Canadian Entrepreneurship in Sharp Decline, Warns Think Tank

The number of self-employed Canadians with paid employees has fallen sharply over the past two decades, dropping from a peak of approximately 867,000 in 2005 to 716,000 by 2025—a 17 per cent decline despite population growth of roughly one-third over the same period, according to a report from the Montreal Economic Institute.

This trend reflects a broader entrepreneurial downturn, with self-employment accounting for about 16 per cent of total employment at the start of the 2000s but falling to just 11 per cent by 2025. The decline has accelerated in the past decade, the institute warns, citing unhelpful government policies as a contributing factor.

Additional data from the Canadian Federation of Independent Business (CFIB) underscores the severity of the situation, showing that small-business exit rates reached 5.6 per cent in the second quarter of 2025, while entry rates fell to 4.8 per cent in the fourth quarter of that year. This marks the sixth consecutive quarter in which more businesses closed than opened in Canada, a ratio CFIB describes as among the worst since the COVID-19 pandemic.

The CFIB report attributes the challenging environment to escalating input costs, tax burdens, labour shortages, regulatory pressure, and global economic uncertainty, which together are constraining entrepreneurial activity nationwide. It characterizes the current climate as one of the most difficult for small and medium-sized enterprises in decades.

Experts argue that the decline is not due to a lack of talent or ambition but rather to systemic factors that make entrepreneurship a riskier and less attractive option compared to stable employment. As one commentator noted in response to the findings, when starting a business involves high taxes, heavy regulation, and significant time lost to red tape—coupled with unstable policy signals—fewer individuals are willing to take the risk. Conversely, when government careers offer greater stability and lower risk, talent shifts away from business creation, resulting in fewer jobs and less innovation.

The combined evidence points to a structural challenge in Canada’s entrepreneurial ecosystem, prompting calls for policy reforms aimed at reducing barriers to business entry and fostering a more supportive environment for job creators.