Why self-employment?

There are a number of different ways in which people can attain economic independence. Self-employment is only one of them and must be compared with alternatives by disabled people themselves and by anyone who is trying to assist them to support themselves fully or in part. It would be altogether wrong if this book were to encourage institutions and policy-makers to promote self-employment as a universal solution, or even as a limited one, if the disabled people or the environment are not appropriate.

The unemployed person seeking employment in private business or government is fundamentally dependent on somebody else deciding to employ him or her. Self-employment is basically different; the unemployed person decides to start an enterprise, however small, and although its success depends on other people being willing to buy from and sell to it, for whatever motives, the decision to start it depends on the individual concerned.

Jobs on the open labour market become more and more scarce. Self-employment may therefore be the only practicable option for many people; however, there are many other reasons why this option, and the myriad of small enterprises that result from people choosing it, are a good thing for national development. This applies whether the entrepreneur is disabled or not; there are certain reasons, which we shall shortly examine, why this option is particularly suitable for disabled people, and others why it is particularly difficult.

In economic terms, self-employment represents possibly the most cost-effective way of creating jobs. The capital requirements are usually very small; perhaps the commonest form of new enterprise is the market vendor whose “fixed capital” may amount to no more than a basket or a sheet of plastic on which to display whatever is sold and whose “working capital” probably consists of sales worth no more than a day, half a day or even an hour. Such enterprises often “squat” on the verandas of existing businesses, or on roadsides or open ground without using any costly infrastructure.

New manufacturing, trading or service enterprises use a minimum of capital and a maximum amount of labour because the objective of the entrepreneur is often to buy a job; necessarily, he or she will keep the cost of the job in terms of capital requirements as low as possible. Since one of the common features of developing countries is their shortage of capital and surplus of labour, any form of employment creation which makes minimum use of the former and maximum use of the latter is clearly to be preferred.

There are other arguments in favour of new small enterprises as a form of economic growth and employment creation. Transport facilities for people and for merchandise in most developing countries are often overloaded and unreliable, and they use scarce foreign resources in terms of vehicles and fuel. A person wanting to start a business will be likely to do it near to or actually in his or her own home. Working for other people, unless it is within a family enterprise, almost inevitably involves travelling, often for long distances from peripheral squatter locations to central industrial areas or business districts.

These enterprises also tend to use readily available materials and to sell to local people; this means that they make still lower demands on transport facilities than enterprises which draw their employees and materials from long distances and which sell to customers in other parts of the country or even abroad.

Small businesses usually start where people live and continue to be local. They also provide goods and services which are economical, in terms both of cost and of the places and times where they are available. They are therefore appropriate in that they produce goods that poor people need at prices they can afford and when and where they need them. Planners, and the wealthy minority whose cars are delayed in streets crowded with vendors and small repair shops and manufacturers, may be irritated by these small enterprises, but the majority benefit by selling to them, buying from them and working in them.

Such enterprises do not usually earn foreign exchange by exporting, although handicrafts are often bought by foreign tourists; they do, however, save foreign exchange by making the maximum use of local equipment and materials. More importantly perhaps, they rarely, if ever, make any demands on foreign expertise and finance. Even when the entrepreneur is able to take advantage of special assistance schemes, the amount of capital used for each job created is almost always less than for larger enterprises. Such businesses are also necessarily appropriate in terms of the skills they demand of their owners. Vendors and roadside mechanics may not manage their enterprises with business school skills or employ the latest high technology methods, but they do make the optimum use of local labour as well as physical resources.

Finally, enterprises which are started by local people, particularly in rural areas, tend to be enterprises involving the whole family. The mutual support and security that this system provides makes it particularly suitable for disadvantaged groups.