Small and Medium-Sized Enterprises and Structural Unemployment in Ghana: Accounting for a Development Paradox

Small and Medium-Sized Enterprises (SMEs) are widely recognised as critical drivers of employment creation in developing economies. In Ghana, SMEs dominate the private sector and account for a substantial proportion of total employment; nonetheless, unemployment—particularly among young people and tertiary graduates— remains persistently elevated. This study interrogates the apparent paradox of expanding SME activity alongside sustained high unemployment in Ghana. Employing a quantitative descriptive survey design, data were collected from 400 SMEs across the Greater Accra, Ashanti, and Central Regions to assess the employment contribution of SMEs and to identify structural constraints on their labour absorptive capacity. Chi-square analysis indicates that SMEs exert a statistically significant effect on employment generation. However, the predominance of micro-enterprises, low employment intensity, skills mismatches between labour supply and SME demand, and the prevalence of unstable or precarious forms of employment collectively limit the sector’s broader potential to reduce unemployment. The study concludes that, although SMEs constitute an indispensable component of Ghana’s labour market architecture, their capacity to contribute meaningfully to unemployment reduction is contingent on structural economic transformation, improved alignment between education and labour market skills requirements, and the implementation of targeted, context-specific policy interventions.

SMEs, unemployment, employment

1. Abor, J., & Quartey, P. (2010). Issues in SME development in Ghana and South Africa. International Research Journal of Finance and Economics, 39, 218–228. [Google Scholar] [Crossref]

2. Ayyagari, M., Demirgüç-Kunt, A., & Maksimovic, V. (2021). Small vs. young firms across the world. World Bank Economic Review, 35(1), 1–28. [Google Scholar] [Crossref]

3. Baah-Boateng, W. (2020). Education and unemployment in Ghana: A paradox. African Development Review, 32(2), 241–255. [Google Scholar] [Crossref]

4. Ghana Statistical Service. (2020). Integrated Business Establishment Survey II. Accra: GSS. [Google Scholar] [Crossref]

5. Ghana Statistical Service. (2021). Labour Force Report. Accra: GSS. [Google Scholar] [Crossref]

6. International Labour Organization. (2023). Global Employment Trends for Youth. Geneva: ILO. [Google Scholar] [Crossref]

7. McMillan, M., Rodrik, D., & Verduzco-Gallo, Í. (2019). Globalization, structural change, and productivity growth. World Development, 63, 11–32. [Google Scholar] [Crossref]

8. Mensah, J., Osei, R., & Frimpong, A. (2023). SME growth constraints and employment outcomes in Ghana. Journal of African Business, 24(2), 189–207. [Google Scholar] [Crossref]

9. OECD. (2019). SMEs and entrepreneurship outlook. Paris: OECD Publishing. [Google Scholar] [Crossref]

10. Osei, B., & Adjasi, C. (2022). Firm size and employment dynamics in Ghana. African Journal of Economic Policy, 29(1), 45–67. [Google Scholar] [Crossref]

11. Pissarides, C. (2000). Equilibrium unemployment theory. MIT Press. [Google Scholar] [Crossref]

12. Schumpeter, J. A. (1934). The theory of economic development. Harvard University Press. [Google Scholar] [Crossref]

13. Vivarelli, M. (2021). Innovation, employment and skills in advanced and developing countries. IZA World of Labor, 154. [Google Scholar] [Crossref]

14. World Bank. (2020). Small and medium enterprises (SMEs) finance. Washington, DC: World Bank. [Google Scholar] [Crossref]

• Impact of Foreign Direct Investment in India
• Issues Involved in Digitalisation Special Reference to Indian Tourism Growth
• Relationship Marketing and Customer Loyalty in the Fast-Moving Consumer Goods (FMCG) Industry in Nairobi County
• Financial Literacy or Financial Inclusion? Which is Which, What is What—To Achieve Uganda’s 10-Fold Economic Growth By 2040
• Harnessing Natural Gas for Economic Transformation: Overcoming the Regulatory and Infrastructural Bottlenecks in Nigeria