SMEs and the creation of decent and productive employment
The world faces serious economic problems, characterised, despite some positive signs, by a
slow emergence from the economic crisis, growing inequality, a distinct lack of newly
created employment, high levels of unemployment, particularly youth unemployment, and
disastrous budgetary situations in many States. The policies pursued do not in fact seem
capable of bringing the economy back on track into sustainable growth, with, furthermore,
the creation of sufficient, decent employment.
While the predominant political discourse seems to advocate short term solutions, a true
reversal of the situation cannot be achieved unless there is a focus on medium and long
term policies, aiming in particular to support the creation of businesses and the promotion
of an enterprise spirit, as well as an increase in the creation of decent employment, by and
in SMEs.
SMEs mean jobs and growth!
For this, social partners in AICESIS [The International Association of Economic and Social
Councils and Similar Institutions] need to contribute to providing political decision makers
throughout the world with the necessary guidance in order to create growth, prosperity and
stability in the largest economic sector, namely that of the SMEs. Without them, there would
be no recovery or economic stability, without them there would be no creation of
productive employment, not to mention decent employment.
The role of SMEs in the economy and society
It can be said that 99.9% of businesses are SMEs. Why therefore should one care so much
about large enterprises? Indeed, almost all the legislation at both economic and social levels
and relating to the business environment that has been adopted throughout the world
seems to have been inspired by a concern to regulate aspects of the business environment
for major companies (finances, governance, fiscal matters, ownership rights, etc…) whereas
logic would dictate that one should deal first with SMEs, and only then add layers of
legislation relating only to large enterprises.
In Europe, out of over 20 million businesses, there are only 43,700 businesses with more
than 250 employees. On the other hand, more than 19 million businesses employ fewer than
10 people (micro-enterprises). The typical business in Europe employs 6 people, including
the owner/entrepreneur, SMEs account for 2/3rds of private employment, and
approximately 60% of added value. 80% of jobs created in the last ten years were in SMEs1.
These figures are even more skewed towards SMEs than in other parts of the world.
Political Europe likes to refer to a “Small Business Act” or the principle of “thinking small
first” but quickly forgetting these adages and reverting to a ‘business as usual’ approach
when it comes to establishing a regulatory, legislative framework. And this despite all the
1
EC – Annual report on European SMEs
evidence, when it is a question of promoting SMEs with their inherent natural advantages:
an enterprise spirit, proximity, and the creation of employment, value, and wealth.
Promoting economic growth and the creation of decent employment through SMEs entails
first of all respecting certain legislative principles:
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Thinking small, first;
Just once;
Proportionality;
Taking impact studies into account.
The recent economic crisis has once again demonstrated that SMEs are the stabilising
influence par excellence in the face of economic adversity. Once again, it is the SMEs that
play a major role in initial and continuing professional education, two factors of major
importance for providing the transition from school to employment and for the qualification
of workers. SMEs contribute innovation, even in the absence of formal R&D programmes in
the traditional sense. In fact innovation in SMEs is established in co-operation with
employees, suppliers and clients, while working on specific projects, and their
competitiveness depends largely on their capacity to improve their products and services on
a constant basis. The transition towards a sustainable economy, towards a “green”
economy, will be provided by SMEs, through the integration of energy efficiency strategies
and the development of products and services that meet the criteria of sustainability.
SMEs are at the heart of economic and regional and local social stability, with a strong
involvement in communities, providing products and day-to-day services, and as a presence
at the heart of towns and villages and in rural areas. With their employees,
owner/entrepreneurs have long-term strategic and entrepreneurial views of the
development of their company at the local and regional level, where shareholders and
managers would only see short term profits and market share.
SMEs, the creation of businesses, and decent employment
SMEs have the potential to bring the economy out of the crisis and to contribute to the
development of employment throughout the world. But they cannot do this on their own;
policies need to support them and to put in place the economic and social framework that is
favourable for creativity and the enterprise spirit, the creation of businesses and the
development of decent, productive employment.
The formalisation of structures and governance
Entrepreneurs need well-established structures such as organisations of employers or
professional chambers. This formalisation of business structures is essential, because they
encourage the governance of States, of communities and of SMEs, and contribute in
particular to the putting in place of joint programmes, for example in the field of initial and
continuing professional training. Organisations of employers are the natural counterpart to
workers’ organisations; together they represent the two sides of the same coin. States need
to ensure that freedom of association is guaranteed and to encourage the establishment of
these social partner structures.
Limitation of the informal sector
Concerning SMEs, alongside the practical support that these structures can offer, they are
essential in limiting competition from the non-formal sector. Illegal, undeclared,
clandestine, illicit working, and the “grey”, informal economy are many factors preventing
the ordered establishment of businesses, particularly in emergent or developing economies.
