Microenterprises and poverty

Evidence from Latin America

María Beatriz Orlando
Molly Pollack

Inter-American Development Bank
Sustainable Development Department
Microenterprise Unit

Table of Contents

Executive Summary

I. Introduction

1.1 Microenterprise and Poverty
1.2 Objectives
1.3 Data Set
1.4 What is a Microenterprise?
1.5 The Poverty Line
1.6 Organization of the Paper

II. Are Workers in the Microenterprise Sector Poor?

2.1 Poverty Rates for Earners in the MIC Sector vs. NON-MIC Sector
2.2 Poverty Rates for Earners in the MIC vs. NON-MIC
Sector by Group
2.2.1 Occupation
2.2.2 Female Earners
2.2.3 Single Female Head of Household Earners
2.2.4 Young Earners
2.3 MIC Income Dependency and Household Poverty
2.4 Main Findings

III Earnings in the MIC and NON-MIC Sectors

3.1 Earnings in the MIC vs. NON-MIC Sectors
3.2 Economic Activity, Size of the Firm and Earnings
3.3 Education Levels in the MIC and NON-MIC Sectors
3.4 Age and Experience in the MIC and NON-MIC Sectors
3.5 Female Earners in the MIC and NON-MIC Sectors
3.6 Main Findings

IV. Conclusions

References
Appendices

 

EXECUTIVE SUMMARY

There are many unanswered questions regarding poverty in the microenterprise (MIC) sector: Are microentrepreneurs and their workers poor? Who are the poor within the sector?

Are households with a high dependency upon microenterprise-generated income poorer than other households? This study assesses poverty in the microenterprise sector in Latin America.

We examine these questions analyzing both household income per capita and individual earnings. Previous studies report that the sector is very heterogeneous and that there are radical differences in earnings: between owners and employees, by gender, and according to economic activity. The study is based on tabulations from household surveys prepared by the Inter-American Development Bank (IDB) for fourteen countries during 1998. We also use tabulations prepared by the Economic Commission for Latin America (ECLA) in 1997 which expand on some variables of interest. The analysis resulted in the following stylized facts:

• The MIC sector represented 54% of total employment in Latin America in the mid 1990’s.
  Most MIC workers are self-employed microentrepreneurs.
• An average of 26% of all MIC workers in the region are poor. Poverty rates in the MIC sector have remained essentially unchanged in the last decade. The incidence of poverty is about twice as high for MIC workers as for NON-MIC workers during the 1990’s. On average, the poverty gap between the MIC and the NON-MIC sector has increased in the last decade. MIC employees have the highest poverty incidence. Self-employed MIC workers also have a large share of poor earners.
• One of the vulnerable groups within the MIC sector is female earners, with an average poverty rate of 55%. Single female heads of household and young earners experience similar poverty rates as female earners.
• More than one-third of households (in a subset of Latin American countries) have at least 50% of their income generated in the MIC sector. Households with significant MIC income dependency tend to have higher poverty rates than other households.
• Employers in the NON-MIC sector register the highest earnings, which are 4.5 times the average earnings of all employees and more than twice the earnings of MIC employers. MIC employers earn more than NON-MIC employees. MIC employees are at the bottom of scale, earning half the wage of NON-MIC employees.
• In the MIC sector, the percentage of poor earners is greatest in the industrial sector and smallest in the commerce sector.
• Low earnings firms are more concentrated among firms with less than 2 employees than high earnings firms.
• MIC workers have lower levels of education than NON-MIC workers, which may partially explain MIC workers’ lower levels of earnings and higher rates of poverty.
• MIC workers are older on average. The MIC sector employs more workers with more than 30 years of experience than the NON-MIC sector.
• Although women earn less than men overall, gender earnings disparities tend to be smaller in the MIC sector than in the NON-MIC sector.

Complete document in pdf format: http://www.iadb.org/sds/mic/publication/publication_159_1563_e.htm

The Inter-American Centre for Knowledge Development in Vocational Training (ILO/Cinterfor)
Avda. Uruguay 1238 - Montevideo - Uruguay - Tel: (5982) 908 6023 - 902 0557 - 908 0545 - Fax: (5982) 902 1305
webmaster@cinterfor.org.uy

Copyright © 1996-2008 International Labour Organisation (ILO) - Disclaimer