EU SMEs Contribute Largely in Terms of Employment to Overall Economy

According to a report by EU on SMEs in Europe, SMEs were found to be largely contributing to Europesn economy in terms of employment. It was found that SMEs provide employment for 88 million of population, while large enterprises employ only 43 million. SMEs constitute for about 67% of the employment in private, non-financial economy. Apart from this, ‘old’ Member States constitute to about 81% of total employment in private, non primary sector, implying 19% in the ‘new’ Member States. Of the total employment in old and new Member States, two thirds were found in SMEs. Because of the differences in GDP per capita, the old and new Member States differ in terms of labour costs per employee. The total labor costs per employee in EU-15 was € 44,000 per year, whereas it is € 9,000 in new Member States. In case of SMEs the labour costs per employees is 4 times higher in old Member States than in new Member States.

The size-class distribution of employment and the average scale at which enterprises in the non-financial business economy operate, differs between the European countries, US and Japanese countries. It was found that SMEs in Iceland, Switzerland and Norway contribute to about 70% of employment, with EU average being at 67%. But in USA the major share of employment is taken by large enterprises, when compared to EU. Japan is found to share the same employment as of EU, with average enterprise size being higher at more than 8 people.

There is difference in employment growth pattern among old (EU-15) and new (EU-12) Member States. In EU-15 contries there was an average positive employment gowth between 2002-2007, with micro and small businesses showing fastest growth, medium and large sized businesses showing moderate growth. But the scene was reverse in the EU 12 countries as the large and medium sized enterprises showed fastest growth and micro and small enterprises showing less growth. This adverse size-class pattern may be due to low profits of micro enterprises. Coming to large enterprises, they showed negative job growth as in EU-15 countries.