DESK REVIEWS | 01.03.07. Prevalence of the informal economy

DESK REVIEW | 01.03.07. Prevalence of the informal economy

In 2019, we identified the highest proportion  of people having informal jobs (these are jobs without constitutional work rights, without formal job contract): 41.4% (Brazilian Institute of Geography and Statistics, n.d.). Data from a National Survey from 2015 (PNAD), showed that among the private sector, 20.6% of the workers were informal workers (that means without formal job contract) (Brazilian Institute of Geography and Statistics, 2015b).

References:

Brazilian Institute of Geography and Statistics. (n.d.). Desemprego cai para 11,8% com informalidade atingindo maior nível da série histórica. Retrieved December 3, 2019, from https://agenciadenoticias.ibge.gov.br/agencia-noticias/2012-agencia-de-noticias/noticias/25534-desemprego-cai-para-11-8-com-informalidade-atingindo-maior-nivel-da-serie-historica

Brazilian Institute of Geography and Statistics. (2015b). Pesquisa Nacional por Amostra de Domicílios—2015. https://biblioteca.ibge.gov.br/visualizacao/livros/liv98887.pdf

In 2018-2019, the proportion of workers in the non-agricultural sectors that were engaged in the informal sector was reported as 64.8% (National Statistical Office (NSO), 2020). The share of the informal non-agricultural sector was reported as 54.1% among female workers and 71.5% among male workers (National Statistical Office (NSO), 2020a).

References:

National Statistical Office (NSO). (2020a). Periodic Labour Force Survey [PLFS]. Ministry of Statistics and Programme Implementation, Government of India.

Based on labour force surveys, it has been estimated that between 61 and 70 per cent of the labour force are employed in the informal sector (Alatas & Newhouse, 2010; Firdausy, 2000). Rothenberg and colleagues (2016) explain the development of the Indonesia economy and its impact on the informal sector. Since the 1970s, Indonesia has developed from a ‘primarily agriculture-based economy’ to an economy based largely on manufacturing and services. In terms of GDP, the share of agriculture declined from 45 per cent (1970) to 14 per cent in 2014. The authors further explain that the reduction in agriculture coincided initially with urbanisation that led to an increase in the informal sector within urban areas. Growth in the manufacturing and service sectors led to an increase in formal sector employment ‘from 34.7 per cent to 44.9 per cent in 1997’ (Alatas & Newhouse, 2010, p.32). However, the economic crisis in 1998 led to shift from people formerly employed in the formal sector becoming employed in the informal sector. The following political crisis, resulting in ‘a regime change and political reform’ aimed to increase minimum wages. This development is understood to have contributed to the ‘weak recovery of formal sector employment’ (Rothenberg et al., 2016, pp.99-100).

References:

Alatas, V., & Newhouse, D. (2010). Indonesia Jobs Report: Towards Better Jobs and Security for All (Vol.2): Main Report (English). http://documents.worldbank.org/curated/en/601901468285575499/Main-reportAlzheimer’sDiseaseInternational

Firdausy, C. M. (2000). The social impact of economic crisis on employment in Indonesia. http://www.ismea.org/asialist/Firdausy.html

Rothenberg, A. D., Gaduh, A., Burger, N. E., Chazali, C., Tjandraningsih, I., Radikun, R., Sutera, C., & Weilant, S. (2016). Rethinking Indonesia’s Informal Sector. World Development, 80, 96–113. https://doi.org/10.1016/j.worlddev.2015.11.005

The informal sector consists of both professionals and non-professionals engaging in small-scale commercial activities such as selling second-hand items, shoe-shining, street vendors, carpentry, vegetable selling, repair and construction work. These activities are not formally established, regulated or protected by the government and often times, simple skills are used to generate income and profits (Institute of Economic Affairs, 2012). There is a higher labour force participation rate among men (77.5%) compared to women (71.5%) (International Labour Organization (ILO), 2016). The considerable part of the population that is unemployed or in the informal work is severely under-insured, which limits their access to health care significantly.

References:

Institute of Economic Affairs. (2012). Informal sector and taxation in Kenya. https://s3-eu-west-1.amazonaws.com/s3.sourceafrica.net/documents/118220/The-informal-sector-and-taxation-in-Kenya-IEA.pdf

International Labour Organization (ILO). (2016). Country profile. https://www.ilo.org/dyn/normlex/en/f?p=1000:11110:0::NO:11110:P11110_COUNTRY_ID:103315