[ Table of contents ]   [ List of papers ] Chemical risk assessment and occupational hygiene preventive measures in small and medium-sized enterprises (SMEs) Chapter 1 SMEs and their Employment Pattern

Our bodies are composed of chemicals. Our skins, bones, blood, teeth, hair and nails are all made of chemicals. We eat proteins, carbohydrates, fats, vitamins, minerals, all of which are chemicals. We drink water, sodas or soft drinks and juices when we are thirsty, all in essence chemicals or mixtures of chemicals. The air we breathe is 78 per cent nitrogen, 21 per cent oxygen and contains traces of other gases. We take chemicals in medicine when we are sick. Our daily soap, shampoo, tooth paste and other cosmetics are all made up of chemicals. They help to make our lives more comfortable. But sometimes they can also threaten our health, our well-being and our safety. Many of the chemicals we encounter daily can cause damage to our own health and that of others.

How chemicals enter the body

DEFINITION OF SMEs

The definitions of "small" and "medium" sized enterprises differ from one country to another. SMEs have been defined against various criteria such as the number of workers employed, the volume of output or sales, the value of assets employed, and the use of energy. Other definitions are based on whether the owner of the enterprise works alongside the workers, the degree of sophistication in management, and whether or not an enterprise lies in the "formal" sector. For example, the OECD defines establishments with up to 19 employees as "very small"; with up to 99 as "small"; from 100 to 499 as "medium"; and with over 500 as "large". However, many establishments in some developing countries with 100 to 499 employees, the OECD definition for "medium", are regarded as relatively large firms.

THE ROLE OF SMES IN ECONOMIC DEVELOPMENT

Promotion of Employment

According to the recent ILO report on "General conditions to stimulate job creation in small and medium-sized enterprises", the role of SMEs in the creation of jobs and the promotion of economic growth and development has seen an increasing recognition. According to statistics, small enterprises in OECD account for the vast majority of new jobs. The same may apply to developing countries where it is particularly needed in the presence of high unemployment in regions such as sub-Saharan Africa and Latin America.

Other advantages

The ILO report cited above enumerated a number of advantages, apart from the direct contribution to employment, of SMEs such as their need for less capital investment per worker than is required by large enterprises. The abundance of labour and the shortages of capital and foreign exchange which are characteristics of developing countries are compatible with the SMEs labour-intensive character. In addition, SMEs mobilize local human and material resources and utilize local raw materials more effectively than large enterprises, and address more of the consumption needs of slow income people. Their scale of production is more appropriate to rural areas and small townships in developing countries. SMEs improve forward and background linkages among social and economic activities of the economy. They promote and enhance foreign exchange earnings, and offer wider opportunities to entrepreneurs and to low income and minority groups. They are flexible in production, have the potential as a training ground for managerial skills, and provide rich personal relations. Their ownerships by the residents of a community results in community based economic decisions, greater stability of employment and better community development. In the modern day structural adjustment, SMEs constitutes a "labour sponge".

Employment patterns in SMEs in developed countries

As stated by the ILO report on "General conditions to stimulate job creation in small and medium-sized enterprises" (1995), small and medium-sized enterprises are major contributors to private sector employment in the industrialized countries. According to the OECD (1994), SME employment in member countries accounts for between 57 per cent (United States) and 81 per cent (Italy) of employment in industry and market services combined. The share of small enterprises alone ranges from 44 per cent (Canada) to 71 per cent (Italy). A detailed breakdown by country is shown in Table 1.1.

Table 1.1 Distribution of employment by enterprise size:

Industry and market services (percentage)

The twelve countries of the EU had 15.8 million non-agricultural private enterprises in 1990. Of these, 14.7 million were micro-enterprises, almost one million were small, approximately 70,000 had between 100 and 500 employees and only 13,000 employed more than 500. Micro-enterprises accounted for 31.8 per cent of total employment in private enterprises outside the agricultural sector, small enterprises for 24.9 per cent and medium-scale enterprises for 15.1 per cent. Distribution by economic sector is shown in Table 1.2.

