AddressingInformality forRural Development

Most informal economy workers and entrepreneurslive in rural areas, often in extreme poverty andinsecurity. A comprehensive and integratedapproach to moving out of informality is essentialto address the multiple dimensions of social andeconomic exclusion that stifle the potential of ruralinhabitants and their communities.

Why action is needed� Informality and poverty overlap significantly, particularly in

rural settings.� Over 70 percent of the world’s very poor are rural, and

most of the poor and hungry are children and youngpeople.9

� The last 60 years of development strategies have shown thatgrowth does not reduce poverty unless associated withimproved employment opportunities and conditions ofemployment, and the elimination of informality, especially inrural areas.

� The problems of informality are exacerbated in rural areasdue to weak socio-economic infrastructure, remotenessfrom national institutions and basic services, limitedincome opportunities and poor legal protection, all ofwhich make rural economies more vulnerable to shocksand risks.

� Since 2005, “Reaching full and productive employmentand decent work for all, including women and youngpeople” has been a target under the first MillenniumDevelopment Goal on the eradication of poverty andhunger; a broad recognition of the crucial need to setemployment and decent work at the centre of economicand social policies. Similarly, in 2009 the UN systemendorsed the Social Protection Floor (SPF) Initiative, toensure populations can at least access basic transfers andservices that reduce labour market risks and provideaffordable health care and income security, therebylimiting pushes towards informality.

� Gender dimensions in rural informality are strong andlinked to persistent socio-cultural constraints that limitgirls’ access to education and training compared to boys,resulting in fewer economic opportunities in adulthood,and creating multiple obstacles to the economic and socialparticipation of women, to their becoming organized andacquiring bargaining power. All this makes it difficult forwomen to access the formal economy, and perpetuatesinter-generational poverty.

Themes Rural Policy Briefs

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Facts and Figures� Informality is a highly significant and persistent

phenomenon, particularly in developing countries. InBenin, Sudan, Tanzania and Zambia, for example, ninein ten workers have informal jobs. Women and youthwho have limited choices for livelihood and survival areover- represented in the informal economy.1

� Overall women are more likely to be in the informaleconomy than men. In sub-Saharan Africa, 84percent of women non-agricultural workers areinformally employed compared to 63 percent ofmen; in Latin America those figures are 58 and 48percent, respectively; while in Asia the proportion is65 per cent for both.2

� Agriculture has high levels of informality. Statisticson informal employment often exclude agriculturalactivities. Including agriculture significantly raisesthe incidence of informality, particularly inSub-Saharan Africa and South Asia,3 due to theirlarge rural populations, and the prominence ofagriculture as the largest source of employment.4 Forexample, 236 of the 370 million informal workers inIndia operate in agriculture.5

� Though often unaccounted for in national statistics, theinformal economy carries significant economic weight.Its contribution to GDP is estimated at some 40 percentin Latin America; 7 to 38 percent in some sub-SaharanAfrican countries; and 16 to 32 percent in Asia.6

� Most rural workers are self-employed and operatetheir own farms or small to very small enterprises,7

many of them informal.� Child labour is a dominant feature of informality. Of

the estimated 111 million informal child labourersin the world, a large percentage – on average twicehigher than urban areas – work in rural areas, mainlyin agriculture.8

� Decent work deficits are glaring in informal activities,where workers typically:� Have ambiguous or disguised employment status

� Have high illiteracy levels, low skill levels andinadequate training opportunities

� Have more uncertain, less regular and lower incomes

� Are exposed to inadequate and unsafe workingconditions, including longer working hours

� Are often excluded from or not reachable by socialsecurity schemes or safety and health, maternity andother labour protection legislation

� Lack collective bargaining and representation rights

Policy optionsFacilitating transition to formality in rural areas rests on a setof multidimensional policies adapted to each country, to becombined in an integrated framework. Policies shouldsimultaneously promote decent and formal employment, andreduce informal employment.

Promoting profitable agriculture� Support agriculture, with special emphasis on small-holder

farmers, to increase productivity and profitability.� Promote non-traditional and high value-added agricultural

production and exports.� Improve the bargaining power of smallholders, so they can

better manage the growing opportunities and risks ininternational agricultural markets.

� Improve access to land, as this will largely determine thebenefits to individual households from policies andprogrammes supporting agriculture.

