Abstract
At present, there is renewed interest in the informal economy worldwide. This renewed interest has rekindled some of the old debates about the phenomenon. This article will address two of the core debates: first, whether or not the informal economy is linked to the formal economy and modern capitalist development; and, second, whether or not the informal economy is outside the reach of government regulation. In so doing, it will raise a third dimension largely overlooked in the debates: the exclusion of the informal economy in economic development planning, especially at the local level. The article concludes with reflections on the exclusion of informal employment in local planning (by government) despite its inclusion in global production (through the market) and a vision for more inclusive approaches to economic development that take into account the size, composition, contribution and dynamics of the informal economy today.
Abstract
Il y a actuellement un renouveau d’intérêt au sujet de l’économie informelle dans le monde. Ce renouveau d’intérêt a ravivé certains des vieux débats sur ce phénomène. Cet article se penche sur deux des débâts au centre de la polémique: tout d’abord, celui de savoir si l’économie informelle est liée à l’économie formelle et au développement capitaliste moderne, et, ensuite, celui qui se demande si le secteur informel est hors de portée des régulations gouvernementales. Ce faisant, l’article soulèvera une troisième dimension souvent mise de côté dans les débats: l’exclusion de l’économie informelle du processus de plannification du développement économique, en particulier au niveau local. L’article se clôture sur des réflexions à propos de l’exclusion de l’emploi informel dans la plannification locale (du gouvernement) en dépit de son inclusion dans la production mondiale (par le biais du marché), et apporte une vision pour des approches plus inclusives quant au développement économique qui tient compte de la taille, de la composition, de la contribution et des dynamiques du secteur informel de nos jours.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
India was chosen as the illustrative case as it is a large, growing and diverse economy with a predominantly informal workforce and one of the few countries with national data on both informal employment (through labour force surveys) and informal firms (through enterprise surveys).
By the late 2000s many countries were using the official international definition of informal employment. Of these, 47 countries responded to the ILO’s request for data and are featured on the ILO-WIEGO data base on the ILO website and in the second edition of the ILO-WIEGO publication Women and Men in the Informal Economy: A Statistical Picture (ILO-WIEGO, 2013).
The term ‘informal workers’ is used here in a broad inclusive sense to include informal wage workers as well as the informal self-employed.
Of course, there are non-statistical definitions of these related phenomena, used by researchers and other observers of the informal economy. Other definitions include enterprises that evade taxes; jobs that violate labour standards or laws; and the production and trade of illicit goods and services. However, these definitions are not easily or often used in the collection of official labour force or economic statistics.
This is a summary of the main findings in WIEGO Working Paper #2, Vanek et al, 2014 Statistics on the Informal Economy: Definitions, Regional Estimates and Challenges.
It is difficult to match type of employment/level or earnings with household income/poverty because poverty is measured at the household level while employment status is measured at the individual level and the number and ratio of earners/dependents vary across households.
Status in employment is used to delineate two key aspects of labour contractual arrangements: the allocation of authority over the work process and the outcome of the work done; and the allocation of economic risks involved (ILO, 2003a).
In labour force statistics, there is another category of employment status: paid contributing members of cooperatives.
This discussion is focused on people who work in their own homes. People who work in the private homes of others include (mostly female) paid domestic workers and nursing assistants, (mostly male) security guards, and the better-paid professionals such as bookkeepers who work for home-based consultants.
What is needed is a new broad, unified conceptual framework for labour statistics, labour law, and labour economics that encompasses all categories of non-standard employment in developed countries and informal employment in developing countries.
See Gereffi, 1994 for a discussion of two basic types of global value chain: buyer-driven chains (for example, garments) and producer-driven chains (for example, automobiles).
Raveendran, Former Additional Director General Central Statistical Organisation, Government of India, generated these estimates at the request of and with support from the WIEGO network. He used extensive cross-tabulations – a combination of industrial, occupational, status in employment, and place of workers – to generate estimates of the different groups, as there is no single discreet classification code for any of these occupations.
