Small family business as regulation method of labor market

Article examines the role of small entrepreneurship, including family business as the method of regulation of regional labor market, promoting the increase of population’s employment and decrease of unemployment level. Main directions of state support of small entrepreneurship are defined, factors are found, influencing  the conditions and perspectives of development of regional labor market, one of them is small family business as the source of demand formation in labor market. It is small family business in Kazakhstan economics, which promotes the creation of new workplaces, and executes the number of the most important social and economical functions: provision of employment, formation of competitive environment, support of innovative activity, decrease of social tension. The level of development of small business directly determines the level  of population welfare, the degree of national economy development in general.In connection with,the need to support the small business in Kazakhstan is accepted as one of priority problems of economic policy today.Author analyzed the situation in labor market, level of employment of rural population in sectors of small and medium entrepreneurship, problems of family business development, factors of its successful development, conditions for regeneration of family business in Kazakhstan and development of modern family business, which demonstrate the stability and efficiency in most regions of the world. According to the results of the study, exact recommendations are offered for future development of small family business. 

The development of competitive socially oriented market economy is impossible without the construction of a civilized labor market. Today, the analysis of the importance of small business, including family business, as method of regulation of the regional labor market, contributing to the employment of the population and reducing the level of unemployment, becomes especially relevant. The level of development of  small business directly determines the level of population welfare, the degree of national economy development in general. In the Message to the people of Kazakhstan «Kazakhstan’s way-2050: a common goal, common interests, common future» the Head of the state NursultanNazarbayev appoints new directions of development of small business potential: «For its development the complex decisions on legislative strengthening of a private property institution are needed. We must abolish all inert legal norms interfering business development. Small business should become a family tradition  transferred  from  generation  to  generation» [1].

Thus, the main objectives of small and medium business in the region today when we are on a threshold of an economic crisis, are the following: formation of rational structure of region’s economy; preservation and development of the middle class; decrease in unemployment due to creation of new workplaces; expansion of revenues of the state budget at all levels; ensuring social stability and removal of social tension and, ultimately, ensuring sustainable development of the region's economy. The sustainable development of small and medium business in modern conditions is a factor of development of labor market and ensuring effective employment of the population [2; 29].

Small business is often a family business, especially at the stage of emergence and development, since  it relies on support of family members. Features of this business are expressed, first of all, in the traditions of a very patient and responsible approach to business which settled for centuries. It is caused by the fact that  the family companies operate with own capital, create long-term workplaces for relatives and try to build up the strong relationship with local population, business entities, and communities. Such approach considerably contributes to the reliability and stability of national economy.

In  countries such as Japan, Germany, Belgium,  Italy, small and medium business makes more than    90 % of the total number of their enterprises, in many developed countries it makes more than 50 % of GDP. In the majority of industrialized countries small business is considered, first of all, as the factor influencing the solution of social and economic problems. A very significant role in creation of new workplaces, increasing of economic activity, living standards and professional qualifications of the population, is traditionally assigned to the small business. Also, in the majority of European countries the family business makes more than 70 % of total number of businesses and plays a key role in growth of economy and employment, the family enterprises make 60-65 % of GDP. The family business is ahead of the non-family companies, and well-being of nation depends on its progress.

As it shown by the research results of the private and family business, conducted by PwC among     2802 companies from 50 countries and various sectors of the economy, such as agriculture, retail and industrial production, that family companies play a vital role in the economy of all countries: they help to maintain stability, and they are capable to undertake long-term obligations and responsibility to their employees and communities in which territory they conduct the activity. The results also indicate that the family business can be a driving force of changes and innovations. In 2016, 64 % of private companies showed growth over the last financial year, which is lower than in 2014 (65 %). At the same time, 85 %  of companies, as well as in 2014, expect growth in the next 5 years, with 15 % of them planning rapid and aggressive growth [3; 8-10].

The need to support the small business in Kazakhstan is accepted as one of priority problems of economic policy today. Putting it into the priority is preferable from the point of view of employment ensuring of the population and creation of a domestic producer in the market of consumer goods. It is no coincidence that in industrialized countries of the world it is considered that the level of small and medium business development is the most convincing evidence of the success of the country, region or city. As the President of the Republic of Kazakhstan N.A. Nazarbayev noted in the Message to the people of Kazakhstan, it is important to «strengthen the trend of innovative industrialization» and not without the help of small and medium business, which by 2050 «will make not less than 50 percent of Kazakhstan’s GDP» instead of current 20 percent. Several state programs are implemented in this direction in the country, and certain privileges are provided in them. For example, since 2017 citizens of Kazakhstan in the countryside or in the city can receive microcredit up to 16 million KZT for their business. In our opinion, this is a unique opportunity provided to everyone who wants to open their family business.

