Small businesses provide most jobs in underdeveloped, developing nations: ILO

Mains Paper 3 : Indian Economy |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : MSME & Self Employment - role in Economy

News

More than two-thirds of total employment in under-developed and developing countries is provided by small economic units as per the latest report – Small Matters.

What the report says

• Policymakers must treat these units as a central part of economic and social development strategies worldwide.
• It argued that such an approach is a must for low- and middle-income countries where the majority is employed in small economic units.

Link to SDGs

• Three of the United Nations’ SDGs depend on employment opportunities — eradicate poverty (SDG 1), full and productive employment and decent work for all (SDG 8) and reduce inequality (SDG 10).

Correlation with the country’s development status

• The report says that there’s a negative correlation between countries’ level of per capita GDP and employment share of the self-employed and micro and small enterprises.
• The countries in the lowest income level groups have almost 100% self-employment. In these countries, hardly any employment occurs in firms with 50 or more employees.
• Self-employment is the highest in South Asia (66%) followed by sub-Saharan Africa (50%) and the Middle East and North Africa (44%), found the report. 
• Around 85% of workers in India are self-employed or do casual work and 73% of non-agricultural workers in Bangladesh were self-employed.

Other findings of the report

• Countries that have more people working in the service sector, have lower employment in the agriculture sector. For example, Niger and Madagascar see agriculture provide 75% of employment and services only 15%. 
• In developed countries like Ireland, Netherlands and Denmark, hardly 5% of total employment is in the agriculture sector, while 80% is provided by services.

Employment in the agriculture

• Most of the employment opportunities fall into the informal category.
• Around 95% of agricultural sector employment in South Asia and sub-Saharan Africa is informal.

The contrasting case of developed and developing countries

• Europe and Central Asia have the largest share of agricultural employment in the formal sector more than 30%. 
• In East Asia and the Pacific, it is more than 20%.
• In sub-Saharan Africa and South Asia, self-employment alone accounts for more than half of the total agriculture employment.
• There is an inversely proportional relationship between countries’ economies and the nature of employment opportunities.
• The share of the self-employed in low-income countries is almost five times the share in high-income countries,.
• The employment share of micro-enterprises is much higher in low- and lower-middle-income countries than in upper-middle- and high-income countries.
• But, the employment in small enterprises (10-49 employees) is more in high-income countries and the employment share of small enterprises is just 3% in low-income countries; but it goes up to 25% in high-income countries. 

Conclusion

The report argued that it is important to understand the nature of employment opportunities available in a country to facilitate and improve the quality.