Low pay for the self-employed?
May 15th, 2009 | Published in Economics idea, Uncategorized | 3 Comments
I heard somewhere that self-employed people tended to earn less than employees. I looked this up online and found this page on the Statistics Canada website. In 2005, the average employee in Canada earned $36,703. The average person earning their entire income from self-employment earned only $22,866, 38 per cent less.
This data suggests that people who work as part of a larger organization are more productive than those who work for themselves. It isn’t an iron clad proof because the types of work self-employed people do may be lower paying. It might be the case that if they worked for a company, they wouldn’t do any better because of the type of work they do.
However, having said that, self-employed people do a lot worse than employees. It seems to me that larger organizations must be more productive to be able to afford to pay higher salaries. This is interesting because self-employed people should be highly motivated to succeed. Their success or failure depends entirely on their own effort. My guess is that self-employed people do work harder than employees on average. however, their productivity is lower because they can’t achieve the same economies of scale.
May 15th, 2009 at 2:42 pm (#)
Very interesting. Another factor might be that when self-employed people are successful, the expand and form companies. Do owners or presidents of companies still count as self-employed?
Eric
May 16th, 2009 at 11:10 am (#)
Rather than motivated for success, I suspect that a large percentage of the self-employed are simply doing ‘their thing’ and the monetary rewards are secondary. It is also possible for the self-employed to engage in barter to a far greater extent than is possible for the ‘employed’ which reduces the reportable income.
No doubt, a significant number are self-employed by necessity an would prefer to be and employee, but are doing what they must to put food on the table.
As Eric says, many probably technically leave the ranks of self-employed by becoming successful owners.
May 18th, 2009 at 3:58 pm (#)
Why self employed people earn less isn’t at all clear to me. I also don’t know how the data is collected. It’s tough to draw any conclusions without knowing more. The statistic, at this point, is merely interesting.