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  • Laura Freschi

Are Small Firm Jobs Good Jobs?

Small firms are a key source of employment, but the jobs they provide are precarious.

In an analysis of the first 4 countries we studied—Colombia, Nigeria, Kenya, and Indonesia—we found that most of the small firms we interviewed had 2-3 workers at any one time (per selection criteria, firms included in the study had between 1 and 20 non-family workers at baseline). But what do these jobs look like? We found that the employment picture is more volatile than it appears from simple counts of workers.

This chart from our Nigeria Country Data Overview shows payments made to five employees at a metal works firm in Kaduna. The firm started the survey with three employees, but of those, only Employee 1 remained for the duration of the study. Two others were hired after the start of data collection. Employee 2 was let go in January, Employee 3 worked in October and November, but not again until February and then did not return. Employee 4 only worked between March in April, when the firm had an influx of orders, and even though Employee 5 worked throughout the year, there was a two month gap for them between March and May. Even those who worked throughout the duration of the study saw their salaries change every month by varying amounts. Curiously, the second highest sum paid to an individual in one month went to the employee with the shortest tenure (Employee 4).

Across the study, the firms are not able to provide consistent income to workers. In Nigeria and Colombia, just over 20% of employees were paid for most (80%) of the study. In Kenya and Indonesia, about half the firms had one key employee who was paid in at least 8 months of the study. But even for workers with stable employment, the amount they are paid month-to-month is very volatile (typically varying each month more than 30% from their average).

At the same time, small firm workers find it difficult to earn income elsewhere. Typically more than half of workers reported they didn’t have another source of income. And as a result, many employees struggle to meet basic needs.

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