The informal sector, by preventing the taking of profits, renders illusory the related
investments and gains in productivity, prevents the putting in place of stable employment
relationships and systems of professional training leading to qualifications. The informal
sector even goes so far as asphyxiating any fair form of taxation, which is after all the basis
of the State. Hence the key importance for States of avoiding as far as possible the
emergence of an informal sector that renders economic and social progress derived from the
SMEs impossible.
Professional training
The most efficient economies throughout the world are characterised in particular by a
system of work-linked training, with the involvement of businesses and educational
establishments. These so-called dual systems of training are ideally administered by
established organisations of social partners with attention paid to quality, recognition
through certification and continual adaptation. This dual training can play a driving role in
training for entrepreneurship, as demonstrated by the German example of dual training, and
particularly the type referred to as “Handwerk” – craftsmanship – where the three facets of
“Geselle” (journeyman) – Meister (master) – Niederlassung (establishment)” can serve as an
example throughout the world. This system, through the strong involvement of
entrepreneurs with a direct interest in training their staff, who may also be their potential
successors, may be cited as an example of the genre. Furthermore, the significant
decentralisation of the system through training provided in companies enables States to put
in place an effective professional training system that has relatively limited financial impacts
in relation to other training systems.
Social partners are even better placed to put in place continuing professional training
systems due to their involvement in companies. Through these structures, social partners
can effectively promote the productivity of businesses, thereby also creating bases for the
sustainable improvement of working conditions.
Access to finance
Both in developed countries and in developing countries, SMEs are experiencing difficulties
with access to finance for their investments. In order to promote the development of SMEs,
it is thus essential to support the banking sector with a particular emphasis on the
development of regional and local banking initiatives. Alongside traditional banking
instruments such as loans, States and International institutions should promote the putting
in place of venture capital or guarantee deposits and securities (co-operatives or mutual
funds), particularly for covering larger financial risks. In this order of ideas, the simplification
of regulations relating to the stock exchange would certainly be a way of facilitating access
to investment for SMEs in many countries. In developing countries, above all access to
micro-finance can be a key element for the development of SMEs.
Access to markets
Guaranteeing access by SMEs to markets is essential to enable them to develop. Many
points need to be addressed in this context:
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Administrative simplification;
Costs of licences and rights linked to intellectual property;
High quality public services; and utilities;
Public contracts and tenders;
Reciprocity in access to supply contracts;
Organised crime (forgery, social dumping practices, etc...)
Internationalisation of SME business activities.
States can thus contribute significantly to the development of SMEs, enabling these
substantial aspects for SMEs to be given adequate consideration. Public contracts are of
particular importance in this context. In fact, States can organise public contracts in a way
that actively supports the development of SMEs by instituting and effectively respecting
certain principles such as separation into lots for the purchasing of products or tendering by
separate trades in specific, different services. The consideration of criteria of sustainability
(learning, continuing training, respect for certain social standards, ecological aspects, CO2
footprint, etc.) alongside simply financial aspects can enable the encouragement of access to
public contracts for SMEs, and thus the creation of decent and productive employment in
these businesses.
Energy
A last, particularly important point to enable the development of SMEs and the creation of
decent and productive employment is that of access to energy, and more particularly,
electrical energy. This point may seem derisory for developed countries – although the
problem of equitable access to energy does remain in respect of distortions in competition
that may be linked to it – it is a much more acute problem in developing countries where
electrical energy is totally lacking, or subject to irregular or erratic supply do not enable its
rational use in a production process. It is thus essential for States and international
institutions to develop access to (electrical) energy supply networks specifically so that
businesses can operate efficiently, and thus to promote societal development. This goes
hand in hand with control that does not amount to a stranglehold by States (with good
governance) or by institutions, on networks, to guarantee clean, ecologically sustainable
energy, a universal service and at affordable prices for all populations and SMEs.
It is all a question of governance
SMEs are the backbone of any economy, regardless of its degree of advancement. States
must therefore ensure that they guarantee an environment that is favourable to the
emergence of businesses while above all ensuring their democratic legitimisation and human
rights, as well as good governance of the State’s functioning. Infrastructures, education, and
energy are all prerequisites for the proper function of society and of the economy, as well as
for the creation of businesses.
Entrepreneurs themselves must also look after their own governance and assume their own
responsibilities. We cannot have it both ways, mixing at will the status of entrepreneur, an
informal economy and nepotism with the sole objective of personal enrichment and
avoiding any contribution to society, even just in terms of taxes or job creation. Businesses
are at the base of the creation of wealth but they must accept the sharing of this wealth,
with a view to sustainability.
Putting in place organisations of employers can in this context constitute an effective way of
ensuring this structure. Together with organisations representing workers, they are best
placed to establish the institutions and programmes that are necessary for the proper
functioning of employment relations.
In conclusion, the involvement of civil society in democratic processes constitutes the final
link in ensuring proper political and economic governance.
In such a propitious environment, through the creation of businesses, SMEs can then
prosper and develop freely, and create wealth and sustainable jobs of high quality.