Agroindústria, produção de mel. Foto: Wenderson Araujo/Trilux

Economy

Micro and small businesses create seven out of ten jobs in Brazil

In May, almost 110,000 jobs with a formal contract were created

Published on 16/07/2023 - 09:00 By Bruno de Freitas Moura - Agência Brasil - Rio de Janeiro

A study conducted by the Brazilian Micro and Small Business Support Service (Sebrae) reveals that micro and small businesses have been responsible for creating seven out of ten jobs with formal contracts this year. From January to May, Brazil generated a total of 865,360 formal jobs, with micro and small enterprises accounting for 594,213 of them, representing 69 percent of the total.

The data are sourced from the General Register of Employed and Unemployed (Caged), which is maintained by the Ministry of Labor and Employment.

According to Sebrae's head, Décio Lima, the majority of micro and small companies have up to five employees. "In a context of approximately 22 million small businesses, they play a fundamental role in the economy, comprising around 99 percent of all companies in the country. They contribute to 55 percent of the total jobs in the formal sector and to almost 30 percent to the GDP [the sum of all products and services produced in the country in one year]," Lima explained to Agência Brasil.

The study categorizes businesses with up to nine employees (in agriculture, trade, and services) or up to 19 employees (in industry and mining) as microenterprises. Small businesses are defined as those with up to 49 workers (in agriculture, trade, and services) or up to 99 employees (in industry and mining).

In May alone, small businesses accounted for 70 percent (108,406 out of 155,270) of new employment, marking a 2 percentage point increase from the 68 percent recorded in the same month the previous year.

This growth in the contribution of micro and small businesses to the overall volume of jobs contrasts with the performance of medium and large companies, as their share of total formal jobs declined from 22 percent in May 2022 to 15 percent in May 2023.

The head of Sebrae explains that small businesses play a significant role in job creation and retention within the economy. "It is natural for medium and large companies to heavily invest in modernizing their production processes to enhance their competitiveness. As a result, they tend to be more labor-saving in the long run. On the other hand, small businesses are labor-intensive, which is why they tend to be the last to lay off staff during times of crisis and the first to hire during economic recovery," he stated.

Sector Analysis

When analyzing the sectors that contributed the most to job generation in small businesses from January to May, the services sector led the way with a net increase of 339,127 positions, followed by construction (123,937), manufacturing (64,754), and trade (34,127).

The survey also indicates that the positive balance of job creation with formal contracts by micro and small enterprises was observed across all 26 Brazilian states and the Federal District.

Sebrae predicts that small businesses will continue to play a crucial role in job creation. "In 2023, the scenario points to a participation rate close to 70 percent for micro and small companies in job creation, with higher levels expected in October and November. Therefore, the employment landscape is likely to remain influenced by micro and small businesses," Décio Lima concluded.

Translation: Mário Nunes - Edition: Juliana Andrade