Diversifying and supporting rural enterprises� Combine agriculture support with support to non-farm rural

entrepreneurship, which needs to assume an ever larger roleas a source of growth and productive employment.

� Support non-farm activities upstream and downstream ofagriculture, as they simultaneously strengthen agriculture,increase local income and the demand for farm andnon-farm products, and create attractive exit opportunities

for agriculture workers, leading to higher incomes for thoseremaining on farms.

� Engage in broad-based industrialisation, in terms ofsectors as well as geographically, to create a strong andcompetitive manufacturing base.

� Expand formal entrepreneurship and access to markets by:� Streamlining registration and other bureaucratic

procedures, reducing transaction costs, and providingtax incentives to facilitate Micro-, Small and Mediumenterprise (MSME) startups

� Improving access to training and business services

� Facilitating access to credit, infrastructure (powersupplies, transportation, etc.), appropriate technologiesand markets

� Promoting value chains and linkages with formalbusiness

� Developing incentive structures for informal enterprisesthat move to formality, in terms of access to markets,public procurement, credit, training, BusinessDevelopment Services (BDS), technology, infrastructure,and taxation

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What is the informal economy andinformal employment?The “informal economy” refers to all economic activitiesthat are – in law or in practice – not covered orinsufficiently covered by formal arrangements. Theseactivities are not included in the law; or are not coveredin practice, as the law is not applied or not enforced; orthe law discourages compliance because it isinappropriate, burdensome, or imposes excessive costs.10

The term “informal economy” is preferred to that of“informal sector”, as it captures the diversity of workersand economic units, in different sectors of the economyand across rural and urban contexts.

Informal employment comprises of: i) own-accountworkers and employers employed in their own informalenterprises, ii) contributing family workers, in bothformal or informal enterprises, and iii) employeesholding informal jobs, in formal enterprises, informalenterprises, or as paid domestic workers.11

Box 1

Training for Rural EconomicEmpowerment (TREE)The ILO’s TREE is a community-based trainingprogramme implemented in some 11 countries topromote income generation and employment creation,particularly among disadvantaged groups such aswomen, the unemployed, underemployed, the poor andinformal workers. Its methodology, always adapted to thelocal socio-cultural characteristics and conditions,identifies local economic opportunities, designs anddelivers skills training, and provides follow-up servicesafter training.

Independent evaluations have documented considerablesuccess. In the Philippines, 94 percent of thoseinterviewed attributed their present economic activities totraining received through the programme. In Pakistan,literacy courses that were included in the programmegreatly improved participants’ ability to benefit fromvocational training, and some 56 percent of participants inskills development or literacy courses were women. In bothcountries, authorities mainstreamed the approach intonational policies.Source: ILO: The Informal Economy in Africa: Promotingtransition to Formality: Challenges and Strategies (Geneva:2009).

Box 2

� Enhance investment in rural economic and socialinfrastructure (e.g. electrification, roads, water, health andeducation centres, and market spaces) that can raiseproductivity and quality, improve access to markets,reduce barriers to mobility and operating costs, therebygiving enterprises the means to formalize.

� Ensure use of appropriate employment-intensivetechnologies that generate formal employment, income,skills and entrepreneurship, while creating or preservinginfrastructure and other assets, including natural resources.

Developing skills relevant to rural transformation� Provide quality education and training, adapted to local

economic opportunities, needs and specificities, especiallyin remote and underserved rural areas, and make thembroadly accessible, including to disadvantaged groups, suchas women, indigenous populations and disabled persons.

� Provide education and training that allows recipients tomove on to higher value-added activities.

� Actively involve private enterprises and trainers, such as inBrazil’s National System for Rural Apprenticeship (SENAR).

Enhancing rural social coverage� Introduce non-contributory social security programmes in

the national social protection strategy. These includeuniversal programmes, such as social pensionprogrammes, child allowances or national health services;and others targeting specific categories like the poor andother vulnerable groups, such as social assistanceprogrammes, conditional cash transfer programmes, andemployment guarantee schemes.

� Devise several, coordinated social coverage instrumentsthat are adapted to the specific characteristics andcoverage needs of the different groups in the informaleconomy, in terms of income (level, regularity, seasonality,etc.), status in employment (employees, employers,own-account workers, casual workers, etc.), sector ofactivity (trade, agriculture, industry, etc.), as well as to thecontingencies to be covered, and the national context.

