Lund 2018

ILO invented concept Four decades since the ILO launched the concept of

the “informal sector” in development policy debate in a report published in 1972 following a multidisciplinary employment mission to Kenya.

Since then has gained wide acceptance as a concept.

Not a simple equationInformal economy is diverse

The informal sector refers to informal enterprises, informal employment refers to informal jobs

‘Employment in the informal sector is an enterprise-based concept which is defined as jobs in unregistered and/or small unincorporated private enterprises; such enterprises are not constituted as separate legal entities (and are thus not officially registered) and do not maintain a complete set of accounts.’

‘Informal employment is a job-based concept and encompasses those jobs that generally lack basic social or legal protections or employment benefits and may be found in the formal sector, informal sector or households.’

The informal economy refers to different situations with different causes, posing different problems that require different solutions.

Workers in the informal economy differ widely in terms of income (level, regularity, seasonality), status in employment (employees, employers, own-account workers, casual workers, domestic workers), sector (trade, agriculture, industry), type and size of enterprise, location (urban or rural), social protection (social security contributions) and employment protection (type and duration of contract, annual leave protection).

Distinguish between recent informalization processes linked to trends in the global economy or to past structural adjustment policies, and the resilience of informal petty production of goods and services for local markets, which is still an important feature of everyday life for a large number of people.

The majority of workers and enterprises in the informal economy produce legal goods and services, although they are sometimes not in conformity with procedural requirements, such as registration or immigration formalities.

Should be distinguished from criminal and illegal activities, such as the production and smuggling of illegal drugs, which are covered by criminal law and are not appropriate for regulation or protection under labour or commercial law.

Numbers – see statistics Available statistics are only a preliminary estimate of its extent and

characteristics because of lack of data and agreed definitions.

The majority of the world’s working population earns its livelihoods under the vulnerable and insecure conditions of the informal economy.

It is estimated that non-agricultural employment in the informal economy represents 82 per cent of total employment in South Asia, 66 per cent in sub-Saharan Africa, 65 per cent in East and South-East Asia (excluding China), 51 per cent in Latin America and 10 per cent in Eastern Europe and Central Asia.

This share would be significantly larger in some countries if informal employment in agriculture were included.

In over half of the 44 countries where we have data disaggregated by sex, women outnumbered men in informal employment as a percent of non-agricultural employment.

However, the majority of the countries registered higher shares of men in informal sector employment as a share of non-agricultural employment as compared with women.

Women, youth, older people, minorities, migrant workers, and indigenous and tribal peoples are disproportionately represented.

The informal economy includes mostly small-scale activities in traditional sectors of the economy, but also a part of new production strategies and changing patterns of employment in the global economy.

In many parts of the world, the greater part of new jobs being created is informal, both self-employment and wage work.

Informality does not necessarily recede as countries grow; several countries are experiencing growing informalizationin spite of good economic performance.

Characterized by lack of coverage by regulations and rights deficit In large part a failure of governance – voluntary or not.

‘Informal employment is negatively correlated with income per capita and positively correlated with poverty across countries. This suggests that as GDP increases and/or as poverty declines across countries, workers are more likely to be aware of their rights to certain legal and social protections and worker benefits and successfully achieve such protections and benefits.’

the informal economy includes wage workers and own-account workers, contributing family members and those moving from one situation to another;

it also includes some of those who are engaged in new flexible work arrangements and who find themselves at the periphery of the core enterprise or at the lowest end of the production chain (compare discussion on employment relationships);

there may be grey areas where the economic activity involves characteristics of both the formal and informal economy, for instance when formal workers are provided with undeclared remuneration ...

or when there are groups of workers in formal enterprises whose wages and working conditions are typical of those existing in informality;

A majority of people work in the informal economy because they are unable to find other jobs or start businesses in the formal economy;

The informal economy has significant job and income-generation potential because of the relative ease of entry and low requirements for education, skills, technology and capital, but the jobs thus created often fail to meet the criteria of decent work.

Workers and economic units in the informal economy experience specific disadvantages and most severe decent work deficits and their conditions are precarious and vulnerable

Solutions neither obvious nor uniform In view of the decent work deficits in the informal

economy, breaking out of informality is increasingly seen as the principal development challenge across regions and as being central to realizing decent work as a global development goal, and to a fair globalization.

