Informal employment: Two contested policy issues

This article addresses two contested issues of crucial importance to policy, namely: formal labour regulations as a cause of informal employment, and so‐called “voluntary” informal employment. The authors provide theoretical overviews on both issues and an extensive survey of empirical studies on the effects of formal labour regulations on informal employment. The article closes with observations on the relevance of the ILO's four decent work objectives for informal employment and economic development, with particular emphasis on the significance of – and potential for – organizing workers in the informal economy.     

Foreign aid,public investment,and the informal economy

This paper examines the absorption of foreign aid in the presence of formal and informal production. Calibrating a two-sector open economy model to 67 aid-recipient countries for 1990–2019, we show that an increase in foreign aid drives resources into the informal sector, and away from the formal sector. With untied aid, the expansion of the informal sector can lead to an economic contraction through the Dutch Disease effect. An economic expansion with an increase in the share of formal production can be attained by re-allocating existing aid to public investment rather than an increase in the aggregate level of aid.     

Volunteering and the gender division of labour: A Franco-British comparison

Cross-national analyses of the gender division of labour usually focus on employment and domestic labour. This paper argues that formal and informal voluntary work should be included in such analyses. Using available secondary sources, the paper compares the gender division of voluntary work in Britain and France – two countries with well-documented differences and similarities concerning employment and domestic labour. The paper reveals that French women, with a higher commitment to the labour market and a slightly larger share of the burden of domestic labour, have a higher commitment to formal voluntary activity but engage less in informal volunteering than their British counterparts whereas French men, with shorter hours in employment and a slightly smaller contribution to domestic labour, undertake more formal and informal voluntary work than their British counterparts. In France, men consistently undertake more voluntary work than women whilst in Britain, there is a degree of gender equality in formal voluntary work but women undertake significantly more informal voluntary work than men. The paper explains the differences and similarities found by considering the role of the state and social policy, the question of ‘time availability’, and the question of what motivates individuals to undertake voluntary work.     

Earning Their Keep and Keeping What They Earn: A Critique of Organizing Strategies for South Asian Women in the Informal Sector

It is now widely understood that the needs of women workers in the informal sector are not met by the conservative practices of labour organizations and trade unions. While the contribution of women to the economies of developing countries is critical, women rarely find employment in the regulated unionized sectors of these countries, and are found instead in overwhelming numbers in the sector that is variously termed ‘unorganized’, ‘unprotected’, ‘unregistered’ or ‘informal.’ This article addresses the situation of women in the informal economy in South Asia. The author explores the major challenges and opportunities facing women in their efforts to organize and mobilize for change. She also provides a critical analysis of the different types of interventions adopted by the state and civil society organizations in South Asia to empower women in the informal sector. The author concludes with an attempt to identify the mix of interventions and strategies most needed for different social, political and economic circumstances.     

Cleaning the ‘People's Home’: The Politics of the Domestic Service Market in Sweden

While there is a substantial scholarly literature depicting the abuses and exploitation of domestic workers in the informal cleaning sector, there is virtually no work that examines conditions in the formal market. This is not an oversight. For many, commodifying domestic labour entrenches gender and economic inequalities; we all should simply clean up after ourselves. We seek to offer a fresh approach: the vital question for those concerned with the women performing this work for pay is not whether to commodify reproductive labour, but rather what form the market will take and what conditions might render it a decent job. In order to make such an assessment, we need to look beyond worst‐case scenarios in the informal sector, and study instead the evolution of the formal market. Only by also examining the content and terms of the work can we address how not to perpetuate inequalities such as the gendered division of labour and its intersection with nationality, race and class. In this article, we analyse the market for household services in Sweden's gender egalitarian social democracy, where a recent tax policy fostered the rapid expansion of a formal market for domestic cleaning. We conclude that domestic cleaning can be a decent job and that there is no inherent contradiction between a market for household services and a social democratic political economy.     

