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Study: Trends in gross domestic product and self-employment of unincorporated enterprises

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1987 to 2005

Throughout most of the 1990s, the gross domestic product (GDP) of unincorporated enterprises grew at a similar rate to that of corporations. However, since the late 1990s, the growth rate of unincorporated GDP was well below the growth rate of corporate GDP.

From 1987 to 1997, the GDP of unincorporated enterprises grew at an average annual rate of 4.7%, a similar growth rate to that of corporations. From 1997 to 2005, unincorporated GDP increased at an average annual rate of 3.8%, well below the pace of 6.4% for corporations.

Unincorporated enterprises in Canada showed a substantial structural shift from goods industries to services industries from 1987 to 2005. This transition was led by enterprises in the finance, health and professional services industries.

In 1987, the services sector accounted for 67.8% of GDP produced by unincorporated enterprises; by 2005, this proportion had increased to 76.5%. In contrast, the services sector accounted for 51.3% of GDP produced by corporate enterprises in 1987; by 2005, this had risen to 54.6%.

Cumulative growth of Canadian gross domestic product by type of business

During the same period, the share of unincorporated self-employment in the services industries increased from 63.4% to 74.6%.

In 2005, unincorporated enterprises contributed $93.2 billion of GDP. This was almost double the level of $43.7 billion two decades earlier.

Note to readers

This study provides estimates of the contribution of the unincorporated sector to Canada's economy between 1987 and 2005. It examines trends in the unincorporated sector's share of gross domestic product and self-employment.

Note that comparing gross domestic product with these employment estimates in this paper does not yield an estimate of productivity, since these estimates require information on hours worked.

The unincorporated sector is comprised of self-employed owners of unincorporated farms, businesses or professional practices and their workers.

Unincorporated enterprises cross many industries. They include landlords, insurance and stock brokers in the finance industry; physicians and dentists in the health industry; lawyers, accountants and consultants in the professional services industry; general and special trade contractors in the construction industry; owner-operator carriers in the trucking industry; and farmers, owners of retail stores, barbers, hair stylists and housecleaners.

Finance industry strongest contributor to shift from goods to services

Much of the transition to services in the unincorporated sector came from the finance, health and professional services industries. In 1987, these industries generated 45.1% of unincorporated GDP; by 2005, this share increased to 53.1%.

The finance industry led the way, representing 22.3% of total unincorporated GDP in 2005, up from 17.5% in 1987. This industry was primarily driven by lessors of real estate (landlords), who accounted for about 80% of the industry.

The health industry represented 18.2% of unincorporated GDP in 2005. The offices of physicians represented less than half of the industry's GDP. Since 2000, substantial increases occurred in other areas of the health industry (in particular acupuncturists, dental hygienists, denturists, dieticians, midwives, naturopaths, nutritionists and registered nurses) and child day-care services.

The share of total unincorporated GDP for the professional services industry increased from 9.2% in 1987 to 12.5% in 2005, as its economic output increased almost three-fold from $4.0 billion in 1987 to $11.6 billion in 2005. This large increase reflected increased activity in the offices of lawyers, accountants and other professionals.

In the goods-producing sector, over 80% of the unincorporated GDP came from construction and agriculture during the period. Agriculture's share of unincorporated economic output in goods-producing industries fell from 16.0% in 1987 to 7.5% in 2005. Conversely, unincorporated GDP in the construction industry increased substantially in the wake of the housing boom, lower interest rates and increases in housing starts.

Employment in the unincorporated sector declines after peak in 1998

From 1987 to 2005, the growth in total self-employment averaged 2.2% a year, outpacing the 1.4% increase for paid workers. During this time, self-employment rose by 812,500.

The unincorporated self-employed created most of the jobs in the business sector during most of the 1990s, adding 409,400 jobs between 1990 and 1998. However, job creation decreased sharply between 2000 and 2005 for the unincorporated sector.

