Running a business, or otherwise being self-employed, is one avenue for economic advancement for Indigenous people. However, employing oneself or others is a complex process with many potential pitfalls. In an increasingly competitive marketplace, where globalisation and instantaneous information processing have increased the mobility of consumers and producers alike, Indigenous businesses have to be increasingly sophisticated to compete. Not only do they need to manage financial risk, but also fluctuating markets require a truly ëworldlyí outlook with adequate access to collateral and social networks. In this context it is not surprising that the Indigenous population continues to have a very low rate of business formation.
This paper provides a profile of the Indigenous self-employed in Australia using data from the National Aboriginal and Torres Strait Islander Survey and recent censuses. It uses this profile to discuss issues raised in the international literature on race, ethnicity and self-employment.
Recent trends in Indigenous self-employment
- Indigenous Australians have markedly lower rates of self-employment than the Maori of New Zealand, but are slightly more likely to be self-employed than Canadian Indians on reserves. The Maori were almost twice as likely as Aboriginal people and Torres Strait Islanders to be employers or self-employed in 1991 with 7.4 per cent of the labour force running some type of business. The self-employment rate for Canadaís Indian reservation population was 2.2 per cent in 1990 compared to 2.7 per cent among Australiaís Indigenous workers at the analogous census.
- There is some evidence of a relative improvement in the number of self-employed among the Indigenous employed with an increase in the number of Indigenous self-employed relative to other self-employed. The ratio of self-employment rates among the Indigenous and non-Indigenous workforce increased from 0.26 to 0.31 between 1991 and 1996. This relative improvement in self-employment rates among those in the labour force builds on low historical numbers with this ratio being only 0.15 in 1986.
- The small size of the self-employed population mean that self-employment plays a minor role in promoting economic independence among the Indigenous population as a whole.
A profile of the Indigenous self-employed in Australia
- In comparison with other workers (excluding Community Development Employment Projects (CDEP) scheme workers), the Indigenous self-employed enjoy on average $2,027 more income from government payments and about $4,400 more employment income. The higher income from employment will, in some sense, be compensation for labour on-costs usually borne by the employer. When the Australian economy enters the next recessionary phase, the self-employed income will be substantially reduced as there is no mechanism to subsidise temporary periods of unprofitability.
- The self-employed work 3.7 and 13.8 hours more per week than non-CDEP and CDEP scheme employees respectively. Also, the fact that the self-employed have been employed for less of the previous 12 months than other employed workers means they will have been more reliant on other income, probably welfare. The fact that the self-employed appear to have less continuous employment probably indicates that the nature of the work is seasonal and impermanent. An alternative explanation of the lack of continuity in employment is that there is a high rate of failure among Indigenous businesses.
- Compared to other Indigenous people the self-employed were more likely to have some education, but less likely to have completed high school. The self-employed were much better qualified than other Indigenous people when it came to vocational training but were less well endowed in terms of tertiary education, presumably including business qualifications.
- Regression analysis is used to describe the characteristics of Indigenous people who become self-employed. The results indicate that males are almost twice as likely to be self-employed as Indigenous females. The analysis also points to the self-employed being concentrated in older age groups with 15 to 24 year olds being significantly less likely to set up a business. There are no significant correlations across geographical areas which indicates that there are market opportunities for the Indigenous self-employed in remote Australia. Finally, living in a family where at least one person is non-Indigenous is strongly positively correlated with Indigenous self-employment.
This paper builds on previous studies, which document the circumstances of individual, Indigenous self-employed people. Unfortunately, the acquisition of data on Indigenous businesses is in its infancy and therefore it is not possible to understand the processes that determine the success of these entrepreneurs. Given that access to capital is a potentially important constraint on self-employment, more detailed information is required on the capital requirements of Indigenous businesses. A useful starting point might be to focus on businesses which utilise government assistance or are involved in the business plans of the relevant local Area Consultative Committee.
The Commercial Development Corporation (CDC) could address the information problems experienced in small firms, and exacerbated by the low levels of educational attainment in the Indigenous population, by providing a business advisory service. One way to raise the profile of the CDC or any Indigenous business advisory service is to develop networks of potential entrepreneurs through ëtradeí magazines and even the world wide web. The Canadian government web site (http://www.inac.gc.ca/ecdev/entre/index.html/) provides an excellent model for starting up an Australian network for Indigenous entrepreneurs.
The United States (US) literature points to significant barriers to minority participation in the government contracting process including: failure of governments to break large contracts down into smaller projects so that small firms can compete; extensive granting of waivers from minority subcontracting requirements; ineffective screening for false minority fronts; and limited notice of the contract tendering process. While the minority subtracting requirements are obviously specific to the US legislation, the other barriers may need to be addressed in the Australian context. The major lesson from the literature on public contracts is that policy needs to examine governmentís own shortcomings as well as address the requirements of Indigenous business.
While government programs for business support are important, it is more important to address the low level of education among potential Indigenous entrepreneurs. This paper highlights the need to increase the level of business qualifications among the self-employed to ensure they can assess and manage the manifold risks in an increasingly globalised marketplace. Easing the constraints on Indigenous entrepreneursí access to capital will yield dividends only after their ability to utilise capital and assess market opportunities is addressed.
ISBN: 0 7315 2611 2