Strengthening legal frameworks and workers’protection� Guarantee the respect of fundamental principles and

rights at work for rural informal workers and entrepreneurs,such as freedom of association, elimination of childlabour, forced labour and all forms of discrimination.

� Set strategies to overcome poor regulations and improvelabour legislation and codes of practice.

� Simplify the law and improve enforcement mechanisms tohelp rural MSMEs comply with legislation and enhancetheir efficiency and competitiveness.

� Promote a multi-pronged approach based onawareness-raising campaigns, training, and tripartitepartnerships to enhance the legal literacy of informalworkers and entrepreneurs as well as to strengthen the roleof rural labour administration and inspection.

Encouraging rural actors’ organization and socialdialogue� Support organization, representation and dialogue with

authorities for rural informal economy actors.� Foster recognition of rural workers’ and employers’

organizations by authorities, to guarantee rural voices andrepresentation in public policy debates and theirparticipation in designing and implementing ruraldevelopment and poverty alleviation programmes, so as toensure their needs, interests and priorities are addressed.

� Support rural cooperatives, to improve the efficiency,competitiveness and capitalization of rural producers,while ensuring legal empowerment and participation.

Promoting local rural development strategies� Envisage Local Economic Development (LED) approaches,

based on broad direct involvement of local stakeholders,including informal economy actors, at all stages ofdecision-making and interventions.

Organizing informal workersThe ILO Syndicoop programme, jointly designed andimplemented with the International Trade UnionsConfederation (ITUC) and the International CooperativeAlliance (ICA), aims to strengthen trade union andcooperative capacity to organize unprotected informaleconomy workers and improve their working conditions.Launched in 2002 in Rwanda, Tanzania and Uganda,Syndicoop subsequently reached Kenya in 2004 and SouthAfrica in 2005. The programme has shown significantpotential for informal economy workers to organize andpursue their interests through cooperatives and trade unions,strengthening existing structures and enhancing services formembers. Among others, it helped build capacity to designand implement local job creation schemes, and to fostergender participation and representation.Source: Smith, S.: Let’s Organize A Syndicoop Handbook forTrade Unions and Cooperatives about Organizing Workers in theInformal Economy (Geneva: 2006); and ILO: Evaluation:SYNDICOOP - Poverty Reduction among Unprotected InformalEconomy Workers through Trade Union – Cooperative JointAction (Geneva: 2005).

The ILO-Norway Workers Education Project(2004-2006), implemented in 646 villages of 12 districts ofTamil Nadu and Madhya Pradesh in India, fosteredintegration of informal workers n rural workers’ organizations,improving their bargaining power and skills. Throughpromoting vocational training and capacity building,establishing self-help groups (SHGs) and income generationprogrammes, as well as helping enforcement of fundamentalprinciples and rights at work, the project reached asignificant number of beneficiaries, namely women workersin agriculture and other rural sectors, fishing communities,trade union leaders and members, tsunami-affectedcommunities and rural workers’ organizations.Source: ILO: The Path of Deliverance: Organizing and EmpoweringRural Informal Economy Workers (New Delhi, 2007).

Box 3

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� Build local authorities’ capacity to reach remote ruralareas and ensure adequate resource allocation to ruraldevelopment.

� Promote public-private partnerships to facilitate andimprove service delivery to remote areas.

� Strengthen policy coherence, linking national and locallevels, to align and coordinate objectives and developappropriate rural strategies.

ILO’s Role� The ILO has been working on informality since the early

1990s.� The discussion on “Promotion of rural employment for

poverty reduction” at the June 2008 International LabourConference and its ensuing resolution, calls for makingformalization a major goal and using an integrated decentwork perspective, with employment, social protection, socialdialogue and labour standards components, to achieve it.This was reiterated at the March 2011 ILO Governing Bodydiscussion on “Unleashing rural development throughproductive employment and decent work”.

� Over 30 ILO legal instruments target rural areas andagriculture in particular. Among these, the Conventions onLabour Inspection (Agriculture), 1969 (No. 129); on MinimumWage, 1970 (No. 131); Rural Workers’ Organizations, 1975(No. 141) and Recommendation (No. 149); Migrant Workers(Supplementary Provisions), 1975 (No. 143); Indigenous andTribal Peoples, 1989 (No. 169); Home Work, 1996 (No. 177)and Recommendation (No. 184).

