We're closing in on the end of the Year of the Entrepreneur, designated as such in early 2011 by Prime Minister Stephen Harper in recognition of the 40th anniversary of the Canadian Federation of Independent Business (CFIB).
Throughout the year, all provincial governments and some municipal ones also signed on to celebrate entrepreneurs. It turns out that 2011 was a good year to acknowledge and honour the contributions of Canadian entrepreneurs and small businesses. The main reason was the continuing strength of the sector in bolstering job and wealth creation. Canada has fared better than many other developed countries, in part because small and medium-sized businesses (SMBs) have held on to their employees and have been creative in finding new ways to grow.
Recent CFIB research shows that, during the 2008 recession, job losses in the SMB sector were minimal compared with the corporate sector. Letting go of valuable employees is a last resort for small-business owners, who will typically try all manner of things before trimming their staff. And during the recession, a significant number of entrepreneurs actually increased employment by pursuing new markets, introducing new products or services, and expanding their online presence. The entrepreneurial sector is a stabilizing influence in difficult times.
Looking back, some positive policy changes also occurred this year – for example, in Employment Insurance (the implementation of hiring credits that encourage small businesses to recruit new employees), measures in the federal budget to improve government transparency and reduce red tape at agencies such as the Canada Revenue Agency, and the introduction of the Pooled Retirement Pension Plan (which toppled a proposal to hike CPP premiums, a move that would have imposed a huge payroll tax burden on SMBs).
Bad government policy was unfortunately not absent from the scene. For example, virtually all provincial governments have been on a binge of increasing minimum wages. This is a foolish policy that does not help lower-income earners, but rather destroys jobs at the shallow end of the wage scale. The jobs killed by rapid minimum-wage increases are those that usually go to young and entry-level workers who need experience before they can improve their earning capacity. It is no surprise that the unemployment rates in these groups are especially high.
This year also saw an inordinate number of elections at all levels of government. Newly elected and re-elected governments have one thing in common – they all need to come to grips with the massive debts they have built up over time in varying degrees.
The quick-fix temptation will be to crank up taxes, but that should be resisted. Canadians already pay about half of their income in taxes of one kind or another, and that proportion dwarfs what they spend on food, shelter, clothing and other necessities. Surely half is plenty. There is much talk about a "tax-the-rich" sentiment in many quarters, spurring international demonstrations and protests. The unfortunate truth is that even if the rich – however defined – were taxed at 100 per cent of their income, it still would not come close to solving the world's debt problems. It might make a convenient slogan, but it doesn't provide a realistic solution.
All governments will also face dramatic demographic changes as the baby boomer generation retires. Among other things, this phenomenon will leave governments with fewer working taxpayers as subsequent generations decline in number. Even without the debt burdens governments face, they will be forced to make do with less revenue as a result of demographics alone. This situation is not unique to Canada; it is the case in all developed countries. If anything, Canada is in a somewhat better position to cope with the changes ahead, although they will still be serious and disruptive.
It appears our economic climate will remain precarious for many reasons, the most important of which is the heavy level of indebtedness faced by governments around the world. One bright spot is that our entrepreneurial sector will continue to do what it does best – adapt, create jobs and provide some stability despite turbulent seas.
Let's hope the recognition of the vital role of entrepreneurs by all Canadians continues beyond 2011 and becomes a fixture of the political landscape for all of our governments in dealing with the challenges that lie ahead.
Special to the Globe and Mail
Catherine Swift is president and CEO of the Canadian Federation of Independent Business. CFIB represents 108,000 small and medium-sized businesses in Canada.