The Future of Small Business Enterprises in Canada

Joe Foster

Small Businesses are rewarding in many ways. Not only the employees but also the owners live, work and contribute to our social and economic well being. They are an essential part of our communities.  

However, it is painfully clear that many Small Businesses in Canada are in trouble. "The Canadian economy changed dramatically in March 2020 as a result of COVID-19 and the situation has had a profound impact on the ability of businesses in Canada to operate. While the majority of businesses in Canada have been impacted by the COVID-19 pandemic, it appears that small businesses have been hit particularly hard by this crisis." (Impact of COVID-19 on small businesses in Canada-StatCan). This is not surprising. In the US, The Nobel Prize-winning economist, Joe Stiglitz warns, ”Unless we put small businesses and average Americans at the center of our recovery, the economic recovery will be difficult. If we don’t manage things well, this will be the deepest downturn in living memory”. However, well before the current pandemic, automation and globalization were seriously threatening to take away customers from Small Businesses. Without  jobs and stable incomes, families cannot support local businesses, money does not circulate, and the structure of our overall economic system is undermined.

Currently, governments have been pouring in billions of dollars in an attempt to keep the economy afloat. While the Canada Emergency Response Benefit (CERB) has helped, the cost has been enormous, as shown by the Finance Minister’s recent “snapshot” of the economy. Moreover, not surprisingly, CERB, although laudable, has been plagued with delays, gaps and uncertainties for the future which is further damaging especially Small Businesses as well as individuals’ ability to financially cope. Furthermore, municipalities have rising deficits where small businesses, particularly in smaller communities play an important part in their economic viability. In providing goods, services, and jobs, Small Businesses are a mainstay of local communities and the national economy. In fact, Statistics Canada reported that as of December 2017, there were 1.18 million employer businesses in Canada. Of these, 1.15 million (97.9 percent) were Small Businesses. From 2010 – 2014, the contribution of Small Businesses to GDP was, on average, 38.4%. (In 2015, Small Businesses with 19 or fewer employees accounted for 86.2 percent of employers in Canada as reported by Statistics Canada.)

Looking at our economy from a different perspective, a recent report from the Parliament Budget Office indicates that the top 1% of Canadians own as much wealth as 80% of the rest of us. The negative effects of the increasing gap between rich and poor results in the lack of money circulating in the economy. On top of this, and in part because of this distortion of financial resources, poverty has reached alarming levels in terms of its social and economic impact. As tax payers, we are paying heavily for this. A 2019 report, The Cost of Poverty in Ontario alone, concluded that poverty costs the province between $27.1 and $33 billion yearly. On-going poverty and increasing homelessness are visible proof. The associated costs of poor health, addictions, declining life expectancy, and lost productivity are enormous burdens on businesses and all tax payers. This impacts not only our financial sustainability but also is damaging our social well being. For example, Toronto is spending well over $1 billion for policing services alone, which is an indication  of scarce resources being spent on controlling crime rather than preventing it .

This may be the opportune time to step back and rethink what is best for a sustainable future. We need to find a better and more financially sustainable solution to combat current social and financial insecurity.

There are no silver bullets, but there is proven evidence that we, individually and collectively, would have been in better financial shape had there been a sustained flow of money circulating throughout the country. It would have provided an income floor for everyone, including workers as well as Small Business owners. This would not have tackled all of the problems that CERB is addressing, but it undoubtedly would have reduced the cost of CERB. It would also have been there at the beginning of the pandemic when most needed. (Has an income security system been in place ,the Governments embarrassing WE initiative would have been avoided and young people would not be left empty-handed.)

It is time to implement a proven solution. Basic Income, an improved type of income support program, is more efficient as it regularly injects money into local economies.  It is fiscally responsible , sustainable and it reduces bureaucracy. Basic Income has already been tested and proven to work around the world.

Of course, not only governments but smart business owners want to know the cost and return of a new investment.  However, the real question is, what is the cost of continuing with the status quo?  If we look at dollars and cents alone as shown above, society is paying heavily for an outdated, inadequate  and demeaning income security system via welfare mechanisms that were not designed for today’s economic realities. The old system simply doesn’t work.

Basic Income is designed to transform our expensive welfare system and provide an economic floor that no one falls below. Once fully in place, it will be a net positive investment for society through cost savings and steadily improved outcomes. It will reduce the mental strain that endangers health and productivity while increasing the financial rewards for increased work.  Since a Basic Income provides for basic needs, most if not all, of this income is spent in the local community for such items as food, rent, and personal and medical needs, creating more sustainable communities.

Making it easier to maintain or start and expand Small Businesses and knowing that there is money available in the community is key to rebuilding a sustainable economy. Therefore, it is recommended that a major component in reconstructing the economy, especially for Small Businesses, should be the design and implementation of an Income-tested Basic Income program.  It is not only economically and politically viable, but urgently needed.

Joe Foster, C-Team Facilitator in collaboration with Ron Hikel (Co-Coordinator, Special Programs) and Saul Bottcher (Small Business owner and Team Advisor )