SMEs role important in creating decent jobs: ILO

Kathmandu, Oct. 11: The International Labour Organisation (ILO) Wednesday said that small and medium enterprises (SMEs) play an important role in creating decent jobs around the globe.

“With more than 201 million workers unemployed in 2017 – an increase of 3.4 million compared to 2016 – the enterprises, particularly small and medium-sized enterprises (SMEs), play a crucial role in creating decent jobs around the globe,” says ILO’s World Employment and Social Outlook 2017: Sustainable Enterprises and Jobs launched on Monday.

According to the report, between 2003 and 2016, the number of full-time employees within SMEs nearly doubled, with the share of total employment attributable to SMEs rising from 31 per cent to 35 per cent.

However, in the past years, their contribution to total employment has stagnated. Between 2015 and 2016 the contribution of SMEs to total employment remained virtually unchanged, increasing from 34.6 to 34.8 per cent.

“To reverse the recent trend of employment stagnation in SMEs, we need policies to better promote SMEs and a better business environment for all firms, including access to finance for the younger ones,” said Deborah Greenfield, ILO Deputy Director-General for Policy.
In developing economies, the SMEs account for 52 per cent of total employment, compared with 34 per cent in emerging economies and 41 per cent in developed economies.

Job dynamics among young firms in terms of full-time permanent employment have also weakened since the global financial crisis, said the report.

“Private sector enterprises accounted for the bulk of global employment in 2016. These enterprises employed 2.8 billion individuals, which represents 87 per cent of total employment,” reads the report.

While permanent full-time employment in SMEs grew more than in larger firms between 2003 and 2008 – on average 4.7 percentage points higher in small and 3.3 percentage points higher in medium-sized enterprises – employment growth premium of SMEs was absent during the period between 2009 and 2014.

The ILO research shows that full-time female permanent employees in the formal sector are more likely to be found in SMEs than in large firms.

On average, and across all regions, around 30 per cent of full-time permanent employees in SMEs are women, compared with 27 per cent in large enterprises.

“Moreover, the share of women’s employment, particularly in SMEs, is strongly correlated with the per capita income of a country. Greater numbers of women in enterprises may,therefore, have a positive impact on growth and development, because micro-enterprises and SMEs often offer women an entry point into the formal labour market.”

The report also finds that providing formal training for permanent employees is associated with higher wages, higher productivity and lower unit labour costs, while increasing the use of temporary employment is associated with lower wages and lower productivity, without any implications for unit labour costs.