� The ILO works with constituents on the comprehensiveplatform of action to transition to formality, established bythe 2002 International Labour Conference Resolution onDecent Work and the Informal Economy.

� The ILO provides support at policy level and in operationalwork, as well as support to ratify and implement relevantinternational labour standards, enrich the knowledge and

tools base, for example through the preparation of a tool topromote freedom of association in rural areas.

� The ILO extensively utilizes partnerships, including withthe Food and Agricultural Organization (FAO),International Fund for Agricultural Development (IFAD),and International Food, Farm and Hotel Workers (IUF). Forinstance, the ILO has co-chaired since 2009 the UNSocial Protection Floor (SPF) Initiative.

1 ILO: The informal economy in Africa: Promoting transition to formality – Challenges andstrategies (Geneva: 2009).2 Chen, M.: Rethinking the Informal Economy: Linkages with the Formal Economy and theFormal Regulatory Environment, (New York, UN DESA: 2007), Available at:http://www.un.org/esa/desa/papers/2007/wp46_2007.pdf3 ILO: Women and men in the informal economy: a statistical picture (Geneva: 2002).4 ILO: Global Employment Trends – 2011 (Geneva: 2011).5 ILO: The Path of Deliverance: Organizing and Empowering Rural Informal EconomyWorkers, ILO Sub- regional Office for South Asia (New Delhi: 2007).6 ILO: Decent Work and the Informal Economy, Report VI, International Labour Conference,90th Session (Geneva: 2002); and ILO: Decent Work and the Transition to Formalization:Recent Trends, Policy Debates and Good Practices, Report of the Tripartite InterregionalSymposium on the Informal Economy: Enabling Transition to Formalization (Geneva: 2007).7 Overseas Development Institute: Rural employment and migration: In search of decentwork New thinking on rural employment is needed to create more and better rural jobs,Briefing Paper 27 (London: 2007), Available at:http://www.odi.org.uk/resources/docs/6.pdf8 Op. cit., ILO: Decent Work and the Informal Economy.9 IFAD: Facts and Figures, Rural Poverty Report 2011 (Rome: 2011), Available at:http://www.ifad.org/rpr2011/media/kit/factsheet_e.pdf10 ILO: Resolution and conclusions concerning decent work and the informal economy,International Labour Conference, 90th Session (Geneva: 2002).11 R. Hussmanns: Defining and Measuring Informal Employment (ILO, Geneva: 2004).

For more information on ILO rural work visit www.ilo.org/rural • Contact us at rural@ilo.org 2012

Links

� ILO: Informal Economy Programme.http://www.ilo.org/emppolicy/areas/informal-economy

� ILO: Rural/Urban Job Creation Programme.http://www.ilo.org/emppolicy/areas/rural-urban-job-creation

Tools

� ILO: The Informal Economy and Decent Work, A Policy ResourceGuide, Supporting the transition to formality (forthcoming).

� ILO: Let’s Organize! A SYNDICOOP Handbook for Trade Unionsand Cooperatives about Organizing Workers in the InformalEconomy (Geneva: 2011).

Other Materials

� ILO: The Informal Economy in Africa: Promoting transition toFormality: Challenges and Strategies (Geneva: 2009).http://www.ilo.org/wcmsp5/groups/public/---ed_emp/---emp_policy/documents/publication/wcms_127814.pdf

� ILO: The Informal Economy: enabling transitions to formalization.Tripartite Interregional Symposium on the Informal Economy:enabling transitions to formalization (Geneva: 2007).http://www.ilo.org/wcmsp5/groups/public/@ed_emp/@emp_policy/documents/meetingdocument/wcms_125489.pdf

� ILO: The Path of Deliverance: Organizing and Empowering RuralInformal Economy Workers (New Delhi: 2007).

� Chen, M.A., Vanek, J. and Carr, M.: Mainstreaming gender andinformal employment in poverty reduction: A Handbook forPolicymakers and other stakeholders (CommonwealthSecretariat and IDRC: London: 2004).

� ILO: Resolution and conclusions concerning decent work andthe informal economy, International Labour Conference, 90th

Session (Geneva: 2002). http://www.ilo.org/public/english/standards/relm/ilc/ilc90/pdf/pr-25res.pdf

Contactemp_policy@ilo.org; lapeyre@ilo.org

Authors: Frederic Lapeyre, Sriani Ameratunga, Silvia Possenti

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