The impact of the small start-up grant scheme on Maltese employment

Abstract

In the EU there are more than 20 million SMEs, representing 99% of the EU businesses. This makes SMEs a key driver for economic growth, employment, innovation and social integration in the EU. In fact, the SMEs in Malta employ around 88,000 persons, 24,000 of which are employed by small start-ups. The EU envisages the need that SMEs and Small Start-ups are given financial support. The Small Start-up Grant Scheme is one of these support programmes offered to the Maltese small start-up firms. This programme of support is managed by the Malta Enterprise and it is aimed to help small start-ups by partly-financing the costs incurred related to wages, renting/leasing of equipment and production facilities, and water and electricity expenses. The research was aimed to study the impact of the Small Start-up Grant Scheme on employment amongst the beneficiaries of this scheme. The prime reason of studying this is that there is no existing literature that shows the scheme had impact on employment. For this reason, this research intends to identify the number of employees hired during the implementation of the scheme, if the persons were hired as a result of this scheme and if the temporary or permanent jobs created were sustainable. The prime hypothesis of the research is that the grant scheme led to permanent employment amongst its beneficiaries. The research also had secondary hypotheses such as the receipt of the grant scheme led to permanent employment amongst the beneficiaries. The prime statistical test used to test these hypotheses is the Chisquared Test for independence. This test examines whether the claimed hypotheses are true or not. The population of this research were the Small Start-ups employing less than 50 employees and had been in operation for less than 3 years. From a total of 22 Small SMEs, only 17 firms were taken into account between the periods 2007-2013. The main reason for this is because 2 years had passed since the last payment received by the beneficiaries and, so one can have a clearer picture of the effect of the scheme on new sustainable jobs amongst these beneficiaries. To prevent any statistical errors, a census amongst the beneficiaries was carried out. All the necessary data was gathered through an on-line survey. After the analysis of the results and findings, the research proved that the usage of the Small Start-up Grant Scheme did not result in sustainable jobs amongst the beneficiaries. Despite this, hiring of employees amongst the beneficiaries occurred as a result of the scheme's criterion, which envisaged that each beneficiary had to employ at least three employees for the first 12 months from the date of the scheme's implementation. Other studies shows that the ERDF support led to the creation of 395,000 jobs in the EU, but in some cases, employees which were hired by the scheme were made redundant after certain period. The research also proved that the beneficiaries managed to achieve greater market share and improved their performance. Most interestingly, the beneficiaries are unwilling to apply again for EU funds.