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The GCC region too has caught-up with this global phenomenon and has some successful start-up stories to boast about. Start-ups are being projected as forerunners of economic growth through job creation and also pursued as the solution for job creation. However, to what extent this presumption about start-ups holds well is debatable.

Do start-ups create jobs?
Table: Increase / Decrease in Employment

Sectors 2012 2013 2014 2015 2016
Construction (27,780) (24,608) 99,087 69,313 56,937
Trade and Repair Services 56,312 41,756 80,811 77,402 8,761
Manufacturing 11,156 (2,139) 30,554 (16,527) (423)
Real Estate 44,091 33,795 78,910 41,158 33,716
Transportation 14,243 24,133  38,113 11,223 11,588
Hotels and Restaurants 17,072 21,950 23,677 (3,431) 11,644
Community Services and أخرى 5,310 6,251 10,833  74,325 7,271
Educational Services and Studies 5,591 2,243 7,859 7,660 7,654
Financial Intermediation 1,690 2,571 5,699 2,240 3,312
أخرى 10,085 917 17,724 28,685 1,603
Total 137,770 6,869 393,267 292,048 142,063

Source: Ministry of Human Resources and Emiratisation

Prior to answering the question-if start-ups can be key to the growing concern of unemployment in the region, the effectiveness of start-ups in job creation has to be assessed.  The Y-o-Y increase in jobs and establishment in the UAE across sectors most cases has resulted in incremental jobs. It is however obvious, that the growth in the jobs on the account of newer establishments coming into existence has be not been consistent within/across sectors.

For instance, the educational sector employment strength increased by 2,571 employees while 61 new establishments were set-up in 2013. Similar level of job creation was witnessed in 2015 in the financial sector but there were only 20 new establishment set-up.

Table: Increase / Decrease in Establishments

Increase / Decrease Establishments 2012 2013 2014 2015 2016
Construction 1,086 (478) 2,713 2,090 2,698
Trade and Repair Services 3,369 2,388 5,328 3,517 451
Manufacturing 368 (271) 1,295 (467) 216
Real Estate 1,388 1,489 2,229 452 3,679
Transportation (813) (692) 837 (79) 153
Hotels and Restaurants 934 873 1,154 570 1,329
Community Services and أخرى 1,052 813 1,082 5,686 703
Educational Services and Studies 109 56 163 536 131
Financial Intermediation 49 61 170 20 159
أخرى 216 (173) 841 1,643 (1,921)
Total 7,758 4,066 15,812 13,968 –  

Source: Ministry of Human Resources and Emiratisation

Contrary to the trend in the financial sector discussed above, in the construction sector 1,086 new establishments were set-up in UAE in 2012, yet, the industry employment strength decreased by 28K. Similarly, the transportation sector witnessed a drop in number of establishments during the years 2012 and 2013, but this didn’t result it drop in the growth in employment, rather the sector employee strength increased by c.30K.

Start-ups a solution for job creation?
Looking at start-ups as a solution for job creation may not be a very wise stand. Based on the employment-established Y-o-Y growth/decline trend across sectors, it is evident that in most cases newer establishments have led to job creation. Though the newer establishments would have led to job creation, in some cases, they have failed to make an impact and the industry on the whole witnessed drop in employment.

The inherent high failure risk of start-ups could cause significant volatility in the job the market. The solution for the job creation should be more stable and consistent and not something which is unpredictable. Moreover, the early stage of start-ups would limit the employment generation, as they tend to run leaner operations to preserve cash and invest it in the business. The employee strength of the start-ups discussed in the table below establish the idiosyncratic nature of start-ups. Depending on the nature of the start-up, a five-member startup could create a much larger impact than a 50-person startup. Therefore, start-ups should be considered as potential source of innovation rather than solution for employment generation.

Table: Selected Leading Start-ups in UAE

Name Employee Strength   Description Sector Founded
Remitr 50 Money transfer app Financial Services 2016
Boxit 10 Connects consumers with storage facilities Transportation 2016
Wing 200 Delivery service Transportation 2016
THE LIST 50 Marketplace for luxury collectibles Retail 2016
Justmop.com 10 On demand home cleaning services أخرى 2016
Shedd 50 Fashion reseller app Retail 2015
Wrappup 10 Smart recorder أخرى 2015
InstaShop 50 Grocery delivery app Retail 2015
ChefXchange 50 Book private chef أخرى 2015
ShortPoint 50 SAAS Web design platform أخرى 2015

Source: Forbes, LinkedIn

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