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

Abstract

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.