In contrast, self-employment in the incorporated sector grew substantially from 1987 to 1999, averaging 3.8% a year. It continued to grow from 2000 to 2005, averaging 4.1% a year and expanding by 178,900 jobs. Evidence suggests that a shift in self-employment did not occur from the unincorporated sector to corporations.

As was the case with GDP, the compositional shift in the industry structure from goods to services of the self-employed was more pronounced for unincorporated enterprises than for those self-employed individuals who incorporated.

The increase in the share of unincorporated self-employment for services occurred predominantly in professional services, business and other support services, finance, educational services, health and information.

Employment in the Canadian economy by business structure

The study "Trends in gross domestic product and self-employment of unincorporated enterprises in the Canadian economy, 1987 to 2005" is released in the September 2009 edition of the Canadian Economic Observer (11-010-X, free), that is available today.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Luke Rispoli (613-951-6407; luke.rispoli@statcan.gc.ca), Economic Analysis Division.

Table 1

Gross domestic product of unincorporated enterprises
Industrial group (based on the North American Industry Classification) 1987 1997 2005 1987 to 2005 1987 to 1997 1997 to 2005 1987 1997 2005
  Gross domestic product Average annual growth rate Proportion of total
  $ millions %
All Industries 43,658 69,219 93,159 4.3 4.7 3.8 100.01 100.01 100.01
Goods-producing industries 14,036 17,196 21,851 2.5 2.1 3.0 32.2 24.8 23.5
Crop and animal production 7,002 7,718 6,998 0.0 1.0 -1.2 16.0 11.2 7.5
Forestry and logging 519 782 775 2.2 4.2 -0.1 1.2 1.1 0.8
Fishing, hunting and trapping 881 603 558 -2.5 -3.7 -1.0 2.0 0.9 0.6
Support activities for agriculture and forestry 177 145 175 -0.1 -2.0 2.4 0.4 0.2 0.2
Mining and oil and gas extraction 156 297 278 3.3 6.7 -0.8 0.4 0.4 0.3
Utilities 4 7 16 8.0 5.8 10.9 0.0 0.0 0.0
Construction 4,860 6,903 12,239 5.3 3.6 7.4 11.1 10.0 13.1
Manufacturing 437 741 812 3.5 5.4 1.2 1.0 1.1 0.9
Service-producing industries 29,621 52,023 71,308 5.0 5.8 4.0 67.8 75.2 76.5
Wholesale trade 845 1,336 1,538 3.4 4.7 1.8 1.9 1.9 1.7
Retail trade 3,207 4,604 5,822 3.4 3.7 3.0 7.3 6.7 6.2
Transportation and warehousing 1,844 3,441 3,943 4.3 6.4 1.7 4.2 5.0 4.2
Information and cultural industries 10 147 303 20.8 30.7 9.5 0.0 0.2 0.3
Finance, insurance, real estate and rental and leasing 7,641 15,566 20,794 5.7 7.4 3.7 17.5 22.5 22.3
Professional, scientific and technical services 4,000 7,542 11,622 6.1 6.5 5.6 9.2 10.9 12.5
Administrative and support, waste management and remediation services 991 1,964 3,574 7.4 7.1 7.8 2.3 2.8 3.8
Educational services 200 841 1,291 10.9 15.4 5.5 0.5 1.2 1.4
Health care and social assistance 8,111 12,163 16,981 4.2 4.1 4.3 18.6 17.6 18.2
Arts, entertainment and recreation 295 642 802 5.7 8.1 2.8 0.7 0.9 0.9
Accommodation and food services 1,305 1,759 1,802 1.8 3.0 0.3 3.0 2.5 1.9
Other services (except public administration) 1,172 2,018 2,836 5.0 5.6 4.3 2.7 2.9 3.0
Data may not add up to totals as a result of rounding.
Note(s):
The average annual growth rate is the compound growth rate calculated between end points of the period.