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ILO: Sluggish SME development hurts jobs, economy

  • Published at 08:06 am October 10th, 2017
ILO: Sluggish SME development hurts jobs, economy
The latest edition of the ILO's flagship report shows investing in workers and innovation, and boosting trade and social dialogue are key to stemming rising global unemployment. According to ILO news, with more than 201 million workers unemployed in 2017, an increase of 3.4m compared to 2016, enterprises, particularly small and medium-sized enterprises (SMEs), play a crucial role in creating decent jobs around the globe. ILO’s World Employment and Social Outlook 2017: Sustainable Enterprises and Jobs Between 2003 and 2016 reports the number of full-time employees within SMEs nearly doubled. However, between 2015 and 2016 the contribution of SMEs to total employment remained virtually unchanged, increasing from 34.6% to 34.8%. According to the report, private sector enterprises employed 2.8bn individuals, which represents 87% of total employment. The report also shows 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. “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, SMEs account for 52% of total employment, compared with 34% in emerging economies and 41% in developed economies, the report says. The report also reflects developments in the overall business environment in the decline in difference of full-time permanent employment during pre-crisis and post-crisis period. 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. The edition finds innovation is an important source of competitiveness and job creation for enterprises and female workers. It also mentions that trade and engagement in global supply chains are also important stimuli for job creation and productivity growth. In 2016, 37.3 per cent of workers were employed in private formal exporting firms. This share is lower than the pre-crisis share of 38.6%. The report notes that trading firms have higher productivity and pay higher wages than those firms not engaged in trade. As the productivity premiums for exporting and importing outweigh the wage premium by 13 and 5 percentage points, the report indicates that there is scope to share gains from trade in a more inclusive manner. The ILO’s flagship report insists on the key role of social dialogue between governments, employers and workers for enterprise sustainability. “While governments play an important role in shaping institutions that boost sustainable enterprises and inclusive growth, workers and their organizations advocate appropriate policies and regulations as well as representation. Through these concerted actions, sustainable enterprises can foster equal employment opportunities, workers’ protection and rights, and invest in workers as well as other important factors of production,” concluded Greenfield.