A new report by the International Labour Organisation has found that more than two-third of total employment in under-developed and developing countries is provided by small economic units, which mean policy makers must treat these units as a central part of economic and social development strategies.
The report released last week argues that such an approach is a must for low- and middle-income countries where the majority is employed in small economic units. In addition three of the United Nations’ Sustainable Development Goals (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).
The ILO used data from 99 countries to conclude 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. This means that countries in lowest income level groups have almost 100% self-employment.
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, according to the report. Sri Lanka has similar dynamics where 24% of the workforce is employed in low productivity agriculture with a large portion of that being in the informal sector. This has led to labour challenges in more productive segments such as industries and services.
But, the developed world is different. Europe and Central Asia have the largest share of agricultural employment in the formal sector, which is more than 30%. In East Asia and the Pacific, it is more than 20%, highlighted the report. In sub-Saharan Africa and South Asia, self-employment alone accounts for more than half of the total agriculture employment.
The report also underlines 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, it added. Similarly, 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, it added. Employment share of small enterprises is just 3% in low-income countries, while it goes up to 25% in high-income countries. The employment share of medium-sized and large enterprises increases with rising country income level.
This trend can be seen in Sri Lanka where more than 85% of companies are categorised as Small and Medium Enterprises (SMEs). This has also created the challenge of understanding how to grow more SMEs, particularly in the services sector that provides better paying jobs. Sri Lankan workers clearly prefer jobs with social security and permanency as seen in the eternal attraction to public sector employment. This puts policy makers into a new quandary of how to create jobs that pay better but also provide social safety nets such as pensions. The dignity of work is where the world is evolving and Sri Lanka will have to find ways to stay in step if it wishes to see genuine economic growth.