Table 1.2 Distribution of enterprises and employment by sector in the European Union

(12 countries), 1990

Small and medium-sized enterprises remain important players in manufacturing activities, even in countries with advanced industrial sectors (see Table 1.3).

Table 1.3 Percentage distribution of employment and value added in the manufacturing industry in Germany, France and Italy, 1987

EMPLOYMENT PATTERNS IN SMES IN DEVELOPING COUNTRIES

A recent survey conducted in 17 economies in the Asia/Pacific region for the Asian/Pacific Economic Cooperation (APEC) forum indicated that the percentage of the workforce in SMEs varied from 32 per cent in the Philippines to 84 per cent in China (see Table 1.4). The survey also found wide differences in the definition of SMEs using as indicators the number of employees, amount of invested capital, total assets and turnover and production capacity. Many of these figures exclude micro-enterprises and rural-based companies for which statistics were not available. In Latin America, it is estimated that SMEs cover 36 per cent (Colombia) and 79 per cent (Brazil) of non-agricultural employment. For Africa a recent ILO report estimated that 61 per cent of the labour force outside agriculture is employed in micro-enterprises and 21 per cent in the modern sector, including private enterprises and the public sector, with the remaining 18 per cent being unemployed (ILO, 1994).

Table 1.4 APEC members' workforce in small and medium-sized enterprises

SMEs IN TRANSITION ECONOMIES

The transition to market economy in Eastern Europe and the countries of the former USSR has encouraged the establishment of new private enterprises, with small scale operations. Large state firms are all expected to break up into smaller companies due to privatization. In Poland, official statistics reported the existence of 2.1 million enterprises in 1995, of which 92 per cent employ five or fewer workers; six per cent employ six to 50 and only two per cent employ over 50. SMEs currently employ about 60 per cent of the workforce.

TRENDS IN SELECTED DEVELOPING COUNTRIES

The present study comprise five developing countries which were selected upon their direct request and for reasons relating to past ILO technical cooperation activities which were undertaken in chemical safety and the prevention of major industrial accidents. The countries selected had different patterns of employment and varied sectors of economic activities. Whilst a large number of workers were engaged in agricultural or construction activities, the information on occupational safety and health in these sectors were sketchy. The legislation in the different countries did not classify the industry into small, medium or large scale. However, in some countries, an enterprise must have ten or more workers to be classified as a factory. The categorization of the enterprises in each country into small or medium ones was made by the national experts in the light of national legislation and pattern of employment followed by the local industry. Table 1.5 classifies SMEs according to the number of workers employed.

Table 1.5 Definition of SMEs according to the number of workers employed

in selected developing countries

For Mauritius an SME is defined as a manufacturing firm which uses assets not exceeding the equivalent of US$ 280,000.

Whilst 10.5% of the workforce in Pakistan is employed by the manufacturing sector's medium and large-sized enterprises, the bulk of the industrial labour force is employed by the small scale sector. The economic survey carried out in Pakistan in 1996-97 acknowledged the role of the small-scale sector. It stated that the small-scale industrial sector plays a pivotal role in the industrial development because it employs less fixed capital investment, generates more employment opportunities, uses indigenous technology and raw materials, and helps reduce urban migration. Its share in GDP is 4.7% and employs about 80 per cent of the industrial labour force. Its share in manufacturing sector export is 30 per cent, whereas contribution to industrial value addition is 27 per cent.

Out of the total estimated population of 135.28 million in Pakistan (1996), approximately 90.04 were of the working age. Of the country's total labour force estimated at 37.15 million, 35.15 million workers were employed. The labour force participation rate was calculated at 27.46%. As an agro-based economy, agriculture in Pakistan contributes 24.2% to the GDP and employs 16.45 million workers, who constitute 46.8% of the total employed labour force of the country. The data for workforce in different sectors of economy is given in Table 1.6.