Institutional change from within the informal sector in Indian rural labour relations

The paper applies a theory of institutional change enriched with mezzorules, fluidity and agency to India's informal sector institutional evolution using two illustrative examples. The concrete examples are rooted in unfree labour and rural casual labouring in India, a country which has a high degree of informality. Section 1 introduces some concepts, and section 2 examines processes of institutional change in the informal sector. In section 3, two illustrations are explored: (1) the norms for girl child bonded labour; (2) the individualisation of women labourers. Section 4 concludes. The fluidity of institutional rules demands a recognition of the supra-economic nature of the context within which economic-institutional change occurs. We propose the analysis of mezzorules in a dialogic research context, i.e. interactions among workers and collective agents – as a helpful and transformative approach for sociologists specialising in the informal economy.     

Caring for informal caregivers: policy approaches to the provision of direct support services

Despite being the backbone of modern welfare states, the informal care sector for elderly people in need of long-term care is highly dysfunctional. The majority of informal caregivers are overburdened on account of their care-related activities, although an evolving market for support services directly aimed at relieving informal caregivers is observable. In this paper, we examine the reasons for the imperfect exchange between demand and supply in this market, applying the economic theory of market failure. Through a case study of Austria based on an empirical, qualitative survey of all direct support services and their suppliers on the national level as well as in three provinces, an understanding of this market's main players and mechanisms is derived. Thus, the authors determine that three different system types can be identified beyond the historical regional discrepancies. They illustrate the approaches to service provision for informal caregivers: centralized and public, laissez-faire and private, and a radically decentralized network for informal caregivers. Still, lack of information, social and psychological barriers, as well as high transaction costs, are identified which undermine the support service market for informal care. If the costs of the formal long-term care sector are to be contained despite demographic developments, better policy approaches will be necessary to overcome this challenge. In light of this, recommendations are derived to ensure a better exchange between supply and demand. By providing an initial empirical understanding and analysis of this market and its imperfections, the authors pioneer future quantitative research in this field.     

Informal sector taxes and equity: Evidence from presumptive taxation in Zimbabwe

Using a mixed‐methods approach, this article evaluates the equity implications of Zimbabwe's presumptive tax system, introduced in 2005 to raise revenue from the country's growing informal sector. The representative taxpayer method, which compares the hypothetical tax burdens of formal and informal sector taxpayers at varying income levels, shows that the presumptive tax regime undermines both vertical and horizontal equity. In addition, interviews with key informants from the tax authorities, other relevant organizations and informal sector operators were conducted to probe issues around collection, compliance and perceptions of fairness. The qualitative data suggest that weak enforcement, with more visible informal activities bearing the brunt of the tax burden, and selective (and sometimes politically motivated) application of the legislation, compromise equity further.     

The globalization of production,national labour regulations and income inequality in the global North and South, 1980–2013

A central concern over global value chains (GVCs) is whether the integration of national firms into GVCs exacerbates income inequality within countries. However, despite decades of research, the distributional consequences of GVCs remain unclear in the empirical literature. Drawing on panel data from 96 countries between 1980 and 2013, we examine the effects of GVC integration on market income inequality and whether national labour regulations moderate these effects. We find integration increases inequality in the global North and South. More importantly, we find labour regulations amplify the inequality effects of integration in Southern countries by expanding the size of the informal sector while suppressing these effects in Northern countries by promoting unionization. This suggests institutional power from national labour regulations may enhance the bargaining power of labour in the North through increasing collective resources while disempowering labour in the South through reinforcing labour market segmentation between formal and informal sectors.     

Pressures towards and against formalization: Regulation and informal employment in Mozambique

The informal economy accounts for the bulk of employment in many emerging economies. Regulation theory suggests that all economic activity is characterized by a complex combination of formal and informal regulation. Looking at the case of Mozambique, this article explores the pressures towards and against formalization, and the forms regulation can take, drawing on qualitative research based on in‐depth elite interviews and observation. The findings highlight how the State's role in promoting formalization of the informal economy is ambivalent; its approach incorporates both “progressive” elements, which focus on the modernization of regulations and institutions, and “conservative” elements, which inhibit this process of change.     

