Edward Akinlade

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How SMEs can create better jobs

To provide the environment for small and medium enterprises to create decent jobs, it is imperative to have a universal policy to guide countries. IFE ADEDAPO looks at the deliberations of the delegates at the ongoing International Labour Conference

The International Labour Organisation has decried the high rate of indecent and non-standardised jobs that keep contributing to high income inequality and poverty rates in many countries.

In its World Employment and Social Outlook 2015 report, it stated that 75 per cent of all workers globally were employed on temporary or short-term contract basis. They were engaged in informal jobs often without any contract under own-account arrangements or in unpaid family jobs.

 

The ILO flagship annual report noted that women were disproportionately represented among those in temporary and part-time forms of employment.

The study reported further that more than 60 per cent of all workers lacked employment contract, with most of them engaged in ‘own-account work’ or ‘contributing family work’ in the developing world.

 
 

The micro, small and medium enterprises in Nigeria, employs a higher percentage of the labour force contributing 48.47 per cent to the nation’s Gross Domestic Product in 2013, data from the National Bureau of Statistics stated.

As identified in the survey, the main challenges facing MSMEs in Nigeria are access to finance, poor infrastructure, inconsistency in government policies, poor business support development services, access to market, multiple taxation and obsolete technology.

Moreover, the total number of persons employed by the MSME subsector in the same year stood at 59,741,211, representing 84.02 per cent of the total labour force.

Although there is information on the number of jobs created by this subsector, there is insufficient evidence on the quality of jobs.

In view of the precarious situation and the need to put a stop to this, the committee on SMEs and employment creation at the ongoing 104th session of International Labour Conference in Geneva, came up with recommendations to enhance decent and productive job creation among SMEs.

In a draft conclusions document, the participants noted that the policy formulation might be difficult because of the non-uniformity of these enterprises which ranged from micro, small and medium enterprises, adding that these categories were based on the number of employees, the annual turnover or the value of assets of enterprises.

To enable member countries to make evidence-based policies that will ensure an enabling environment for SMEs and reduce the creation of indecent jobs, the committee said that the member countries should collect up-to-date data periodically on SMEs.

The group notes that data from some countries shows that decent work deficits are high in small businesses in comparison with large establishments.

It explained further, “Where data is available, they indicate that decent work deficits are generally more prevalent in SMEs than they are in large establishments.

“However, it is necessary to have more information on the scale and scope of these deficits. Substantial progress has been made on an operational definition of the quality of employment.

“While the governing body of the ILO has not yet agreed on the ILO Decent Work Indicators, these provide a useful reference framework for assessment, which member states may use to generate information specific to SMEs. Workers in SMEs in some contexts are fully or partially excluded from labour legislation, including the rights to freedom of association and to collective bargaining.

On ways to provide an enabling environment, the working group pointed out that complex regulation should be simplified through consultation with representative organisations of employers and workers while new rules and regulations be made with special consideration given to the SMEs and workers in their employ.

The committee added, “Improving SMEs’ access to finance through measures such as loan guarantees, start-up grants, facilitation of crowd-funding, sector-specific financial institutions, improved financial literacy or financial inclusion is part of policies for the formalisation of micro and small enterprises.”

“Cooperatives and mutual associations can be an effective way of achieving scale and a better position in supplier and end markets, as well as mobilising savings and enhancing social security coverage. Special attention should be given to creating an enabling environment for cooperatives, in particular in rural areas.”

“Because SMEs depend on vocational and entrepreneurship training programmes, the committee said that government should give special attention to the modernisation of technical and vocational education systems, lifelong learning and to quality apprenticeship schemes in cooperation with social partners.”

According to the participants, SMEs are among the main providers of employment but have significantly lower levels of productivity.

The committee noted that the cost of labour formed a larger share of their cost of production, which limited wealth creation and its equitable distribution.

It suggested, “Upgrading to higher value-added activities and improved total factor productivity, with good workplace relations to enhance product quality and improved resource and energy efficiency can help overcome this constraint.”

“Occupational Safety and Health frameworks should be adapted to establish a preventative safety and health culture and to address the disproportionate incidence of occupational accidents and health problems in SMEs.”

“This not only prevents human tragedy but is also highly cost-effective and improves productivity. This requires a proper legal framework, appropriate enforcement capacity, readily accessible assessment tools, customised guidance as well as effective outreach to SMEs and their workers to overcome information gaps.”

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