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informal work in asia
Today, 60% of the world’s working population has a job in the informal economy. How to take better account of this reality, which is in particular a source of social precariousness and lost revenue for public finances, and adapt policies? Cecilia Poggi, an economist responsible for social protection research at AFD provides some answers.
Cecilia Poggi, an economist responsible for social protection research at AFD 
Cecilia Poggi, an economist responsible for social protection research at AFD 

How to define informal employment? And why does this pose serious methodological problems?

Informal employment is generally defined by the fact that there is no social protection (mainly health cover) or no written contract (but this criterion can only be applied to employees and is therefore narrower than social protection). All the definitions are not consistent, which shows how complex it is to grasp all the diversity of the phenomenon. We can fall back on the method put forward by Jacques Charmes (2012), which differentiates between three levels of informality:

  • Employment in the informal sector = an individual informally or formally employed in an informal enterprise;
  • Informal employment = an individual informally employed in an informal enterprise or in a formal enterprise;
  • Employment in the informal economy = an individual informally employed in an informal or formal enterprise + an individual formally employed in an informal enterprise.

There is, however, good news: thanks to the 20th International Conference of Labour Statisticians (ICLS), major strides will be achieved in the future in the configuration of data collection. This will allow us development actors to make a much more precise measurement of unpaid work, the care economy and, more generally, the various forms of non-formal or atypical female labor.

Is the informal sector a means to “regulate” the dysfunctions of employment in the formal sector? And why are women also primarily affected?

I would say that we are in a form of complementarity between formal and informal employment. Informality is not only a matter of individual choice (not to register one’s activity). It can also involve an activity that has shifted into informality. In most cases, it is regulations or policies to manage production, services or the use of public spaces that lead individuals into the informal system. It may involve casual daily workers, those paid piece-rate, generally at home, subcontractors… These are working relations that are generally more flexible and precarious. It may also involve partially informal work, such as those who offer their services (“gigs”) on digital platforms. 

In terms of women, they indeed remain in the majority in certain informal sectors. This is due to the fact that they it either involves forms of work that are difficult to identify (periodic support to the family business) or unpaid work (care work). The real problem for the time being is the lack of institutional recognition, whether for home-workers or domestic workers, collectors of materials or street vendors, which are all activities with a very high participation of women. There is real work to be done on public policies in the fields of employment and social protection in order to take these realities into account.

What is the role and positioning for development aid – and in particular for agencies like AFD – faced with informal employment?

To improve informal working conditions in a context of major changes – both economic and environmental – it is essential to guarantee social protection for all and support policies for forms of decent work, whether formal or not. These transitions need to be supported rather than settling for “formalizing” these activities from above.

To be more specific, I think that the extension of the coverage and instruments of a social protection system to informal workers and their households would already provide a response to a number of human development issues (access for these populations to healthcare, better quality jobs, more effective support to cope with shocks), but also to economic development issues (improvement in productivity) and, finally, this would improve the financing of national solidarity (so that each person contributes according to their means to ensure that everyone has access to the services they need). The financing of an extension will depend on the tax structure of States, on a participation in the social dialogue of the private sector and of representatives of professions, activating a process in which donors can play an essential support role.

Initiatives to support productive and properly paid work, workplace security and social protection for households, and freedom of individuals to organize themselves and participate in decisions that affect their lives (including gender equality and equal treatment for all) are all in line with AFD’s “100% Paris Agreement and 100% social link” commitments. 

Further reading:

5 Challenges for Employment in Developing Countries

Antoine Godin: “We Have Everything to Gain from Protecting the Environment and Workers at the Same Time”

The Amount Global GDP Would Increase By If Women Had the Same Economic Opportunities as Men