Kagad Kach Patra Kashtakari Panchayat translates as ‘Paper Glass Tin Workers’ Collective’.
SWaCH, an acronym for Solid Waste Collection Handling, means ‘clean’ in the local Marathi language.
References
Apte, P. (2008) Dharavi: India’s model slum. Planetizen, http://www.planetizen.com/node/35269, accessed date 2008.
Basole, A. and Basu, D. (2011) Relations of production and modes of surplus extraction in India: Part II – ‘Informal’ industry. Economic and Political Weekly. 9 April 46 (15): 63–79.
Chan, M.-K. (2012) Making Agricultural Value Chain Programmes Work for Workers: A Practical Guide for Development Donors and Practitioners. Cambridge, MA: WIEGO.
Chan, M.-K. (2013) Informal Workers in Global Horticulture and Commodities Value Chains: A Review of Literature. WIEGO Working Paper # 28. Cambridge, MA: WIEGO, http://www.wiego.org.
Charmes, J. (1998) Informal Sector, Poverty and Gender: A Review of Empirical Evidence. Washington DC: The World Bank.
Chen, M. (2014) Home-Based Worker Sector Report: Informal Economy Monitoring Study. Cambridge, MA: WIEGO.
Chen, M. and Raveendran, G. (2011, updated in 2014) Urban Employment in India: Recent Trends and Patterns. WIEGO Working Paper # 7. Cambridge, MA: WIEGO, http://www.wiego.org.
Chen, M., Vanek, J. and Carr, M. (2004) Mainstreaming Informal Employment and Gender in Poverty Reduction: A Handbook for Policymakers and Other Stakeholders. London: Commonwealth Secretariat.
Chen, M., Vanek, J., Lund, F., Heintz, J., Jhabvala, R. and Bonner, C. (2005) Progress of the World’s Women 2005: Women, Work and Poverty. New York: UNIFEM.
Chikarmane, P. (2012) Integrating Waste Pickers into Municipal Solid Waste Management in Pune, India. WIEGO Policy Brief (Urban Policies) # 8. Cambridge, MA: WIEGO, http://www.wiego.org.
Chikarmane, P., Deshpande, M. and Narayan, L. (2001) Report on Scrap Collectors, Scrap Traders and Re-cycling Enterprises in Pune. Geneva, Switzerland: ILO-UNDP.
Dias, S. (2011) Statistics on Waste Pickers in Brazil. WIEGO Statistical Brief No. 2. Cambridge, USA: WIEGO, http://www.wiego.org.
Gereffi, G. (1994) The organization of buyer-driven global commodity chains: How U.S. retailers shape overseas production networks. In: B.G. Gereffi and M. Korzeniewicz (eds.) Commodity Chains and Global Capitalism. Westport, CT: Praeger.
Government of India (2008) Operational Characteristics of Unorganised Manufacturing Enterprises in India. Report No 524, NSS 62nd Round, July 2005–June 2006. New Delhi, India: National Sample Survey Organisation.
Hart, K. (1973) Informal income opportunities and urban employment in Ghana. Journal of Modern African Studies 11 (1): 61–89.
HomeNet Thailand (2012) Report on Contract Farming in Thailand. Bangkok, Thailand: HomeNet Thailand.
Horn, Z.E. (2009) No Cushion to Fall Back On: The Global Economic Crisis and Informal Workers. Cambridge, MA: WIEGO and Inclusive Cities.
Horn, Z.E. (2011) Coping with Crises: Lingering Recession, Rising Inflation, and the Informal Workforce. Cambridge, MA: WIEGO and Inclusive Cities.
International Labour Office (1972) Employment, incomes and equality: A Strategy for Increasing Productive Employment in Kenya. Geneva, Switzerland: ILO.
International Labour Office (2003a) Scope of the Employment Relationship: Report IV, International Labour Conference, 91st Session. Geneva, Switzerland: ILO.
