Local Answers for Employment Crisis: The Role of Microenterprise Development

Abstract

The global crisis of the past few years generated adverse labor markets characterized by high unemployment, challenging regions and their governments. As labor markets collapse, unemployment rise and wages plunge, individuals are pushed to entrepreneurship of micro enterprise ventures. Under this context, micro enterprises development can be an effective response to unemployment and the desperation derived from the lack of opportunities, particularly to those endowed with low human capital and assets. Micro enterprise development has already been an issue of the development reports and programs of international agencies which regard these enterprises as market-based strategy for poverty alleviation in low developed regions. A similar reasoning applies for employment crisis like the one currently striking the world economy: micro enterprises can be regarded as a strategy for employment This paper aims at providing answers to increase formal employment and improve welfare prospects under the context of a crisis. Thus, the program “Micro enterprise Assistance and Training for Micro enterprise Development and Employment” is introduced, which was implemented in Mexico as public policy by a local government in collaboration with the public university, as compensatory mechanism for the unemployment burden created by the recent economic crisis. This public policy benefited from synergies of both institutions: an innovative model of assistance to deliver non-financial services to micro enterprises designed by university researchers, including technical assistance and training with the participation of senior students, and the provision of financial services to support micro enterprises from government. During the most profound stage of the crisis between 2009 and 2013, the program trained, formalized in the tax authority and financed about 10,000 individuals running micro enterprises, creating thousands of jobs. This experience may be useful to many governments fighting against unemployment.