But few countries have developed a comprehensive and integrated approach to curb the spread of informality.

Policy responses still tend to be uncoordinated, ad hoc or limited to certain categories of workers.

a comprehensive range of actions to address the decent work deficits in the informal economy and to facilitate integration in the mainstream economy

‘ ...eliminate the negative aspects of informality while at the same time ensuring that opportunities for livelihood and entrepreneurship are not destroyed, and promoting the protection and incorporation of workers and economic units in the informal economy into the mainstream economy.’.

The “Arab Spring” emphasized the failure to link economic growth and investment with appropriate labour and social policies which ensure a fair redistribution of the gains of growth.

Legal identity and recognition of worker and/or entrepreneur status are often necessary first steps.

...facilitating access of the majority to mainstream economic resources including investment, capital, finance, property and markets.

... providing effective legal and social protection and bringing it in the ambit of formal arrangements.

... providing a minimum floor to all, irrespective of their working situation.

... strengthening the organization and representational rights of workers and entrepreneurs in the informal economy

A long way to go And no clear road map – but it has to be addressed or

the rights of these workers are outside our reach.

Indigenous and Tribal Peoples – a special situation in which the most marginalized need to enjoy benefits of law while maintaining their own identity. But not unique – see later rubric of disadvantaged goups

International standards are applicable –but maybe not in practice Though not covered by national law, often is by international

standards.

ILO Conventions often have a provision to the effect that standards should be implemented in a way appropriate to national circumstances and capabilities;

it is untrue that ILO standards are only for those in the formal economy where there is a clear employer–employee relationship;

when a standard initially applies only to workers in the formal economy, there is sometimes explicit provision for its extension to other categories of workers;

there are instruments which focus on specific categories of workers who are often found in the informal economy; and

even when informal workers are not explicitly referred to in the text, indications of the applicability of a particular instrument can be sought within the framework of the ILO supervisory system.

ILO Recommendation No. 204 on Transition from Informal to Formal Economy, 2015 The informal economy thrives in a context of high

unemployment, underemployment, poverty, gender inequality and precarious work. It plays a significant role in such circumstances, especially in income generation, because of the relative ease of entry and low requirements for education, skills, technology and capital.

But most people enter the informal economy not by choice, but out of a need to survive and to have access to basic income-generating activities.

Recommendation No. 204 (2015) From Preamble:

Acknowledging that most people enter the informal economy not by choice but as a consequence of a lack of opportunities in the formal economy and in the absence of other means of livelihood, and

Recalling that decent work deficits – the denial of rights at work, the absence of sufficient opportunities for quality employment, inadequate social protection and the absence of social dialogue – are most pronounced in the informal economy, and

Acknowledging that informality has multiple causes, including governance and structural issues, and that public policies can speed up the process of transition to the formal economy, in a context of social dialogue,

For the purposes of this Recommendation, the term “informal economy”:

(a) refers to all economic activities by workers and economic units that are – in law or in practice – not covered or insufficiently covered by formal arrangements; and

(b) does not cover illicit activities, in particular the provision of services or the production, sale, possession or use of goods forbidden by law, including the illicit production and trafficking of drugs, the illicit manufacturing of and trafficking in firearms, trafficking in persons, and money laundering, as defined in the relevant international treaties.

Covers (inter alia):

(c) employees holding informal jobs in or for formal enterprises, or in or for economic units in the informal economy, including but not limited to those in subcontracting and in supply chains, or as paid domestic workers employed by households; and

(d) workers in unrecognized or unregulated employment relationships.

Measures laid down span the field, including

better legislation and enforcement,

employment creation in formal sector,

respect for human rights,

stepped up health and safety

extension of social security

living wage

reduce red tape for entry into formal economy

collect, analyse and disseminate statistics

Special attention to: the need to pay special attention to those who are

especially vulnerable to the most serious decent work deficits in the informal economy, including but not limited to women, young people, migrants, older people, indigenous and tribal peoples, persons living with HIV or affected by HIV or AIDS, persons with disabilities, domestic workers and subsistence farmers;

And much more aimed at creating conditions in the informal economy that resemble those in the formal economy.

Is an ILO Recommendation the correct mechanism? OK if taken as a policy statement, and if help is given.

To discuss When and whether reliance on the informal economy

would be appropriate for economic development and even survival/