The informal sector and in particular micro and small enterprises (MSEs) account for a large share of production, income and employment in many developing countries. This project analysed the interlinkages between employment, empowerment and living standards building on the Capability Approach as conceptual framework. It further examined the observed heterogeneity among MSESs in terms of firm performance and associated forms of employment in the urban, informal sector. Taking the findings to the policy level, we discussed how to measure productive employment and decent work in the Sustainable Development Goals (SDGs).
Contribution to International Research
Our findings enrich the internationally prevailing International Labour Organisation (ILO) definition of decent work by highlighting the features of work valued by urban, informal workers in developing countries. We contribute to the ongoing discussion about the design of the SDGs by proposing a new target and corresponding indicators to monitor productive employment and decent work. Moreover, the project advances the empirical literature on financial, social and behavioural constraints to MSE growth in informal, urban settings. In particular, we are able to look at the dynamic processes of capital accumulation and firm graduation using firm-level panel data.
Research Design and Methods
The project employed quantitative and qualitative data collection in the urban centres of Ouagadougou, Burkina Faso; Kampala, Uganda and Colombo, Sri Lanka. Multidimensional surveys have been designed to capture information on demographics, socio-economic networks, economic performance and employment characteristics of entrepreneurs and their households across multiple sectors in each country. Time and risk experiments provided information on participants’ willingness to take financial risks and make intertemporal choices. The quantitative data were analysed with the help of microeconomic techniques.
Focus group discussions (FGDs) informed about participants’ perceptions of decent work in the context of informal employment. Finally, we conducted qualitative life history interviews to gain a deeper understanding of participants’ experiences related to employment, empowerment and well-being over the life course. Coding and text analysis instruments were used to explore the qualitative data.
Building on the Capability Approach, we developed the Agency, Capability and Empowerment (ACE) framework that identifies key analytical concepts for analysing the challenges, opportunities and constraints faced by entrepreneurs as well as the interlinkages between employment and empowerment. Using qualitative data from life history interviews with female entrepreneurs in Sri Lanka, we find that entrepreneurship per se does not necessarily lead to empowerment. Rather, positive effects of entrepreneurship on women are often diluted through existing disadvantaging gender norms and roles. Yet, we can show that the realisation of even small profits, contributing to household income and subsequent improvements in living standards go along with rising decision-making power within the household and in some cases even within the respective community of the female entrepreneur.
Our analysis of the FGDs underline the multidimensional aspects of employment, combining traditional features of good work – such as income and occupational safety – with additional elements, most importantly social recognition. While it would certainly be desirable to measure these additional aspects of decent work, our discussion of employment-related indicators in the SDGs shows that conceptual problems and data limitations only allow for a rather income-focused set of universal employment indicators.
Looking at the role of the entrepreneur’s social network on business performance we find opposing effects. On the one hand, entrepreneurs belonging to an ethnic or religious minority appear to enjoy reduced uncertainty in their business environment as well as better access to resources through their social network which in turn, positively affects their business outcomes. On the other hand, prevailing sharing norms may force the entrepreneurs to make financial transfers to the kin which can distort investment in the business.