Side Businesses Adding Billions to Economy, Owners Driven by Extra Income

New research by PayPal Canada and Barraza & Associates revealed that 2.5 million Canadians are leading profitable side businesses, adding $2.5 billion to the country’s economy in the past year.

Often touted as a new form of entrepreneurship, nine per cent of adults in Canada are side sellers; running an income-generating business in addition to maintaining a full-time job.

The data showed that half of this community, described as “makers, creators, freelancers and service providers,” have seriously considered making their part-time business their full-time career. E-commerce tools and online marketplaces like Kijiji, Etsy and eBay in addition to social media channels have created a digital environment where side businesses can flourish.

However, the motivations behind 5-to-9 work weren’t firmly linked to passion projects.

Roughly half of those surveyed cited two money-driven reasons for starting a side business: 55 per cent saying it was to make extra money to save for a “rainy day” and 49 per cent stating it was to generate additional income. Nearly a third of respondents viewed their work on the side as a way to test out an idea with the goal of turning it into a small business.

“The rise of digitization, cloud-computing, smartphone apps and e-commerce enables people to work when and where they want, over and above regular 9-to-5 jobs,” said Paul Parisi, president of PayPal Canada, in a release. “At PayPal, we believe this community of entrepreneurs will grow exponentially.”

Side Businesses May Not Lead to “Real Jobs”

While 5-to-9’ers—as they are sometimes called—may be adding to the economy, former NDP MP Andrew Cash said the latest research on side businesses reflects the increasing difficulty of sustaining permanent, full-time jobs in Canada. Cash is the co-founder of the Urban Worker Project, a group that advocates for independently employed Canadians.

“Digital platforms like Etsy and eBay do make it easier to find a market for what you’re selling… But the other fundamental change is the fact we are experiencing an incredible shift in the job market from stable, full-time permanent employment to contingent, part-time, freelance, on contract, self-employed temporary work,” said Cash. “People need to find ways to shore the gap.”

Cash said that while online marketplaces have allowed “makers” to grow an audience of buyers and even prosper, entrepreneurs are “overly hopeful and optimistic” that these side businesses will turn into real jobs.

“We need to be careful in how we celebrate what looks like burgeoning, new entrepreneurial attitudes among Canadian workers,” said Cash.

Cash doesn’t deny that mobile payments tools like PayPal and Square are valuable for independent workers, but that statistics about e-commerce side businesses must be better contextualized.

“We do need to be looking at this issue more broadly than just being cheerleaders for the tech sector,” he said.

The past two months have seen significant changes in the shedding of full-time and part-time work. In September, there were 112,000 net new full-time jobs in Canada, offset by a decline in 102,000 part-time jobs.

Yet the opposite was true a month earlier. August saw an increase in 110,000 part-time jobs but a drop in 88,000 full-time roles—loss that mostly affected young workers.

“The question we need to be asking ourselves in Canada is do we want the economy to go in the direction of its continued workplace fragmentation?” said Cash.

“Is it acceptable to expect that especially young workers be regulated to a future of multiple, part-time, temporary contract jobs that are largely paying them in the minimum wage range—albeit via a sexy, cool app?” he added.

Women-Run Online Businesses Still Face Pay Gap

Side business data also showed that while women dominate the current 5-9’er landscape—representing two-thirds of the community in Canada—they may face the same pay gap that exists in the traditional workforce. Women-led side businesses reported 71 per cent less in average revenue compared to their male counterparts.

“It’s no surprise that you are seeing more activity among women. But because the pay gap continues to exist in the analog economy, we see that mirrored in the digital economy,” said Cash.

More so, 12 per cent of women started their side business while on maternity leave. That was the case for Shelley Jones who founded Dignify, a Calgary-based online store.

“After the birth of my second child, I wasn’t sure I wanted to return to a traditional 9-to-5 work environment, so I used my maternity leave as a time to explore entrepreneurship on my own terms,” said Jones. She credits an online-first approach to transitioning her quilted goods store from a passion project to a full-time business.

To coincide with the new research, PayPal Canada launched a resource page for both those hoping to turn a hobby into a full-time job and current business owners looking to grow their company.