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Minimum wage fuels entrepreneurial yearnings - GEM report

Published:Friday | July 11, 2014 | 7:00 AM

Some Jamaicans who begin their own businesses do so to avoid the fearful prospect of low wages.

That's one of the insights in the Global Entrepreneurship Monitor 2013, whose report states that more than one third of Jamaicans surveyed are earning minimum wage, and that most early-stage enterprises and even older ventures were started to escape poor earnings.

The national minimum wage was increased to $5,600 per 40-hour workweek in January, up from $5,000 per week.

According to GEM, necessity was the main motive for involvement in entrepreneurship. It was the reason cited by 45 per cent of early-stage entrepreneurial ventures, that is, those less than 3.5 years old; and by 56 per cent of established businesses, that is, those older than 3.5 years.

Only 24.5 per cent of the population surveyed were employed by others in full-time work, the GEM report states.

With this focus, most businesses continue to employ the owner only, with low overall expectations of adding workers in the medium term.

The Global Entrepreneurship Monitor is a comparative study of entrepreneurship, serving as a database for regional and international comparative research.

Local data was gathered by researchers from the College of Business and Management at University of Technology Jamaica. UTech released the report in Jamaica at a June 25-26 conference in Kingston.

The analysis on Jamaica states that, with the exception of the owner, more than a third of the businesses - 35 per cent - had no other employees, indicating that the business was started to create a job for its owner.

Similarly, most entrepreneurs indicated that they expected to have no one employed in the business in the next five years - 21 per cent - other than the business owner.

Overall, the report stated that 36.55 per cent earned below the minimum wage $195,360 annually - the equivalent in 2013 of about US$1,784 - this also having "implications for the ability of respondents to accumulate funds for business start-up".

In Jamaica, the total unemployed labour force increased by 34,200 or 20.4 per cent year-on-year at July 2013.

"The 2013 TEA data was consistent with the 20 per cent increase in unemployment rates as the majority of early-stage entrepreneurs were based on necessity, 45 per cent, with 37.9 per cent being motivated solely by opportunity," the report said. TEA refers to total early stage entrepreneurial activity.

Noting that high-growth entre-preneurs contribute a dispropor-tionate share of all the new jobs created by firms, the GEM data also shows that the majority of Jamaican businesses - 92.3 per cent - had less than five employees currently working in the business.

Eighteen per cent of the entrepreneurs believed that they would have at least two employees and 16 per cent expected to employ up to five persons in the next five years.

The results show that Jamaican entrepreneur's exhibit limited business growth aspirations, said the GEM report.

business@gleanerjm.com