Table 1.6 Employment of the labour force by sectors of economy in Pakistan (Millions)

As can be seen from Table 1.6, mining and manufacturing sectors employ only 3.69 million people. However, Pakistan has a large small scale sector, which is largely undocumented, and only rudimentary statistics for the employment and its contribution in the economy are available.

As described earlier, only 10.5% of the employed labour force of the country works in the manufacturing sector. However, this figure may be misleading as a large proportion of the labour force is migratory in nature, working in the factories and construction sites for some time and then returning home in the harvest and sowing seasons. In addition, the role of small scale sectors is largely unrecognized.

The employment data in major large/medium scale industrial enterprises is given in Table 1.7. As would be clear from these tables, the bulk of the industrial workforce is employed in textile sector. The other major industries in terms of employment are food, leather and products, ginning of cotton, drugs and pharmaceuticals, iron and steel, industrial chemicals, non-electrical and electrical machinery manufacture of transport equipment, and manufacture of fabricated metal products.

Table 1.7 Yearly employment data in different manufacturing industries in Pakistan (1984-91)

N.B.: Labour Force Survey has not been carried out since 1991, so latest data was not available.

Contrary to the industrialized countries, the small-scale sector in Pakistan is neither capital intensive nor technologically modernized. Except for a few sectors like manufacture of garments, sports goods, hand-made carpets, surgical goods, leather products, the small-scale sector usually caters to the demands of the local consumption in the areas where such enterprises are located. The consumption of chemicals among the small scale enterprises is also very unevenly distributed. While the small scale enterprises based in the rural areas are concerned mainly with the fabrication or manufacture of labour intensive goods like garments, rugs, and handicrafts with very little exposure of the workers to chemicals, the urban based enterprises are usually more technical and skill-oriented, and use machines, tools, electric devices and chemicals in their processes.

In Lebanon, the country's economy is struggling to bounce back from the effects of the civil war which lasted from 1975 to 1992. The industry was thriving before the civil war. However, by 1985, 58% industrial units were in operation, the remaining 42% were either closed down or destroyed. At present approximately 137,000 workers are employed by over 21,000 enterprises. The majority of these enterprises are small-scale, with 88% employing 10 or less workers. The leading manufacturing industries are those dealing with food products and beverages, furniture, fabricated metal products, wearing apparel, wood and wood products, leather and leather products, textile, printing, rubber and plastics. The pattern of employment in different industries is given in Table 1.8.

Table 1.8 Pattern of industry and employment in Lebanon

The industrialization in Mauritius started after the end of the colonial era in 1970s. The rate of industrial growth has been rapid since the 1980s. The number of registered factories rose from 408 in 1986 to about 4400 in 1996. The country has been striving from a mono crop economy (sugar based) to a diversified one with more emphasis on manufacturing and tourism. Out of the total of 466,100 employed persons (from a population of 1,107,324) in 1996, the number of male and female workers was 316,200 and 149,000 respectively. The pattern of employment in different industries is given in Table 1.9.

Table 1.9 Pattern of industry and employment in Mauritius

The labour force in Syria of 3.3 million amounts to 38 per cent of the population which the 1991 census recorded as 12.5 million. Whilst the private SMEs, including the agricultural sector, employ 78 per cent of the labour force, the SMEs in the public sector employs 10 per cent, which brings to 88 the percentage of the labour force employed by SMEs at the national level. Table 1.10 shows the distribution of SMEs by sector, their number, and the number of workers employed by each.

Table 1.10 Distribution of SMEs in Syria by sector, their number and labour force

During the study, specific local conditions were taken into consideration. The data collected was supported by informal contacts with employers, workers and members of the public. The number of SMEs covered was left to each collaborator to decide. The following numbers of SMEs were covered by the study as shown in Table 1.11. Included in the Table also is the total number of workers employed by these SMEs.

Table 1.11 Number of Enterprises and Workers covered by the Study

It may be noted that in most of the SMEs surveyed, the owners and managers worked alongside the workers.

The type and number of SMEs surveyed in the selected countries appear in the Table under Annex 1.

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