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IS INFORMAL NORMAL?

The 60-second guide

Informal workers in developing countries make up more than half the workforce. They receive low wages and no formal contracts or benefits, yet often represent the most dynamic part of the economy. The likely surge of informal jobs due to the economic crisis makes the management of informal employment even more challenging and topical. Responding to this emerging challenge is critical, not only for the well-being of millions of workers but also for sustainable development. Is Informal Normal? provides evidence for policy makers on how to deal with this issue and promote more and better jobs for all.

ISBN: 978-92-64-05923-8 / 164 pages / Price: €24 $32 Buy this book at our online bookshop: www.oecd.org/bookshop For more information: www.oecd.org/dev/poverty/employment Contact us at : +33 (0) 1 45 24 95 59 / dev.gdo@oecd.org


HOW COMMON IS INFORMAL EMPLOYMENT ?

HOW WILL THE CRISIS AFFECT INFORMAL EMPLOYMENT?

Informal work is the norm in low and most middleincome countries, and is also sizeable in some highincome economies. In several cases, the share of jobs performed outside a country’s formal structures may be more than half of all non-agricultural jobs, and up to 90 percent if agricultural jobs are included. Moreover, in places like South Asia and Latin America economic growth over the past 20 years was accompanied by increasing, not falling, rates of informal employment.

Past experience suggests that the current economic crisis will lead to rising poverty levels in poor countries, as they lack the means to provide comprehensive safety nets. The share of informal employment also tends to increase during economic turmoil: job losses in the formal sector will lead to a surge in informal employment, depressing wages and incomes as the majority of the poor depend exclusively on labour for their survival.

Did You Know? Out of a global working population of 3 billion, nearly twothirds (1.8 billion workers) are informally employed.

WHAT PROBLEMS INFORMAL WORK?

ARE

ASSOCIATED

Did You Know? During Argentina’s 1999-2002 economic crisis the country’s economy shrank by almost one-fifth, while the share of informal employment expanded from 48 per cent to 52 per cent and urban poverty rose from 2 per cent to 10 per cent.

WITH

HOW CAN WE DEAL WITH RISING INFORMAL EMPLOYMENT?

Generally, informal workers earn less and their basic rights are more vulnerable and difficult to defend. Informality can be a major cause of poverty as most informal workers are insufficiently protected from illness or health problems, unsafe working conditions and possible loss of earnings due to sudden dismissal. This is particularly important for the poor, whose labour is their most significant asset. Persistently high levels of informal employment also reduce fiscal revenues and the state’s ability to develop social security systems.

In the current context of economic crisis, immediate and unconventional action is urgently needed to prevent the likely surge in unemployment and insecure, poorly paid jobs from increasing poverty around the world. While formalization should remain the ultimate objective, a comprehensive package of actions should also promote good quality job creation in the informal sector. These measures should boost public works, micro-credit and conditional transfer programs in order to improve infrastructure, skills development, institutional reform and access to resources for informal businesses.

Did You Know? Over 700 million informal workers live in extreme poverty, surviving on less than $1.25 per day.

Did You Know? 90% of technical and vocational training in Africa is provided by the informal sector.

Worldwide Informal Employment 80

%

Share of Informal Non-Agricultural Employment in Developing Countries by Region

70 1.2 Billion, 40 %

60

Formal 1.8 Billion, 60%

Informal

50 40 30

Sources: OECD Development Centre, Is Informal Normal?, 2009; ILO LABORSTA database; ILO Global Employment Trends, January 2009.

20 10 0 Sub-Saharan South and Africa Southeast Asia

Latin America

North Africa West Asia Transition Countries

Source: OECD Development Centre, Is Informal Normal?, 2009 based on data from the latest available period in each region.

www.oecd.org/dev/poverty/employment

www.oecd.org/dev/poverty/employment


Is Informal Normal? (OECD)