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The Role of Small and Medium Enterprises in Job Creation. Nigel Twose Director Development Impact Department. Larger firms tend to be more productive, pay higher wages, offer more training and often better working conditions.
in Job Creation
Development Impact Department
Larger firms tend to be more productive, pay higher wages, offer more training and often better working conditions.
Firms training, wages and labor productivity by firm size and country income group
Larger firms pay higher wagesLarge is beautiful
Figure uses 138 household and labor force surveys for 33 countries over 1991–2010.
Source: Source: WDR 2013 team based on Montenegro and Patrinos (2012)
Compared to micro enterprises, small firms typically offer a wage premium of 10–30%, but
large firms offer a wage premium of 20–50%.
Source: Enterprise Surveys
1 Source: Ayyagari, Demirguc-Kunt, et. al. (2011)
Many firms are born small and grow little
Source: Hsieh and Klenow (2011)
Country income group
* Small= 5-20 employees, medium= 21-99 employees, large >= 100 employees. Source: WBG’s Enterprise Surveys covering 46,566 firms in 106 countries.
High Growth SMEs (HGS) create the majority of new jobs in developed markets:
How to identify HGS
Box source: IFC’sSME and Jobs Committee. IFC interviewed relevant organizations. These are the most common factors mentioned by the organizations interviewed, and backed up by research. Additional sources: 1 Birch et al; 2(Holzl)
ProductsPartners in DevelopmentTarget SMEsImpact
Source for figure on IFC products through impact: SME and Jobs Committee (2012) “SME and Jobs”, May.
Lessons Learned from SME Ventures
From 2000 to 2010, 494 Firms financed by IFC’s private equity funds created, net of job loss, ~300K jobs Strong growth compared to small portfolio.Micro-case studies: Lebanon and Pakistan
Micro-case studies in Manufacturing, Agribusiness and Services
Supply chains & distribution networks provide multiple of direct jobs
Higher number of jobs can be associated withlower value added per job
1. Macro and Sector Level
2. Client Level
3. SME Level
* 2013 WDR
Note: IS = Ongoing IS project, AS = Ongoing AS project; Status as of October 2012
Source of financing for working capital and fixed investment needs (%)
Source: IFC (2010). Scaling-up SME Access to Financial Services in the Developing World.