MSEs are an increasingly important source of employment creation in many States.• Job quality in MSEs is generally very poor.• Poor job quality is due in part to the fact that many MSEs are unstable, short-lived and operate in a state of semi-formality. This has repercussions for job quality and for broader economic growth and development.• The formalization of MSEs is critical for the creation of Decent Work: MSEs that operate within the scope of the regulatory framework are more likely to create productive, remunerative jobs in which workers have rights at work, security, and equality.• States must devise a policy environment that balances the need to protect workers, with acknowledgement of the extent to which MSEs genuinely require special regulatory measures in light of their ability to meet the costs of the regulatory framework.• A key challenge for the ILO and for its member States is how to devise a legal and regulatory environment that promotes Decent Work in MSEs and facilitates economic growth.• Labour and labour related laws can be an important means of improving job quality.• This study suggests that there is significant scope for States to take regulatory action to address these challenges. CHAPTER 3 LABOUR LAW, JOB QUALITY AND FORMALIZATION OF MSEsChapter summary• Job quality for workers in MSEs falls far below the level necessary to promote or achieve Decent Work.• There is little evidence to suggest that excluding MSEs from labour laws, or failing to apply them in practice, has major positive effects on MSE growth and economic development.• There are substantial benefits that can be gained from compliance with labour laws.• Surveys across seven countries have found that MSE owners do not regard the costs of complying with labour laws as a major constraint on MSE growth.• Evidence suggests MSE owners make strategic choices about which elements of their regulatory environment they will comply with. This suggests that they will respond to innovative regulatory approaches targeted specifically at MSEs.