Education and wage inequality in the informal sector: The case of Cameroon

This article analyses the effects of education on wage inequality in the informal sector in Cameroon. The author uses quantile regression on data from the Second survey on employment and the informal sector in Cameroon (EESI 2) of 2010. The results indicate that both wages and wage inequality increase with education in the informal sector, with tertiary education creating greatest inequality. These findings point to a number of policy recommendations for a transition to formality, such as the creation of more jobs for a skilled workforce, the development of sites adapted to informal sector activities and the creation of more vocational schools.     

What to Do with the Informal Sector?

Almost all informal firms in the Kenyan manufacturing sector are managed by Kenyans of African origin. Formal enterprises are run by Kenyans of both African and Asian origin. These three groups are distinct in terms of experience, productivity and access to finance. Asian formal firms are the most efficient, while there is no significant productivity difference between informal and formal African firms. There are thus weak incentives for African informal firms to become formal. At the same time, Kenya needs higher investments and larger exports to achieve economic take‐off, and this can only be achieved through an efficient formal sector. Therefore policy should aim to integrate the sectors by improving infrastructure, capacity‐building, credit delivery, and supporting networks.     

Good jobs and bad jobs for Indonesia's informal workers

In contrast to the majority of studies that have treated informal workers as a single homogeneous group, this article accounts for the possibility of “winners” and “losers” among informal workers. Applying unconditional quantile regressions to data from the Indonesian Family Life Survey, the authors are able to estimate the formal–informal wage gaps for different segments of the earnings distribution. Although the evidence confirms the existence of a substantial earnings penalty for many informal workers, there is also a group who earn roughly similar incomes to formal workers. The findings are consistent with Fields's (1990 and 2005) model of heterogeneous informal employment.     

Out of the shadows: Classifying economies by the extent and nature of employment in the informal economy

Given the prevalence of informality, this article proposes a typology for classifying countries by the extent and nature of employment in the informal economy, rather than by the composition of their formal economies. The author analyses ILO data on employment in the informal economy in 36 developing countries, and shows that there is a significant correlation between cross‐national variations in the degree and intensity of informalization and cross‐national variations in social and economic indicators such as levels of GNP per capita, corruption, poverty, taxation and social contributions. The article concludes by discussing implications for theory and policy.     

Role of informal sector recycling in waste management in developing countries

Many thousands of people in developing country cities depend on recycling materials from waste for their livelihoods. With the focus of the Millennium Development Goals on poverty reduction, and of waste strategies on improving recycling rates, one of the major challenges in solid waste management in developing countries is how best to work with this informal sector to improve their livelihoods, working conditions and efficiency in recycling.The general characteristics of informal recycling are reviewed, highlighting both positive and negative aspects. Despite the health and social problems associated with informal recycling, it provides significant economic benefits that need to be retained. Experience shows that it can be highly counterproductive to establish new formal waste recycling systems without taking into account informal systems that already exist. The preferred option is to integrate the informal sector into waste management planning, building on their practices and experience, while working to improve efficiency and the living and working conditions of those involved. Issues associated with integrating informal recycling into the formal waste management sector are discussed.     

Doing good when times are bad: volunteering behaviour in economic hard times

This paper examines how the 2008–9 recession has affected volunteering behaviours in the UK. Using a large survey dataset, we assess the recession effects on both formal volunteering and informal helping behaviours. Whilst both formal volunteering and informal helping have been in decline in the UK since 2008, the size of the decline is significantly larger for informal helping than for formal volunteering. The decline is more salient in regions that experienced a higher level of unemployment during the recession and also in socially and economically disadvantaged communities. However, we find that a growing number of people who personally experienced financial insecurity and hardship do not explain the decline. We argue that the decline has more to do with community‐level factors such as civic organizational infrastructure and cultural norms of trust and engagement than personal experiences of economic hardship.     

