EI for the self-employed

Chris Hopkins never really wanted to be an entrepreneur. But facing dire job prospects after moving to Prince Edward Island, he started a home business that eventually failed. 

Now, Hopkins is using his free time to spearhead a campaign to allow entrepreneurs to opt into the federal employment insurance program. 

In doing so, he’s highlighted a hole so big in Canada’s social safety net that it could fail 15 per cent of the country’s work force – about 2.6 million people. 

“Why is it that self-employed people aren’t even asked to contribute?” said Hopkins.

“Many small businesses are failing. Their employees will be able to draw EI, but the owners won’t. The owners have nothing to fall back on. For people trying to build the economy, hiring people and creating cash flow, there’s nothing.”

If his campaign is any indication, it’s an idea whose time has come. 

“I got into every daily newspaper across Canada,” he said. “So the word is out there. And we’re going to keep at it. I’m getting more members every day. People stop me in the grocery store and say: ‘well done.’ It’s a battle worth fighting. But I’m not doing it for myself. My business is already toast.”

In an economic climate where massive job cuts are daily news, there’s been an upswing of interest in employment insurance program reform. But the discussion centers on the estimated 20 to 25 per cent of workers who pay into it but who are excluded from collecting benefits and the unequal access to benefits from coast-to-coast. 

The debate ignores the 2.6 million people who in 2007 were classified as self-employed in Canada, about one third of them women.

Self-employment has grown steadily since the 1970s. In 1987, 13.8 per cent of the workforce was self-employed and by 1998 the percentage had risen to 17.2. It accounted for 43 per cent of employment growth in the 1990s. 

Because self-employment increases during time of recession, we can only expect a surge in that sector over the coming years. (It also shrinks during economic growth – the percentage of self-employed workers fell in 2002, for example).

Many of Canada’s self-employed face a severely precarious work situation. In 1995, over 55 per cent of own account workers made less than $20,000 while only 2.2 per cent made over $80,000. In comparison, almost nine percent of employers made over $80,000. In terms of earnings between men and women, the wage gap in self-employment is also greater than that among paid workers.

“I don’t think Conrad Black needs Employment Insurance, and he’s self-employed,” said Larry Haiven, an associate professor with St. Mary’s University Sobey School of Business in Halifax. 

“But a lot of people are self-employed involuntarily or semi-voluntarily. They’ve been laid-off, or been contracted out, or their industry runs that way. More and more people who are in precarious work are self-employed. I would say they are in a position of dependency.”     

Canada’s social programs have yet to fall into line with our new labour reality and that leaves a large chunk of our work force without social welfare programs that we took for granted only a couple of decades ago. 

“All the labour law and employment law is based on the model of standard employment,” Haiven said.

Entrepreneurs also miss out on many of the benefits that come with employment. Some, like health and disability insurance, can be bought through private channels, though the cost can be prohibitive for the self-employed working poor. 

Other benefits - including vacation time and days off, sick leave, overtime pay and minimum wage, regular hours, workplace health and safety standards, maternity and parental benefits, and the right to be able to sue for wrongful dismissal – simply no longer apply. 

Extending employment insurance benefits to the self-employed is not unprecedented policy. 

Seasonal and fishery workers fought and won for coverage under the plan and the Quebec government allows self-employed persons to apply for its parental insurance plan under its assurances-emploi programs. The Tory government supports providing EI maternity and parental leave to women who opt into the program.

Maternal and parental leave is one area where the idea of extending benefits to entrepreneurs has gained traction, notes Sylvain Schetagne, an economist with the Canadian Council on Social Development, who’s been advocating for extended benefits for almost a decade. 

“We have a false perception that EI is there for us, but it’s not,” he said. 

EI helps stabilize the economy and keeps people consuming goods and services when there have been layoffs, Schetagne says, and when the self-employed are deemed ineligible, “it means when they lose their business, a significant proportion are running out of money and are no longer contributing by consuming. Giving them access to EI would have a positive impact at the micro level.” 

Federal, provincial and municipal governments promote self-employment and offer incentives to Canadians to start their own business. The Business Development Bank of Canada, for examples, helps start-ups and government employment agencies have programs that help the unemployed launch their own careers. 

But they’re not there when the business fails. 

“This whole area is full of myth and ideology,” Haiven said. 

“We want to celebrate the self-employed, but we also use them. They’re seen as the real true heroes of the economy, but they’re no more heroic then employees.”