Ray WayAlberto Navarro

The economic activity that is not taxed, monitored, or regulated by the government.

Informal sector jobs are generally low-wage and low-productivity work.

These jobs include: Food Vendors Street Show Entertainers Garbage Collectors Psychics Taxi Drivers Fruit and Vegetable Barbers Vendors Recycling

Urbanization: Large numbers of rural residents

moving to the cities in search of work.

The urban population of Peru in 1960 was 46.8%,

by 2005 the figure had reached 74.6%.

The formal sector does not provide enough jobs to

absorb the inflow of rural-urban migration.

The cost of doing business legally is too high

The time it takes for registering and

engaging in production is too long.

In “The Other Path,” by Economist Hernando

de Soto, he documented that it took 100

administrative steps and a full year to

register a small garment company in Peru.

The lack of judicial and legal efficiency

increases the size of the informal sector.

Excessive Regulations Filling Excessive Unnecessary Paperwork Obtaining Unnecessary Licenses Having multiple people or committees

approve a decision Makes a process longer and tedious

Fictitious Clothing Co. 10x’s bribes were

solicited 289 days $1,231 expenses 32 Min. monthly

wages Difficult for people

with modest means to open a small buss.

They don’t pay taxes. They don’t follow legal, health, and safety

procedures. Although it provides primary or

secondary income, Informal work does not contribute to human capital; which is necessary for better wages and a modern economy.

75%-80% of those employed in the informal sector earn less than the poverty level.

Can’t request: Municipal Services Utilities Obtain Titles to Property Apply for Credit No Legal Recourse to Agreed Contracts

When subcontracted they have no rights to: Job Security Vacation Days Minimum Wage Sick Days Personal Days Benefits

Provides many services cheaply and efficiently.

Many low-income housing is produced in the informal sector.

Save money and time Can be sub-contracted by companies to

work for them. Women are disproportionately

represented in the informal sector.

http://www.youtube.com/watch?v=McSdLTno7tw

http://www.youtube.com/watch?v=gWf4SvO_5Ww

The informal sector, while not legal and unaccountable to tax collection and government health, safety, social security, and laws, it provides a secondary economy in developing countries in Latin America that helps to reduce unemployment, increase income, and provide goods & services that other wise would cost more legally.