Problematizing the “informal sector”: 50 years of critique,clarification, qualification,and more critique

Since its coining in 1971, the concept of the “informal sector” has been used to draw scholarly, political, and philanthropic attention to hundreds of millions of workers who lack basic labor protections. But as the term proliferated, so too did its detractors. Critics claim that the label of “informal” homogenizes the world's poor and distorts understandings of the sources of and solutions to their economic woes. What are the origins of the concept's contradictory nature? What strategies have scholars used to increase the likelihood that it will be used to illuminate and uplift, rather than to distort and denigrate? This article analyzes how scholars have resignified and retheorized the informal economy in response to five conceptual challenges: stigmatization, definitional fuzziness, homogenization, an either/or fallacy, and the presumption of “formalization” as the solution. Such efforts have preserved the concept's analytic potency and political relevance. In the longer term, however, a true testament to the concept's value would be if it outlives its own utility; that is, if it mobilizes enough recognition and resources to the invisibilized majority of the world's workers that scholars and state bureaucrats no longer feel the need to lump them together under a misleading catchall label.     

Participation in formal and informal volunteering: Implications for volunteer recruitment

This study examines factors influencing “formal” volunteering (that is, to an organization) and “informal” volunteering (that is, volunteering carried out individually outside of an organizational context) and the relationship between these two activities. We hypothesize that formal and informal volunteering activities are positively interrelated but that they are shaped by different types of personal resources: involvement in social networks increases the likelihood of both types of volunteering, but human capital increases the likelihood of formal volunteering rather than informal. The bivariate probit regression results emanating from the Independent Sector's “Giving and Volunteering in the United States, 2001” survey are generally supportive of the hypotheses. The findings suggest that nonprofit and public organizations that involve volunteers consider the pool of informal volunteers as a fertile ground for recruitment and find ways to better utilize older Americans in formal volunteering. The results also suggest that volunteer recruitment through organizational membership may be an effective strategy.     

A critical evaluation of competing representations of the relationship between formal and informal work

Analysing the extensive literature on informal work reveals multiple, often contradictory, views regarding its relationship with formal work. The aim of this paper is to evaluate critically these competing claims. Evaluating in turn the predominant views of informal work as a residue, by-product, complement and/or alternative to formal work, reveals that universal generalizations are not possible and that all of these articulations only apply in specific contexts. However, rather than simply conclude that these contrasting readings of the relationship between informal and formal work are therefore context-bound generalizations, two features common to all these perspectives are identified that necessitate a more fundamental rethinking of the relationship between formal and informal work. These relate to the way in which all firstly, simplistically attribute one form of work with positive features (e.g. modernization, virtue and progress) and the other with negative attributes (e.g. tradition, backwardness, exploitation) and, secondly, delineate formal and informal work as discrete and separate entities. The paper concludes by setting out a research agenda to not only highlight the political values underpinning each of these representations but also achieve a fuller and finer-grained understanding of the relations between informal and formal work.     

Day Labourers' Work Related Injuries: An Assessment of Risks,Choices, and Policies

Literature and theory surrounding the informal economy in international contexts suggest that informal work arrangements may entail assuming various levels of risk, and that the higher the level of risk in an employment arrangement, the higher the premium paid to the worker. This study is designed to assess if a wage compensation for risk exists within the United States' day labour job market ‐ the most visible sector of the United States' informal economy. Using data from the 2005 National Day Labour Survey we find a statistically significant wage premium indicating that a risk‐wage tradeoff within the day labour informal economy exists. Ultimately, we argue that current policy interventions facilitated through day labour centres into the day labour market appear to be effective in mitigating the risks associated with this type of employment.

• Evidence of a risk‐wage premium in the day labour market suggests there is an incentive to assume higher levels of risk in work arrangements which presents significant concerns for worker safety.
• Higher levels of work related risks assumed by day labourers, may be minimized if they receive proper safety training through a formal venue such as a worker centre.
• Worker centres only serve 20 per cent of all day labourers in the United States, suggesting a need for the establishment of additional worker centres in other connected or industry based work sites, to help mitigate potential work related risks and injuries in the day labour market.