By Baher Kamal
Women sell fruit and vegetables on a sidewalk in the Philippines. Credit: ILO/Minette Rimando
MADRID, Mar 15 2022 (IPS) – More than 60 percent of the world’s adult labour force –or about 2 billion workers– work in the informal economy. “They are not recognised, registered, regulated or protected under labour legislation and social protection. The consequences can be severe, for individuals, families as well as economies.”
The International Labour Organization (ILO) on 18 February 2022 on this issue reported that despite major efforts over the years, there are few signs of the informal economy shrinking in size.
“In fact, the COVID-19 pandemic has pushed more workers into informal work to survive while highlighting the vital role access to social protection plays to support workers, especially when they are unable to work.”
Just what is life like for workers in the informal economy, what are the global solutions to intransigent informality and will the growth of the ‘gig’ economy help informal economy workers gain the security and social protection they so badly need?
The informal economy comprises more than half of the global labour force and more than 90% of Micro and Small Enterprises worldwide, the ILO informs in another report.
“Informality is an important characteristic of labour markets in the world with millions of economic units operating and hundreds of millions of workers pursuing their livelihoods in conditions of informality.”
The expression “informal economy” encompasses a huge diversity of situations and phenomena, the world body explained.
- 60 percent of the world’s adult labour force – approx. 2 billion workers – work in the informal economy.
- The informal economy accounts for some 90 per cent of micro and small enterprises (MSEs) worldwide.
- 4.1 billion people worldwide (53 per cent) obtain no income security at all from their national social protection system.
- 1.6 billion across Asia and the Pacific lack access to social health protection.
What is the informal economy?
The International Monetary Fund (IMF) in July 2021 explained five facts needed to be known about the informal economy.
The informal economy, it says, is a global and pervasive phenomenon. Some 60 percent of the world’s population participates in the informal sector. Although mostly prevalent in emerging and developing economies, it is also an important part of advanced economies.
In what activities. And where?
The informal economy consists of activities that have market value but are not formally registered, adds IMF.
“It embraces professions as diverse as minibus drivers in Africa, the market stands in Latin America, and the hawkers found at traffic lights all over the world.”
In advanced economies, examples can range from gig and construction workers, through domestic workers, to registered firms that engage in informal activities.
The International Labour Organization estimates that about 2 billion workers, or over 60 percent of the world’s adult labour force, operate in the informal sector–at least part time.
“While the informal economy is a global phenomenon, there is great variation within and across countries. On average, it represents 35 percent of GDP in low- and middle- income countries versus 15 percent in advanced economies.”
Latin America and sub-Saharan Africa have the highest levels of informality, and Europe and East Asia are the regions with the lowest levels of informality.
Difficult to measure
The informal economy, adds the International Monetary Fund, is difficult to measure.
This is because activities within it cannot be directly observed, and for the most part, participants in the informal economy do not want to be accounted for.
Anyway, informality can be measured in two different ways.
The direct approach is based on surveys, voluntary replies, and other compliance methods to directly measure the number of informal workers and firms.
Indirect methods focus on certain characteristics, or proxies, that can be observed and are related to informal economic activity.
“Examples of proxies include electricity consumption, night-light satellite data, and cash in circulation. Using these methods, the share of the informal economy in total output can be measured.”
COVID-19 pandemic hits informal workers particularly hard
According to the IMF, this uneven impact of the pandemic is because the majority of informal workers are employed in contact-intensive sectors (such as domestic workers, market vendors, taxi drivers…) and in insecure jobs that do not offer paid leave or the ability to work from home.
“Close to 95 million more people —many of them informal workers– are estimated to have fallen below the threshold of extreme poverty in 2020 compared with pre-pandemic projections.”
Women, hit the hardest
Gender inequality is also increasing as millions of women who are informal workers, have been forced to stop working since the start of the pandemic.
For example, says the IMF, women make up 80 percent of domestic workers globally, and 72 percent of them have lost their jobs as a result of the pandemic.
In sub-Saharan Africa, 41 percent of women-owned businesses closed, compared with 34 percent of those owned by men.
The UN Women reports on the percentage of women in informal employment is:
– 95 percent in South Asia,
– 89 percent in Sub-Saharan Africa,
– 59 percent in Latin America and the Caribbean
From street vendors and domestic workers to subsistence farmers and seasonal agricultural workers, women make up a disproportionate percentage of workers in the informal sector, adds the UN Women.
“Working in this informal, or grey economy, as it’s sometimes called, leaves women often without any protection of labour laws, social benefits such as pension, health insurance or paid sick leave.”
“They routinely work for lower wages and in unsafe conditions, including risk of sexual harassment. The lack of social protections has a long-term impact on women.”
For example, fewer women receive pensions globally, and as a result, more elderly women are now living in poverty. Even in developed economies, such as in France, Germany, Greece and Italy, women’s average pension is more than 30 per cent lower than men’s.
In what sectors do women work informally?
According to the UN Women, they are involved mostly in the services sector, with up to 61 percent, followed by agriculture (25 percent), and industry (13,5).
“Women are concentrated in lower-paid, lower-skill work with greater job insecurity and under-represented in decision-making roles and fields such as science and technology.”
UN Women also informs that:
– Today, half the global working population works in services, a sector where women dominate.
– The share of women in services reaches as high as 77 per cent and 91.4 percent respectively in East Asia and Northern America.
– Where women work varies greatly by region and income-level though: In high-income countries, women are concentrated in health, education, wholesale and retail trade sectors, whereas in low-income and lower-middle-income countries women are concentrated in agricultural labour.
– Sectoral and occupational segregation is a consequence of structural barriers and gender-based discrimination, such as poverty, inflexible working hours, limited or no access to affordable quality childcare, poor parental leave policies and social attitudes, among many other factors.
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