In the conditions of the formation of the socially oriented market economy, the state faces a difficult task: on the one hand, it should support and facilitate the functioning of the market system by means of economic instruments; on the other hand, it should not break this system by excessive influence [4]. Effective systems of economic, legal, social and organizational support of the environment for a sustainable development of small business operate in economically developed countries.

The state support of small business is carried out in the following directions:

• formation of infrastructure for support and development of small enterprises;
• creation of preferential conditions for use of state financial, material and technical, and information resources, as well as scientific and technological developments and technologies;
• establishment of the simplified registration procedure, licensing of small enterprises’ activity, product certification, submission of state statistical and accounting reports;
• support of foreign economic activity of small

The state and municipal programs for supporting SFB (small family business) include the measures providing: involvement of socially unprotected strata of the population in business activities; proposals on establishment of tax benefits and the annual assignment from the relevant budgets; ensuring results transfer of research, developmental and technological works to the small business entities; provision of transfer of incomplete construction and vacant objects, non-remunerative and unprofitable enterprises, etc. to other  small business entities on preferential terms [5].

Throughout the world, state support for small businesses is provided through the provision of tax benefits. At the same time, it means not a mechanical reduction of tax rates, but a well-thought-out system of taxation that would stimulate the development of this sector of the economy. The range of tax benefits can be various depending on what problems must be solved first.

The tax code of the Republic of Kazakhstan [6] is more focused on strengthening of the stimulating role of tax legislation in increasing business activity and developing production. For certain groups of payers the special taxation schemes are provided. Special taxation scheme is a special procedure of payments with the budget, established for certain categories of taxpayers and providing application of the simplified order for the calculation and payment of certain types of taxes, as well as reporting on them [7, 8].

Special taxation scheme based on a simplified declaration is applied by the small business entities corresponding to the following conditions:

• for individual entrepreneurs: maximum average number of employees for the tax period is twenty five people, including the individual entrepreneur; maximum income for the tax period is 10000,0 thousand KZT; 
• for legal entities: maximum average number of employees for the tax period is fifty people; maximum income for the tax period is 25000,0 thousand KZT [9].

In Kazakhstan the family business is a natural form of expression and preservation of family culture, tradition. As it is known, family traditions, being the foundation of culture of any people, remain as its originality, primarily in rural areas, which are less subjected to the influence of external or new phenomena than urban settlements. Therefore, from all economy branches, agriculture has the most traditional character, depends on traditional commitment of people to life in the countryside and is a natural environment for development of the family business [10; 43].

According to the official data, 45 % of Kazakhstan's population lives in rural areas. The family farm represents the industrial, social, civil, cultural and moral basic element of effective agricultural production, working for centuries. This is confirmed by the experience of the leading countries of the world. In each of them the family farm is the basis of agrarian economy. In the USA the number of farms is 2,2 million. They own 89 % of all lands. Average site size 168 hectares. The livestock farm on average 118 heads of cattle. Dairy – 131 cows. Pig – 800 heads. In Germany, agriculture consists of more than 90 % of family farms. Their number is 300 thousand. The average size is 49 hectares. Livestock farm an average of 77 head of cattle, dairy – 50 cows. Average pig-breeding farm – 1 thousand heads. In Finland, agriculture is agrarian almost for 100 %. There are 60 thousands of family farms with an average size of the earth – 38 hectares. There are 1200 heads in average in a pig breeding farm, In cattle-breeding – 50 heads of cattle, in dairy– 29 cows. This means it is common practice to rely on small family-type farms throughout. And this business model is exclusively effective [11]. However, there are only 181,000 peasant and private farms, and in some regions 50 % of rural households do not have any livestock at all: neither chickens, nor duck, without mentioning cattle stock.

T a b l e

The main indicators of small and medium business in the Republic of Kazakhstan 

Note. Compiled by the author according to sources: [12, 13; 13-17, 14]. 

Business activity, in particular, the family business is an engine of small and medium business development, the basis of the middle class, the guarantee of economic prosperity and social stability of any country. For today in Kazakhstan’s sphere of small business there are hundreds of thousands of residents of our country. They are represented in various regions of the country and branches of economy. In particular, in agriculture the family cooperation is the most effective and convenient format for doing business.

Introduction of special taxation scheme for the small business entities which helps to significantly reduce the tax burden and to simplify the procedure of payments with the budget, contributed to the growth of number of small business entities, increase of production output in volume and number of employed population in all forms: legal, individual and peasant or farming (Table).

