A new study examines the degree of dependence on self-employment income among self-employed workers with and without T4 Supplementary income (wages and salaries for which a person receives a T4 slip). It also looks at the impact this degree of dependence may have on their ability to cope with financial difficulties after COVID-19.
The presence of T4 income in the total income of self-employed workers is important for two reasons. Firstly, such income can provide a financial cushion for self-employed workers who are unable to continue their self-employment activities. Secondly, self-employed workers who also have T4 income may be eligible for Employment Insurance(EI) benefits if they lose their salaried employment.
The degree of dependence on self-employment income is measured as the median individual share of self-employment income in total annual income. Median shares are calculated for each decile of the total income distribution among Canadians aged 15 and over.
The study shows a high level of financial dependence on self-employment income among self-employed workers with no T4 income. The median share of self-employment income in this category is over 75% for men and women in all income deciles. In contrast, the median share of self-employment income among self-employed T4 earners is below 25% for men and women in all income deciles, with the exception of men in the second-lowest decile (32%). It should also be noted that the average total earnings of self-employed men and women with T4 earnings are considerably higher than the average total earnings of self-employed men and women without T4 earnings.
The study reveals that financial assistance in the form of the Canadian Emergency Benefit and the Canadian Recovery Benefit will temporarily alleviate the financial hardship caused by COVID-19 experienced by those who depended entirely (or almost entirely) on self-employment income prior to the pandemic. However, their ability to continue their business activities after the end of these programs will largely depend on the extent to which changing social attitudes towards physical distancing will affect their relationships with their customers. Self-employed workers who also had T4 earnings before the pandemic are in a better position to qualify for regularEI benefits, and could also benefit from the Canada Emergency Wage Subsidy. Their long-term ability to cope with the financial consequences of COVID-19 will depend primarily on their ability to remain employed or to be re-employed in stable jobs.
(Source: Statistics Canada)
For further information, visit the Statistics Canada website, here
