Setting up Shop: Self-employment Amongst Canadian College and University Graduates

Changes in the labour market such as an increase in the incidence of part-time, part-year work, multiple job holding and self-employment have often been conjectured as demand-driven shifts - that is, that they have resulted from a lack of more traditional job opportunities rather than in response to workers' changing preferences. Yet while the issue of non-standard work is an interesting and important one, there is relatively little existing empirical evidence on the topic. The general purpose of this paper is to report the results of an empirical analysis that exploits the self-employment status indicator available in the National Graduates Survey (and Follow-Up) databases. It documents and analyses the patterns of self-employment amongst several cohorts of Canadian post-secondary graduates in the first five years following graduation. More specifically, it provides solid empirical documentation of the incidence of self-employment (levels, patterns, trends) amongst recent college and university graduates, overall, and broken down by degree level, sex and year of graduation. This paper also addresses the issue of whether self-employment tends to be the preferred employment option (for those who enter it), or the result of a lack of suitable "conventional" employment opportunities, or some combination of the two. There are two over-arching conclusions to be drawn from the analysis. First, the incidence of self-employment was relatively stable for the first three cohorts of graduates covered in the analysis. The overall rates ranged from 6.5 to 11.1 percent amongst male graduates and from 3.2 to 6.7 percent for females. The rates tended to be higher for some (but not all) graduates of the most recent cohort (graduates of 1995). Second, the evidence generally points to self-employment representing a relatively attractive job status on average: For every cohort the rates of self-employment rise from the first interview following graduation (after two years) to the second (after five years), an interval over which job opportunities generally improve significantly for graduates; Simple point-in-time (cross-sectional) comparisons of earnings, the job-education skill match, and job satisfaction levels suggest that although the results are somewhat mixed, there is little evidence that the self-employment status is generally characterized by less favourable outcomes, and is perhaps particularly marked by generally higher (not lower) overall levels of job satisfaction; Finally, both the conventional cross-sectional earnings model and the difference equations which control for various fixed effects with which job status might be correlated, further point to self-employment being a higher-paying (and therefore more attractive) job status than the conventional paid worker status.