As Ontario’s economy sheds full-time jobs there is a growing movement towards self-employment. Is this a good thing? Well, let’s have a peek into the positives and negatives.Historically self-employment was for people who really wanted to work for themselves, for whatever personal reason. Some felt that they could make more money working for themselves, others wanted the flexibility of time management, and others still just liked the idea of being your own boss.
But, what are the down sides? I believe that there are down sides for the province, and in fact the entire country, when too many people move to self-employment. The negatives?
a) The government loses the proceeds from employers for EI, CPP, and WSIB. This is becoming a significant problem as there are fewer workers to cover the growing costs of these government obligations. If the trend to self-employment continues then there will be fewer people to squeeze to cover the monstrous unfunded liabilities in CPP and WSIB.
b) Whether people want to admit it or not there is a growing trend to work for cash thereby removing the HST from the transaction, impacting the federal and provincial coffers.
c) As a self-employed individual you have a much more difficult time obtaining financing for major purposes such as homes or vehicles. Self-employment is considered too volatile so the risks to lenders are high. New entrants into self-employment have virtually no chance of borrowing money unless they have considerable assets that they will have to pledge. This is a difficult decision for anyone who must put up their hard-earned assets and hope that they will succeed or face losing everything they have put up for collateral.
d) The self-employed are able to write-off a variety of expenses such as a home office, vehicle, and a portion of the associated costs. This reduces the income taxes that such individuals pay, impacting both the province and the feds.
e) When things are going well then the self-employed are on Cloud 9. But, if the business hits a rough spot such as a cash crunch, the impact can be devastating. Assets can be lost and families can be torn apart. When business is good then life is great but when problems arise it takes a tough person to weather the storm. Add to the pressure the calls from creditors, and even worse the government, and the good life can turn to your worst nightmare virtually overnight.
f) Just how many opportunities for work are there? Can everyone who has a skill find enough customers in order to be succesful?
So, self-employment, is it the right way to go for you? I know that I made the mistake of taking this path and given an opportunity to turn back the clock I would not do it again.