International Labour Office (2003b) Report of the Seventeenth International Conference of Labour Statisticians. Geneva, Switzerland: ILO.
International Labour Office (ILO) and WIEGO (2013) Women and Men in the Informal Economy: A Statistical Picture, 2nd edn. Geneva, Switzerland: ILO.
Lee, E. (1998) The Asian Financial Crisis: The Challenge for Social Policy. Geneva, Switzerland: ILO.
Lewis, W.A. (1954) Economic development with unlimited supplies of labour. Manchester School of Economic and Social Studies 22: 139–191.
Mahadevia, D. and Vyas, S. (2012) Law, Regulations and Rights of Street Vendors: Ahmedabad. Ahmedabad, India: Centre for Urban Equity.
Piore, M.J. and Sabel, C.F. (1984) The Second Industrial Divide. New York: Basic Books.
Portes, A., Castells, M. and Benton, L.A. (eds.) (1989) The Informal Economy: Studies in Advanced and Less Developed Countries. Baltimore, MD: John Hopkins University Press.
Rodrik, D. (1997) Has Globalization Gone Too Far? Washington DC: Institute for International Economics.
Roever, S. (2014) Street Vendor Sector Report: Informal Economy Monitoring Study. Cambridge, MA: WIEGO.
Roy, T. (1999) ‘Outline of a history of labour in traditional small-scale industry in India’. Archives of Indian labour, http://www.indialabourarchives.org/publications/Tirthankar%20Roy.htm, accessed 1999.
Sanyal, K. and Bhattacharya, R. (2009) Beyond the factory: Globalisation, informalisation of production and the new locations of labour. Economic and Political Weekly. 30 May 46 (2): 35–39.
Scheinberg, A., Simpson, M.H. and Gupta, Y. (2010) Economic Aspects of the Informal Sector in Solid Waste Management. Eschborn, Germany: German Technical Cooperation (GTZ).
Sethuraman, S.V. (1998) Gender, Informality and Poverty: A Global Review. Washington DC: The World Bank.
Singer, H.W. (1970) Dualism revisited: A new approach to the problems of dual society in developing countries. Journal of Development Studies 7 (1): 60–75.
Standing, G. (1999) Global Labour Flexibility: Seeking Distributive Justice. New York: St. Martin’s Press.
du Toit, A. and Ewert, J. (2002) Myths of globalisation: Private regulation and farm worker livelihoods on Western Cape farms. Transformation: Critical Perspectives on Southern Africa 50 (1): 77–104.
Tokman, V. (1984) Wages and Employment in International Recessions: Recent Latin American Experience. Working Paper #11. Notre Dame, IN: Helen Kellogg Institute for International Studies.
Unni, J. (2000) Urban Informal Sector: Size and Income Generation Processes in Gujarat, Part I, SEWA-GIDR-ISST-NCAER. Report No. 2. New Delhi, India: National Council of Applied Economic Research.
Unni, J. and Rani, U. (2000) Urban Informal Sector: Size and Income Generation Processes in Gujarat, Part II’, SEWA-GIDR-ISST-NCAER Contribution of the Informal Sector to the Economy. Report No 3. New Delhi, India: National Council of Applied Economic Research.
Vanek, J., Chen, M., Heintz, J. and Hussmanns, R. (2014) Statistics on the Informal Economy: Definitions, Regional Estimates and Challenges. WIEGO Working Paper #2. Cambridge, MA: WIEGO, http://www.wiego.org.
Vanek, J., Chen, M. and Raveendran, G. (2012) A Guide to Obtaining Data on Types of Informal Workers in Official Statistics. WIEGO Statistical Brief # 8. Cambridge, MA: WIEGO, http://www.wiego.org.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Chen, M. Informal Employment and Development: Patterns of Inclusion and Exclusion. Eur J Dev Res 26, 397–418 (2014). https://doi.org/10.1057/ejdr.2014.31
Published:
Issue Date:
DOI: https://doi.org/10.1057/ejdr.2014.31