Employment creation

Small businesses and self-employed provide most jobs worldwide and in Asia

A new ILO study reveals that almost seven in 10 workers worldwide are self-employed or in small businesses. Self-employed and micro-enterprises account for more than 80 per cent of employment in South Asia. By contrast, medium-sized and large enterprises account for 46 per cent of employment in East Asia and the Pacific.

News | 11 October 2019
GENEVA/BANGKOK (ILO News) – Self-employment, micro and small enterprises play a far more important role in providing jobs than previously believed, according to new report by the International Labour Organization (ILO), entitled Small matters: Global evidence on the contribution to employment by the self-employed, micro-enterprises and SMEs.

Data gathered in 99 countries worldwide found that these so-called ‘small economic units’ together account for 70 per cent of total employment, making them by far the most important drivers of employment.

The study also found that an average of 62 per cent of employment in these 99 countries is in the informal sector, where working conditions in general tend to be inferior, (i.e. a lack of social security, lower wages, poor occupational safety and health and weaker industrial relations).

A comparison of the different regions indicates that the share of self-employment in total employment is highest in South Asia (67 per cent), followed by sub-Saharan Africa (50 per cent) and the Middle East and North Africa (44 per cent).

Employment share of the self-employed and different firm size classes by region

The combined employment share of small economic units decreases as a country’s income level rises. This share is highest in countries in South Asia, Africa and the Middle East.
In each of these regions, the self-employed have the highest employment shares of all the size classes examined. Together, the self-employed and micro-enterprises account for almost 70 per cent of employment in the Middle East and North Africa, and for more than 80 per cent in both South Asia and sub-Saharan Africa.

By contrast, medium-sized and large enterprises play a prominent role in East Asia and the Pacific and in Europe and Central Asia, where they account for 46 per cent and 43 per cent of employment, respectively

The report finds that in high-income countries, 58 per cent of total employment is in small economic units, while in low and middle-income countries the proportion is considerably higher. In countries with the lowest income levels the proportion of employment in small economic units is almost 100 per cent, the report says.

Employment share of the self-employed and different firm size classes, by country income group

The employment share of small economic units decreases with rising country income levels while the employment share of medium-sized and large enterprises increases with rising country income level.

The estimates draw on national household and labour force surveys rather than using the more traditional source of enterprise surveys that tend to have more limited scope.

“To the best of our knowledge, this is the first time that the employment contribution of so-called small economic units has been estimated, in comparative terms, for such a large group of countries, particularly low and middle income countries,” said Dragan Radic, Head of the ILO’s Small and Medium Enterprises Unit.

The report advises that supporting small economic units should be a central part of economic and social development strategies. It highlights the importance of creating an enabling environment for such businesses, ensuring that they have effective representation and that social dialogue models also work for them.

Other recommendations include; understanding how enterprise productivity is shaped by a wider “ecosystem“, facilitating access to finance and markets, advancing women’s entrepreneurship, and encouraging the transition towards the formal economy and environmental sustainability.

*Micro-enterprises are defined as having up to nine employees, while small enterprises have as many as 49 employees

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