Apparently from the table, in the structure of operating subjects of SFE (small family entrepreneurship) on legal organizational forms, the entities which carry out business activity without formation of a legal entity prevail, and they are individual entrepreneurs, the number of which in 2015 was 930 thousand units, the number of peasant farm enterprises was 181 thousand, and legal entities – enterprises of SFE accounted 179 thousand subjects. In dynamics of the existing SFE entities in terms of organizational and legal forms, the following tendencies are traced during the period from 2010 to 2015:

1. the number of individual entrepreneurs in the country increased twice for the last 6 years, which led to noticeable change in the structure of active SFEs: there was a growth in the share of operating individual enterprises from 63,7 % in 2010 to 72,1 % in 2015;
2. the number of peasant farm enterprises (PFE) remains unchanged, but as a result of the increase in number of IE, the share of PFE in the structure of active SFE is decreasing: if in 2010 it was 26 %, then in 2015 – 14 %;
3. the number of SFE enterprises has almost doubled since 2010, however the share of SFE enterprises in the structure of the operating SFE increased only by 2.4 percentage points since 2010, and accounted  13,9 % in

As well as in previous years, the uneven development of SFE sector in regions of Kazakhstan remained in 2015. This is due both to the uneven distribution of the population and resources, and to the specifics of social and economic development of the country's regions, the distinctions in the structure of their economies. Financing of SFE sector shows the most disproportions between regions, for instance, in 2015 about  70 % of all funds of banks aimed at the development of SFE sector, account for Astana and Almaty. The comparative analysis of SFE sector development in regions of Kazakhstan helps to draw the following conclusions: according to the results of 2015, South-Kazakhstan and Almaty regions, as well as Almaty city itself, are traditionally leading in terms of the number of active SFE entities; and by the share of active SFEs  in the total number of registered SFE entities, the first positions were taken by West Kazakhstan and Pavlodar regions [12, 13; 21-24, 14].

Ranking of regions by the share of activity of SFE entities reflects the conditions created in the region for stable business activity, and the level of qualification and general readiness of entrepreneurs belonging to a particular region of the country. Atyrau and Kyzylorda regions with indicators of 89,19 and 88,87 % respectively are in the lead by the share of the acting SFE entities in their general quantity.

The analysis of the number of employed people in SFE entities characterizes the growing importance of Kazakhstan's entrepreneurship in solving the employment problem. Relative share of the population, actively engaged in SFE, in 2015 amounted 36,5 % of total number of employed in economy population. Dynamics  of this indicator in the period from 2010 to 2015 has the general tendency of growth: the share of the population which is actively engaged in SFE increased by 4,1 % points. In absolute terms over the past six years, SFE sector has employed for 516 thousand people more, only for 2015 employment in SFE sector grew by 377 thousand people. As a result, as of 01.01.2016 the number of workplaces in SFE reached 3147 thousand people.

Traditionally, Almaty is the region with the largest number of SFE enterprises registered in the form of  a legal entity, due to the productivity of which the city has the greatest indicators of production output of  SFE and number of the population engaged in it. The total number of people employed in SFE in 2015 accounted 3231 thousand people which is 22,8 % higher, than in 2010.

The distribution of the population employed in SFE by regions is uneven. The largest number of people, just  like in previous years, is engaged in SFE in Almaty, Astana, South Kazakhstan, and Almaty regions  [12, 13; 25, 14]. In all areas, except for Kyzylorda, the growth in number of people employed in SFE sector  is observed. In the gender aspect, 42 % of SFE entities, operating in the republic, are headed by women. At the same time, in the regional context the largest share of women heading small and medium-sized enterprises is observed in Kostanay and Karaganda regions (48 % each), and Pavlodar region. The smallest share of the small and medium-sized enterprises headed by women is observed in South Kazakhstan, Almaty, Jambyl regions [13; 24-25].

The volume of output of the whole SFE sector in Kazakhstan in 2015 amounted 15858,4 billion KZT.  In the regional context, the largest contribution to production is made by SFE entities of Astana and Almaty cities, whose output accounts for 47 % of the total production of SFE in the country (7 418 billion KZT). In all regions, except for the Kyzylorda region, an increase in the output of SFE entities is observed in 2015  [12, 13; 25, 14].

On improvement of the business climate in the country within the last 6 years, Kazakhstan has raised its position in the rating «Doing Business» of the World Bank, characterizing the ease degree of business activity from 80th to the 50th place out of 189 countries, at the same time for the taxation indicator it takes the 18th place, which indicates a favorable taxation scheme. Russia in this rating takes the 47th place, and Belarus takes the 63rd place [15, 6]. This should be assessed positively, since the small business contributes the employment of the population and replenishment of local budgets’ income. All this contributes, finally, the decrease of unemployment level and growth of the welfare of society in general.

