UNDERSTANDING THE INFORMAL ECONOMY

FRANCIE LUND, WIEGODirector: Social Protection Programme

(with acknowledgements to Martha Chen and Joann Vanek)

European Commission Meeting, 25th to 27th June 2012

A granny in Durban, looking after her grandchild, working in a street market in the traditional herbs and medicines sector

The IE – what is it?

The informal economy is the diversified set of economic activities, enterprises, jobs, and workers that are not regulated or protected by the state.

Informal employment as share ofnon-agricultural employment

South Asia: 82 percent Range: 62 in Sri Lanka to 84 percent in India

E and SE Asia: 65 percent Range: 42 percent in Thailand to 73 percent in Indonesia

Sub Saharan Africa: 63 percent Range: 33 percent in South Africa to 82 percent in Mali

Latin America: 51 percent Range: 40 percent in Uruguay to 75 percent in Bolivia

Source: 1) James Heintz Regional Estimates for ILO; 2) WIEGO and ILO 2012 ‘Women and Men in the Informal Economy: A Statistical Picture’

The informal economy

The informal economy can be classified into two broad groups of workers:

self-employed in informal enterprises wage workers in informal jobs

How are informal enterprises and informal jobs defined?: informal enterprises = unincorporated enterprises that

may also be unregistered or small in size informal jobs = jobs without employer contributions to the

social protection of the employee

ICLS categories of informal employment, internationally accepted

Self-Employed in Informal Enterprisesemployers who hire othersown account workers who do not hire others

single person operations heads of family enterprises/farms

o unpaid contributing family workers

Wage-Employed in Informal Jobso informal employees in informal enterpriseso informal employees in formal enterpriseso domestic workers in householdso casual day laborers with no fixed employer

The pyramid of status in employment related to

risk, earnings, and gender segmentation Poverty Risk

Average Earnings

Segmentation by Sex

Low

High

Employers

Predominantly Men

Informal Wage

Workers: “Regular”

Men and Women

Inf ormal Wage Workers: Casual

Industrial Outworkers/Homeworkers

Predominantly Women

High

Low

Unpaid Family Workers

Own Account Operators

Some barriers to improved conditions of work, linkages, ‘exit’

Employers (particularly where there are ‘disguised’ employment relationships)

Government – shortage of resources for regulation of even formal places of work; vested interests

Trade union movement – generally, resistance to informal workers; but rapid changes in attitude recently

Informal workers themselves Income is a priority; piece work may lead to self-exploitation Unregistered status of small-small enterprises means little

security, and little incentive to invest to improve work conditions (Rongo et al 2004)

Even where an SME is registered, high turnover of workers may mean employers resist paying for employees’ expensive health screening (Alfers, 2010, in Accra)

Reconciling child care with the need to earn an income

Incentives to formalisation

For waged informal workers/ industrial outworkers, it is most often the owners of capital/ employers who avoid formalisation.

When the barriers to becoming formalised are lowered, many informal enterprises and workers choose to formalise/ be recognised/ be regulated (World Development Report 2005 for summary of initiatives – good examples from Africa).

Approaches for inclusion of workers’ needs

All of these relate to empowerment and sustainability

Recognition Sectoral approach

For TVET And for social protection

Level of government to engage with Organisation and representation of informal

workers

(and then scaling up)

Recognition as workers

Official statistics (labour force surveys) Recognition in law as workers Registration at city level (as traders for example) Accreditation of courses Representation as interested parties

Recognition as a worker in a sector(s)

Using a sectoral lens to explore policy interventions

Industrial outworkers Sectoral differences: construction compared to garment workers Different scope for improving work conditions through trade

agreements; codes of conduct; Fair Trade; Ethical Trade Initiative – better scope for horticulture, wine’ non-timber forest products, fisheries

Sometimes good links with formal trades union Street vendors

Sectoral differences: fresh food compared to cosmetics compared to tourist trade – different training needed?

Primary importance of site/ secure place of work – for ‘passing feet’, for access to people with disabilities

Sectoral approach (continued)

Domestic workers TVET:

‘women’s skills’; huge demand globally for domestic workers and for care workers as more women enter labour market

Social protection: relatively easy to extend unemployment insurance, accident insurance

Waste pickers Sectoral differences: medical waste compared to household refuse good examples of negotiating directly with multi-national chains in

which they work (and partnerships with local authorities – KKPKP, Pune)

But it is NOT decent work

Linkages, and levels of government

Informal workers and their enterprises need the same things as formal firms need – affordable and secure place in which to work, water, sanitation, storage, electricity (lighting, production, refrigeration), waste disposal, and safety at the work place.

These are usually local government functions.

Are the policies of different levels of government compatible regarding informal workers and their place in value chains, income-generating activities, use of public space, right to organise ?

Informal worker’ representation on national commissions, and health reform bodies

Homenet Thailand (industrial outworkers)

- Commission for the ‘30 baht’ health scheme (now UHC); alliance of 9 civil society sectors (all ‘vulnerable groups’)

KKPKP, Pune, India (waste pickers)

- social security scheme for waste pickers – Task Force

SEWA, India

- National Commission on the Unorganised Sector

- WHO Global Commission on the Social Determinants of Health

- Integrated Health System for India

Scaling up

Design of equipment Health screenings Litigation on right to work, stopping

harassment and confiscation, giving access to sources of products

City level policy and intervention dialogues

Exposure Dialogue Programmes

KKPKP Waste Pickers Organisation, Pune, India

Waste collector with cart designedto ease her load – iterative participatory work with Maharashtra State Institute of Design

Self Employed Women’s Association, India

SEWA’s solar head torches for early morning flower pickers

Brazil: ear plugs for informal workers at Salvador’s famous and NOISY annual festival

Health screenings – bringing health to the people, and the people to health

Large scale community event – general health or particular issue (eye testing, dental caries)

Spread information about health services – opening times, referrals, costs

Spread information about work-related risk, early detection, and prevention

Create demand for health services Volunteer/ committee involvement in organising screening,

and learning about health services

Scaling up

Litigation Waste collection routes in Bogota, Colombia Return of confiscated goods in Durban, South Africa Stop the destruction of the historical food market in

Durban (for the FIFA World Cup)

City level dialogues for policy reform Fire extinguishers in Accra, Ghana

Concluding remarks

A sectoral approach enables focused strategic thinking about interventions

The essential need is for higher and more reliable incomes Formalization has limits – and what would be the basic

elements of formalization would mean from the informal workers’ perspective

Informal workers and their organisations should be represented on all platforms where policy decisions are made (not just ‘be consulted’)

Make clear the contradiction between calls for active labour market policies, at same time as the destruction of livelihoods by a different level/ branch of government

Concluding remarks ….

The importance of infrastructural provision as a form of social and economic security

The importance of child care in social protection Make private savings for elderly years more

affordable and reliable – many informal workers want to save

Social protection cannot redress the effects of macro-economic and trade policies that reinforce inequality and insecurity and exclusion.