decent work and the informal economy

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  • 1. Contents IInternational Labour Conference90th Session 2002Report VIDecent work andthe informal economySixth item on the agendaInternational Labour Office Geneva

2. II Decent work and the informal economyISBN 92-2-112429-0ISSN 0074-6681First published 2002The designations employed in ILO publications, which are in conformity with United Nations practice, andthe presentation of material therein do not imply the expression of any opinion whatsoever on the part of theInternational Labour Office concerning the legal status of any country, area or territory or of its authorities,or concerning the delimitation of its frontiers.Reference to names of firms and commercial products and processes does not imply their endorsement bythe International Labour Office, and any failure to mention a particular firm, commercial product or processis not a sign of disapproval.ILO publications can be obtained through major booksellers or ILO local offices in many countries, ordirect from ILO Publications, International Labour Office, CH-1211 Geneva 22, Switzerland. A catalogueor list of new publications will be sent free of charge from the above address.Printed in Switzerland ATA 3. Contents IIICONTENTSPagesCHAPTER I. Decent work and the informal economy . . . . . . . . . . . . . . . . . . . . . . . . . 1Old and new forms of informality and informalization . . . . . . . . . . . . . . . . . . . . . 1Decent work and the informal economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Aims and outline of the report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7CHAPTER II. Who is in the informal economy and why is it growing? . . . . . . . . . . . . 10Who is in the informal economy? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Employment in informal enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Status in employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Some regional and country maps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Child labour in the informal economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25The factors shaping and reshaping the informal economy . . . . . . . . . . . . . . . . . . . 27Legal and institutional frameworks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Economic growth, employment creation and the informal economy . . . . . . . 29Economic restructuring, economic crisis and the informal economy . . . . . . . 30Poverty and the informal economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Demographic factors and the informal economy . . . . . . . . . . . . . . . . . . . . . . 32Globalization and the informal economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Flexible specialization and global chains . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35The links between the formal and informal economies . . . . . . . . . . . . . . . . . 37CHAPTER III. Enhancing rights in the informal economy . . . . . . . . . . . . . . . . . . . . . . 39The rights deficit in the informal economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39The ILO Declaration on Fundamental Principles and Rights at Work and theinformal economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Freedom of association and the right to collective bargaining . . . . . . . . . . . . 41Elimination of forced labour . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Elimination of child labour . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42Elimination of discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43The promotional follow-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43ILO instruments and the informal economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44Promoting rights through national and local legislation, regulations and institutions 47Improving labour legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48Legal literacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50Strengthening labour administration and enforcing labour rights . . . . . . . . . 52Protecting workers through improving commercial and business regulation . 53 4. IV Decent work and the informal economyCHAPTER IV. Improving social protection in the informal economy . . . . . . . . . . . . . 55The social protection deficit in the informal economy . . . . . . . . . . . . . . . . . . . . . . 55The reasons for low social protection in the informal economy . . . . . . . . . . . . . . . 57Improving social protection in the informal economy . . . . . . . . . . . . . . . . . . . . . . 58Extending and adapting statutory social insurance . . . . . . . . . . . . . . . . . . . . . 59Encouraging micro-insurance and area-based schemes . . . . . . . . . . . . . . . . . 62Promoting cost-effective tax-based social benefits . . . . . . . . . . . . . . . . . . . . 64Occupational safety and health in the informal economy . . . . . . . . . . . . . . . . . . . . 65The implications of HIV/AIDS for social protection in the informal economy . . . 69CHAPTER V. Strengthening representation and voice in the informal economy . . . . . 71The representational gap in the informal economy . . . . . . . . . . . . . . . . . . . . . . . . . 71Strengthening representation and voice in the informal economy . . . . . . . . . . . . . 74The role of national and local governments . . . . . . . . . . . . . . . . . . . . . . . . . . 74The role of trade unions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77The role of employers organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86The role of cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92CHAPTER VI. Meeting the global demand for decent employment . . . . . . . . . . . . . . . 95The global employment deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95Creating quality jobs and enhancing employability . . . . . . . . . . . . . . . . . . . . . . . . 99Promoting employability and productivity through investing in knowledge and skills 99Literacy and basic education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99Training and skills development for formal, decent employment . . . . . . . . . 100Providing training for those in the informal economy . . . . . . . . . . . . . . . . . . 102Quality job creation through enterprise development . . . . . . . . . . . . . . . . . . . . . . . 105An enabling policy, legal and regulatory framework . . . . . . . . . . . . . . . . . . . 106Good governance and the role of national and local governments . . . . . . . . . 107An enterprise culture for formal, decent jobs . . . . . . . . . . . . . . . . . . . . . . . . . 108Support structures and services for micro-enterprises . . . . . . . . . . . . . . . . . . 110Improving job quality in micro- and small enterprises . . . . . . . . . . . . . . . . . . 112Securing property rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113Financing in the informal economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115Local economic development and quality job creation . . . . . . . . . . . . . . . . . . . . . 118SUGGESTED POINTS FOR DISCUSSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120ANNEX. Matrix and glossary of terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121Glossary of terms used in the report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125A country-specific example based on the matrix: Mexico . . . . . . . . . . . . . . . . . . . 127 5. Decent work and the informal economy 1CHAPTER IDECENT WORK AND THE INFORMAL ECONOMYOLD AND NEW FORMS OF INFORMALITY AND INFORMALIZATIONIt was exactly 30 years ago that the ILO first used the term informal sector todescribe the activities of the working poor who were working very hard but who werenot recognized, recorded, protected or regulated by the public authorities.1 And it wasmore than a decade ago in 1991 that the 78th Session of the International LabourConference discussed the dilemma of the informal sector.2 The dilemma was posedas whether the ILO and its constituents should promote the informal sector as a pro-viderof employment and incomes or seek to extend regulation and social protection toit and thereby possibly reduce its capacity to provide jobs and incomes for an ever-expandinglabour force. The 1991 Report emphasized that there can be no question ofthe ILO helping to promote or develop an informal sector as a convenient, low-costway of creating employment unless there is at the same time an equal determination toeliminate progressively the worst aspects of exploitation and inhuman working condi-tionsin the sector.3 The Conference discussion stressed that the dilemma should beaddressed by attacking the underlying causes and not just the symptoms through acomprehensive and multifaceted strategy.4Today, there is still a dilemma but one that is much larger in magnitude and morecomplex. Contrary to earlier predictions, the informal economy has been growing rap-idlyin almost every corner of the globe, including industrialized countries it can nolonger be considered a temporary or residual phenomenon. The bulk of new employ-mentin recent years, particularly in developing and transition countries, has been inthe informal economy. Most people have been going into the informal economy be-causethey cannot find jobs or are unable to st

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