About the Informal Economy
The Informal Economy
The informal economy is the diversified set of economic activities, enterprises, and workers that are not regulated or protected by the state. Originally applied to self-employment in small unregistered enterprises, the concept of informality has been expanded to include wage employment in unprotected jobs. So defined, the informal economy comprises half to three quarters of the non-agricultural labour force in developing countries.
When agriculture is included, the share of informal employment in total employment is higher still: as high as 90 per cent in some countries in South Asia and Sub-Saharan Africa. Although comparable estimates are not available for developed countries, evidence suggests that non-standard jobs and self-employment represent a sizeable (more than 25%) and growing share of total employment in Western Europe and North America. In sum, the informal economy today represents a significant share of the global economy and workforce.
Since its “discovery” in the early 1970s, the informal economy and its role in economic development have been hotly debated. Some observers view the informal economy in positive terms, as a “pool” of entrepreneurial talent or a “cushion” during economic crises. Others view it more problematically, arguing that informal entrepreneurs deliberately avoid regulation and taxation. Still others see the informal economy as a source of livelihood for the working poor. Each of these perspectives is right in regard to specific components or aspects of the informal economy.
Today, there is renewed interest in this phenomenon worldwide. In part, this stems from the fact that the informal economy has not only grown, but also emerged in new guises and in unexpected places. It represents a significant, but largely over-looked, share of the global economy and workforce, a fact that has become more apparent in the recent global downturn. That renewed interest in the informal economy also stems from the recognition of the links between informality, growth, poverty and inequality.
What’s Available in this Web Section
This Informal Economy site on the WIEGO website is designed as a user-friendly resource on the informal economy worldwide. Recent information and thinking on the informal economy are presented under the following sections:
- Section 1 presents an historical overview of the “discovery” of the informal economy in Africa in the early 1970s and the subsequent debates about it, including a summary of the four dominant schools of thought on the informal economy.
- Section 2 consists of the most recent regional estimates of informal employment in developing regions; concepts, definitions and methods used to collect these data and a history of the development of statistics on the informal economy.
- Section 3 explores the linkages between informality and poverty, growth, and economic crises by summarizing the findings from recent data analyses and studies on these linkages.
- Section 4 features information on a number of key occupational groups in the informal economy, including the size and significance, driving forces, and working conditions of each group as well as policy responses, programmatic initiatives, and organizing efforts relating to each group.
- The two concluding sections summarize policy and programmatic responses to the informal economy and organizing efforts – as well as membership-based organizations – among informal workers.
- Statistical Picture
- Concepts, Definitions & Methods
- The Development of Statistics in the Informal Economy