revenue of self-employed men, compared to a figure of 73% among salaried employees.

Self-employment and maternity

Self-employed women who decide to have children have two difficulties to overcome. First, the prospect of being cut off from the job market for several months affects their network of contacts and results in a drop in the number of clients and revenue. Second, they have no means to provide income during the period when they stop working.

Because the majority of self-employed women work alone, they cannot count on employees to keep their businesses operating in their absence. Therefore they must attempt to put money aside - no easy task when they often earn less than $20,000 per year. Otherwise, they are forced to resort to welfare, if they are eligible. Alternatively, they can attempt to carry on their work while pregnant or caring for a newborn child. A study by Statistics Canada reveals that 80% of self-employed women who had a child in 1993-94 returned to work by the end of the first month following the birth, compared to only 16% of salaried workers who returned to work that quickly.

Self-employment, Employment Insurance and parental leave

Among the social safety measures available to workers, EI is one of the most important in terms of revenue support. One aspect of Canada's EI system is that it also covers employees in certain situations, specifically in the case of the birth or adoption of a child. Starting in January 2001, in order to claim maternity or parental leave, a female worker will have to have accumulated 600 hours of work in insurable employment over the previous 52 weeks.

According to the EI Act, insurable employment consists of employment in Canada by one or more employers, under any express or implied contract of service or apprenticeship, written or oral, whether the earnings of the employed person are received from the employer or some other person, or by any other means. However, self-employed women do not generally work under this type of contract. They typically work under business or service contracts, therefore they are not considered to have insurable employment under the terms of the Act. Consequently, they do not have access to EI, unless they work for their spouse and own less than 40% of voting shares in the business, or they are employed in one of the occupations covered by the Act, such as a hairdresser.

Access to Employment Insurance

The increasingly precarious job market and changes to EI have considerably reduced access to benefits conferred by the Act. Rapid increases in the number of self-employed workers and non-standard jobs over the last few years have created a large pool of labor without access to EI protections. Since the last decade has seen a steady drop in the number of people eligible for EI (see Figure 2), extending and improving parental leave available under EI seems insufficient. A government that encourages the growth of self-employment must not do so at the expense of families. In its Speech from the Throne, the federal government stated that parents and families have the primary responsibility for the care of their children. But governments have a responsibility to ensure that this remains possible. In the current climate, it seems difficult for self-employed women to find a way to spend the first months with their newborn children.

Given that the birth rate has continued to drop over the last few years, while the number of self-employed women continues to increase, this would be a highly appropriate time to intervene to improve the lives of self-employed women and their children.

Time for action

To address the growing number of self-employed women and the dropping birth rate, the federal government should not only consider extending the duration of parental leave, it should also consider extending access to such benefits to include workers who are most in need, particularly self-employed women. The government of Quebec has proposed to reassign a portion of the funds in the EI account to create its own parental insurance account. It suggests increasing benefits from 55% to 70%, as well as broadening access to benefits to include self-employed women. Given the significant suplus in the EI account, it would be timely to improve the current system and improve access to it for women in unstable employment situations, particularly those who are self-employed.

Sylvain Schetagne is a Research Associate with the CCSD, specializing in labour market issues.

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