Job Stability over Entrepreneurship in Developing Countries

For those unfamiliar with Micro-Finance Institutes:
1) A brief intro to Micro-financing
2) Micro-finance borrowers vs Entrepreneurs
3) The Misconception of Entrepreneurs in Developing Countries

The poor don’t aspire to be entrepreneurs
“Perhaps the many businesses of the poor are less a testimony to their entrepreneurial spirit than a symptom of the dramatic failure of the economies in which they live to provide them with something better.”

The poor then try to buy a job
“The enterprises of the poor often seem more a way to buy a job when a more conventional employment opportunity is not available than a reflection of a particular entrepreneurial urge. Many of the businesses are run because someone in the family has (or is believed to have) some time on hand and every little bit helps.”

If this additional job is only a convenient opportunity for little additional value, then it is no surprise why there would be dread in expanding it.

Stability is the dream
“Everywhere we have asked, the most common dream of the poor is that their children become government workers.”

“The emphasis on government jobs, in particular, suggests a desire for stability, as these jobs tend to be very secure even when they are not very exciting. And in fact, stability of employment appears to be the one thing that distinguishes the middle classes from the poor.”

A stable job can change people’s out look on life in decisive ways
“The middle class spends much more on health and education than the poor. Of course, in principle, it may be that patient, industrious people, inclined to invest in the future of their children, are better able to hang on to good jobs. But we suspect that this is not the entire explanation, and that this spending pattern has something to do with the fact that parents in better-off households have steady jobs.”

stability makes (1) it easier and cheaper to borrow money, which could be invested in a family business, (2) schools accept their children more readily, (3) hospitals give more expensive treatments, knowing they will get paid.

Perhaps this idea that there is a future is what makes the difference between the poor and the middle class
“A sense of stability may be necessary for people to be able to take the long view”

If you don’t see a possible future of improved quality of life, you may stop trying and end up staying where you are.

A plea bargain in favor of more ‘good jobs’
“A good job is a steady, well paid job, a job that allows a person the mental space needed to do all those things the middle class does well. This is an idea that economists have often resisted, on the reasonable grounds that good jobs may be expensive jobs, and expensive jobs might mean fewer jobs. But if good jobs mean that children grow up in an environment where they are able to make the most of their talents, it may well be worth the sacrifice of creating somewhat fewer of those jobs.”


All quotes are from Poor Economics by Abhijit V. Banerjee and Esther Duflo

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