Finally, a major economic actor in Canada has recognized the important contributions of self-employed Canadians. The Business Development Bank (BDC)’s report, The Entrepreneurial Spark of Canada’s Self-Employed, confirmed what many advocates have long argued: self-employed Canadians have distinct needs and make significant contributions to our economy.
But the report also revealed something else — a narrow and troubling definition of economic value.
BDC places particular emphasis on what it calls “agile and ambitious self-employed” individuals, those who plan to hire employees and transition into employer firms. In doing so, it reinforces a hierarchy that values business growth measured by payroll size above all else. Self-employed Canadians who do not aspire to become employers are implicitly cast as less economically valuable.
This narrow framing plagues small business policy in Canada. It shapes programs and supports that exclude many, particularly women, Indigenous, Black, racialized, disabled and other equity-seeking entrepreneurs, and limits their ability to participate fully and equitably in the economy.
Nowhere is that exclusion clearer than in Canada’s parental income support system.
The invisible majority of women entrepreneurs
There are one million self-employed women in Canada. They represent 11 per cent of the total women’s labour force and a staggering 80 per cent of all women who earn business or professional income. Only 20 per cent of women earning business income own small- and medium-sized enterprises (SMEs).
Yet BDC’s Index of New Entrepreneurial Activity defines “entrepreneurs” exclusively as those with employees. By that definition, 80 per cent of women who generate business income in Canada are not considered entrepreneurs at all.
This exclusion has policy consequences.
When public supports are designed around employer firms and traditional payroll employment, self-employed Canadians, particularly women, are routinely excluded. And when it comes to income supports for new parents, the exclusion is baked into the legislation itself.
A safety net built for payroll employees
In Canada, parental income support is legislated under the Employment Insurance (EI) Act. The structure itself sends a powerful message: caring for a new child is treated as analogous to a period of unemployment.
The consequences are structural and widespread. On average, 38 per cent of mothers are excluded from accessing benefits under the federal EI-based parental leave program. Eligibility is tied to accumulating 600 hours of insurable employment, a threshold that systematically excludes part-time workers, contractors, seasonal workers, students, and many in precarious work.
Self-employed workers face additional hurdles. They must opt into EI special benefits at least 12 months in advance and demonstrate a 40 per cent reduction in business activity, a vague and discretionary standard. For many, especially those with unplanned pregnancies or fluctuating income, this amounts to automatic exclusion.
In effect, our current parental leave system privileges stable, full-time payroll employment, a model that does not reflect the realities of a modern, diverse labour market.
The gendered cost of exclusion
The economic implications are profound.
The gender pay gap among self-employed Canadians is significantly larger than among those in traditional employment. Over 50 per cent of self-employed women earn less than $50,000 annually. Many cannot afford to take leave at all, especially when benefits replace only 55 per cent of earnings, or 33 per cent under the extended option, up to capped maximums.
Low wage-replacement rates have not kept pace with inflation, pricing many parents out of taking leave. The result? Lower-income mothers are increasingly returning to work sooner, while higher-income mothers are better positioned to take longer leaves.
This is not gender equality. It is the reproduction of inequality through public policy.
Moreover, because EI benefits are classified as “unearned income,” time spent on parental leave reduces RRSP contribution room, permanently decreasing the potential for retirement savings.
Beyond employment insurance: A universal approach
If supporting self-employed Canadians is truly about advancing economic growth, as BDC suggests when it estimates GDP could increase if more self-employed individuals hire employees, then we must ask: what policies would genuinely support them?
The answer begins with decoupling parental income support from employment insurance.
The creation of a standalone, federal New Child Income Support Program, separate from EI and not tied to labour-force participation, could achieve this goal. This program would:
- Provide income support to all new parents and caregivers, regardless of employment status.
- Increase wage replacement rates to reflect the national cost of living and index them to inflation.
- Guarantee a minimum of 26 weeks of support for each parent as an individual, non-transferable allowance.
A universal parental income support plan would include self-employed individuals, students, gig workers, grandparents who are primary caregivers, and others currently left out.
It could also be designed more rationally from the ground up, for example, ensuring additional support for multiple births. It makes little sense to accept a 45 per cent income cut precisely when household expenses increase.
An investment in the future
Some will ask: who pays?
The answer is simple. All of us.
Children are not private luxuries. They are future taxpayers, healthcare workers, engineers, teachers, and caregivers. They will build the roads, run the hospitals and sustain the social systems we all rely on.
Funding parental income support through general tax revenues, rather than payroll-based EI premiums, recognizes this shared societal stake.
It also reframes care as what it is: productive, essential labour.
If we truly value entrepreneurship in all its forms — including the one million self-employed women who already power Canada’s economy — then we must build a social safety net that reflects the reality of modern work.
A Universal Parental Income Support Plan is not just good social policy; it is sound economic policy.
And it is long overdue.
