WIEGO Network: Holistic Framework

Composition

Six-Segment Model by Status of Employment

In the International Classification of Status of Employment, five statuses of employment – employer, employee, own account worker, unpaid contributing family worker, and member of producer cooperative – are defined by the type/degree of economic risk (of losing job and/or earnings) and of authority (over establishment and other workers).

WIEGO has made the case that two additional statuses of employment need to be added to the official classification: namely, casual day labourer and industrial outworker. This is because day labourers face greater economic risk than “employees” (as they face the risk of losing job and/or earnings on a daily or seasonal basis) and industrial outworkers do not exercise the same authority over their work as “own account workers” (as they depend on employers/contractors for work orders, product specification, raw materials, and product sales).

WIEGO tested its six-segment model in six developing countries – Costa Rica, Egypt, El Salvador, Ghana, India, and South Africa – by analyzing national data in those countries (Chen et al. 2005). When segmenting by sex, average earnings, and poverty risk, it found a similar percentage of workers in different segments that are from a poor household  across the six countries. This segmentation is depicted in the figure below:

Holistic Framework - Figure

 

Causal Theory 

Exclusion, Entry (Barriers), Exploitation, and Exit (“4 Es”)

The premise of the WIEGO model is that the causal theories of all four dominant schools of thought are valid – but only for certain segments of informal employment. In its “4 Es” model, WIEGO characterizes these causal theories as Exclusion, Entry (Barriers), Exploitation, and Exit, as follows:

 

CAUSAL THEORY

SCHOOL OF THOUGHT

CENTRAL ARGUMENT

EXCLUSION

Dualists (ILO-WEM)

mismatch between demand for and supply of labour

ENTRY (BARRIERS)

Legalists (de Soto)

unreasonable regulations and hostile legal environment

EXPLOITATION

Structuralists (Portes)   

subordination of informal units and workers to capitalist firms

EXIT

Voluntarists (Maloney)

calculated decision by informal entrepreneurs to exit
formal system 

Different Segments Have Different Causes

Based on its research and experience, WIEGO posits that the primary driving causes of each segment of informal employment (by employment status) are as follows:

 

SEGMENTS OF INFORMAL EMPLOYMENT      PRIMARY CAUSAL EXPLANATION

Informal Employers
Informal Employees
Own Account Operators
Casual Day Labourers 
Industrial Outworkers
Unpaid Contributing Family Workers

Exit + Entry Barriers
Exclusion + Exploitation
Exclusion + Entry Barriers
Exclusion + Exploitation
Exclusion + Exploitation
Exclusion + Exploitation

 

Notes:

  • Informal Employers may chose to exit from or face barriers to entry into the formal economy.
  • Own Account Operators may be excluded from or face barriers to entry into the formal economy.
  • Informal Employees + Casual Day Labourers + Industrial Outworkers tend to be excluded from the benefits associated with regular employment and exploited by employers or their contractors.
  • Unpaid Contributing Family Workers are excluded from the benefits of the state (along with other members of the family business) but may also be exploited by the head of the family business or other members of the family (when it comes to allocation of labour and benefits within the family).