In Kazakhstan today good conditions for entrepreneurship appeared, although there is still a lot of work. For example, it is important for entrepreneurs to be able to use correctly the opening opportunities, to develop the business on a modern basis. For this purpose entrepreneurs need to study, to acquire new knowledge  in order to fully realize their potential. As it was noted above, for development of entrepreneurship and improvement of business climate in Kazakhstan, the systematic work is carried out on improvement of the legislation in the sphere of entrepreneurship, on simplification of the procedure for creation and running of the business, optimization of licensing systems and state control, elimination of administrative barriers, and implementation of the program of state support for entrepreneurship.

In order to provide comprehensive support of entrepreneurship and creation of new permanent workplaces, an unprecedented «Business Road Map-2020» program was launched in 2010, which provides rendering of the state support in the form of subsidies, guarantees, grants for new business ideas, microcredit infrastructure, and training, internships abroad, service support and specialized consulting [16].

Over the period of program implementation the measures of the state support within the integrated program covered more than 320,000 of entrepreneurs; 252,000 of workplaces were saved and created. As for the beginning of 2016, within this program more than 6 700 projects at the cost of 1,3 trillion KZT were subsidized, over 1600 guarantees for the loans were given at the total amount of 65 billion KZT. The beginning entrepreneurs received 869 grants for more than 2,3 billion KZT. Within the program of infrastructure development «Nurlyzhol» [17], 200 billion KZT for financing of SFE were allocated. At the expense of the specified funds, entrepreneurs receive loans on unprecedented conditions: at the rate of 6 % per annum and up to 10 years. As for the beginning of 2016, 1221 projects of domestic producers are provided with financing for the amount of 223,5 billion KZT.

Family business, as a rule, is one of forms of small business or self-employment of the population and it is not singled out in Kazakhstan legislation as a special form of legal regulation and state support. Thus, one of the key problems of the state support for the development of family business is represented by the absence of effective regulatory and legal framework for family entrepreneurship, both at the state and regional levels, as well as the absence of well-established mechanisms for implementing laws and programs already adopted to support small and family entrepreneurship. It should be noted that for the population the model of family entrepreneurship is attractive enough because, as a rule, serious financial investments for one person are beyond the power, and it is problematic and risky to involve strangers in joint business. Modern family business is based on trust, common property interests, moral foundations [18; 29]. Besides, today the small business sector of the economy of Kazakhstan is of particular importance as a link, which under certain conditions will contribute to the creation of new workplaces. As practice shows, many qualified specialists, who are unemployed, seek to find themselves in small and medium businesses, start their own business. A significant role in this situation can play a family business, because it is the main source of the formation of demand in the labor market. In this regard, we agree with the point of view of those authors who believe that there is a need in Kazakhstan to consolidate the family business as an effective form of entrepreneurship, which should become in the future the basis for the formation of the middle class. At the same time it is expedient to use of experience of foreign countries.

Summarizing all above, it is possible to draw the following conclusions and suggestions: 

1. One of the main methods of regulation of labor market is the state support for the development of small family business as powerful source of new workplaces, as well as the reorientation of this economy segment in the direction of predominantly productive activities. The need for labor of this small family enterprises, can be provided with municipal bodies in the sphere of employment of the population fully due to retraining and professional development of workers, both in the specialized training centers, and on the basis of the enterprises close in profile, in close cooperation with local authorities, and
2. Small family business not only creates, directly and indirectly initiates the emergence of additional workplaces, but also expands the field of business activity, involving in labor activity those citizens who do not possess high competitiveness in labor market. More «flexible» working conditions in small enterprises, including the non-standard modes of working hours, make them attractive for employees. Sensitively reacting to changes in market conditions, small enterprises become participants of investment process, they contribute to the qualitative improvement of the workforce, and form workplaces based on new
3. Support of small family business by the state can be carried out by granting preferential credits to the entrepreneurs working in the sphere of production. One of the schemes of preferential crediting is partial compensation of interests on the credit by the state at its strict target use for replenishment of fixed assets. This will allow to switch the activity of small family business from trade to development of real production, to strengthen the position of the domestic producer in the market, to accelerate the development of the small business necessary for formation of socially oriented
4. Special attention at the support of small family business should be given to the elimination of administrative barriers interfering development of business and promoting the growth of bribery and corruption. Control over the regulation of relations between the sphere of small family business and the authorities should be conducted by professional self-regulating organizations of
5. It is necessary to carry out monitoring of the current state of family business in Kazakhstan, with allocation of regional and branch specifics and to develop programs of the state support of family business in RK by the

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