Canada used to be a country that punched above its weight in job creation and entrepreneurship, but that quality has declined in recent years. More worryingly, more jobs are being created in the public sector and by non-profit organizations/NGOs, hindering the development of the private sector.
A recent post on X highlighted the deterioration of entrepreneurship in Canada. This is important because innovation and entrepreneurship lead to new jobs and wealth creation. Having a strong, innovation-driven economy is the goal of every developed democratic/market economy. In Canada, the number of active businesses under 2 years old is down nearly 40% year over year, and “entrepreneurship is collapsing.”
Entrepreneurship is collapsing in Canada.
The number of active new businesses under 2 years old decreased by 40% year over year.
This should be ringing alarm bells! pic.twitter.com/8a5GcMS0kW
— Kirk Lubimov (@KirkLubimov) June 12, 2026
Data is a release Distributed by Equifax Canada (NYSE:EFX) states:
“Canadian data shows Canadian entrepreneurship is in decline in the first quarter of 2026, and business payment challenges continue to rise as more companies fall behind on payments to banks and lenders.”
The research shows that fewer people are considering starting a business and the volume of new business lasting less than 24 months has dropped significantly by 38.7%.
“This may indicate that rising business costs, persistent inflation and current macroeconomic conditions may be having an impact that actively disrupts the sustainability of business ownership across Canada and harms new venture creation.”
recently report published by MEI We share that self-employment in Canada accounted for approximately 16.1% of total employment in 2000. In 2025, this rate dropped to 12.9%.
The report states:
“But while Ottawa and the provinces debate resource extraction, entrepreneurship, the heart of innovation, job creation and economic growth, is in sharp decline. Indeed, as we will see below, entrepreneurship in Canada has been declining for decades.”
In parallel, venture capital investments also fell. In 2025, total investment decreased by 6% and the number of transactions decreased by 12%. Canadian VC funds raise just $2.1 billion in 2025, weakest year Since 2016.
What encourages entrepreneurship in Canada? The culprits are pretty obvious. High taxes are at or near the top of the list. In some provinces, the marginal income tax rate is over 53%.
A recent proposal to increase suspended capital gains taxes has sent shivers back to potential risk-taking entrepreneurs.
Excessive regulation is a hidden tax on the public. While many policymakers view regulations as a burden on employers and businesses, the cost is ultimately borne by end users, consumers and other firms.
Canadian Federation of Independent Business reports that total regulatory costs for small businesses are $51.5 billion in 2024, a 13.5% increase from 2020. The Federation believes that most of these rules are unnecessary or mere bureaucratic formalities.
On the other side of the equation, public sector employment and NGO/charity work are increasing. The same MEI report warns that public sector employment is increasing while private sector employment is decreasing. Estimates place public employment at around 21.8%, with the recent increase. Meanwhile, NGOs and Charities are estimated to account for around 14.5% of business. Eventually, government and taxpayer-supported organizations may dominate employment. Canada currently runs budget deficits due to the extensive public services it provides. So who will pay for all this? More public sector jobs increase the load.
The sad thing is that decades ago Canada had a strong industry focused on innovation. The country is also home to a robust higher education system, vast natural resources, and incredible natural beauty that belies economic challenges.
Innovation is struggling in Canada today and GDP has stagnated or declined. A recent economic report declared Canada’s economy in recession, the only G7 country to achieve this status.
To fix all this, harsh policy decisions that will not please the voters need to be made. This is more a matter of whether it is about today’s pain or a greater pain tomorrow. This is inevitable.
Most politicians will throw it away to get re-elected on promises they will never keep. Unfortunately, these same politicians will be supported by a deluded population that will not let facts get in the way of their hollow predictions of a better future.
