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close this bookJob Quality and Small Enterprise Development - Working Paper No. 4 (ILO, 1999, 35 p.)
close this folder2.0 Description of the situation
View the document(introduction...)
View the document2.1 The aggregate picture
View the document2.2 The disaggregated picture
View the document2.3 Quality as a basis for competition

2.1 The aggregate picture

Two areas of job quality will be examined by using aggregated data: wage and non-wage conditions. In respect of industrialised countries, an ILO review at the beginning of the 1990s of nine industrialised countries found that on average incomes tended to be inferior in smaller enterprises (Sengenberger et al., 1990). Other studies4 have confirmed these findings. Evidence for non-industrialised countries is less available. However, what data exists5, together with anecdotal evidence suggests that incomes tend to rise with firm size. For example, a 1995 World Bank survey of over 2,000 manufacturing enterprises in Malaysia found that average incomes increased with firm size, except for the very biggest (World Bank, 1997).

4 For example, in Europe a 1993 EU Observatory Report presented evidence that gross wages are higher in larger enterprises in Greece, Ireland, Italy, Netherlands and Portugal; one exception was France (ENSR, 1993). Other reviews such as Storey’s (1994) and, for the USA, Brown et al. (1990); for West Germany, Wagner (1995); for Veneto, North East Italy (Crestanello, 1996); and for Canada (Baldwin 1998; cited in Cowling and Storey, 1998) confirm the aggregate picture of a tendency for wages to increase with enterprise size.

5 In respect of Ghana, van Dijk reported that a 1992 enterprise survey there found average earnings for all workers rising with the size of the firm, with large firms paying workers ‘significantly higher wages than micro firms (van Dijk, 1994).’ Also, a 1995 survey of eight countries in Latin America (Bolivia, Costa Rica, Ecuador, Honduras, Mexico, Panama, Peru and Venezuela) found that the average earnings of informal workers (composed of people working in micro-enterprises, the self-employed and people working as servants) was only half that of those employed in modern establishments, whilst average hours worked were longer (ILO, 1996).

As for non-wage conditions (ranging from the provision of pension, holiday entitlements, car allowances and sick pay, to areas like safety and health, working hours, equal opportunities and security of employment) again, the aggregate general picture is one of likely improvements with size. Studies have shown this to be true in respect of industrialised countries6 and non-industrialised countries7. More generally, small enterprises and self-employment is equated with the non-regulated informal sector, where instability and insecurity in particular is endemic (ILO 1997; van Ginneken, 1998, 1999). A comprehensive 1995 ILO survey of self-employed and small scale activities (employing less than ten persons), in the urban informal sector of Metro Manila, Philippines, found the sector ‘beset with problems of poverty, dismal working environments, child labour, and a lack of social protection’. Women, often working from home, appear to have been particularly affected, with home-workers risking their health in houses that tended to be cramped with poor lighting and ventilation (Joshi, 1997). As reported earlier, the informal sector in Metro Manila and elsewhere has been experiencing growth in recent years8.

6 Such was the finding of the 1990 ILO review mentioned above (Sengenberger et al., 1990), and the conclusion of other reviews, such as that of Storey’s (1994), and, for the UK service sector, that of Curran et al. (1993), and, for the USA, Brown et al. (1990), for Portugal (Cowling and Storey, 19986), and for West Germany, Wagner (1995). For example, in the USA, small firms are much less likely than their larger counterparts to offer health insurance benefits to their employees (McLaughlin et. al, 1995); whilst in the UK a recent survey has found that the rate of accidents at work is significantly higher in smaller businesses (Buckby, 1998a).

7 Comprehensive data is, as for incomes, again lacking, but the information available suggests that the aggregate picture is similar, if not even more pronounced, to that of industrialised countries. For example, Dombois (1993) has pointed out that in Colombia a range of fringe benefits, security and opportunities is generally inferior in smaller firms. Also, in the case of Brazil, ‘poor quality’ self-employment and employment without a labour card7, often in small businesses, is reported to have experienced rapid growth in the period 1987-1992. (Carneiro and Henley, 1998).

8 Indeed, 84 out of 100 new jobs created in Latin America over the period 1990-95 were said to be created in the informal sector (ILO, 1996). Countries like Venezuela, Panama, Paraguay, Bolivia, Honduras, Ecuador, and Costa Rica all saw the numbers employed in this sector increase between 5 percent and 8 percent per annum between 1990 and 1995, whilst other countries saw rises not much less (ILO, 1996).