The Informal Economy: Recent Trends, Future Directions

Abstract: Informal employment represents more than half of nonagricultural employment in most developing regions, contributes to the overall economy, and provides pathways to reduction of poverty and inequality. Support to the informal economy should include the expansion of occupational health and safety to include informal workers, based on an analysis of their work places and work risks. The paper presents main schools of thought and argues for a holistic understanding of the different segments of the informal work force and for policies and interventions tailored to the needs and constraints of these different segments. The paper recommends a policy approach which seeks to extend social protection, including occupational health and safety services, to informal workers, and to increase the productivity of informal enterprises and informal workers through an enabling environment and support services. The paper calls for a new paradigm of a hybrid economy which would value and integrate the informal economy alongside the formal economies.