Updated: Dec 17, 2019
There are over 2 billion informal workers globally. According to the ILO, in Latin America, over 50% of the total female workforce (54%) are informal workers. The exact statistics of the prevalence of informality in economies across the region and informal workers is elusive because definitions and the way categories are measured change across countries due to national legislative designations. The consensus set forward by the ILO identifies informal workers as laborers who meet any of the following conditions: work for formal or unregulated enterprises without a contract, or employment benefits or guarantees. The lack of legal recognition of their work often disqualify informal workers for access to social programs, the protections of labor laws and public health systems, creating an unstable social safety floor for them and their families.
More women in low-income countries rely on self-employment and informal jobs than in higher income countries. Is projected that the expansion of technology platforms that promote crowd-work or create gig-economy jobs will only make these numbers continue to grow. Researchers with the Overseas Development Institute (Hunt, A. & Samman, 2019) have concluded that women often choose to work on these jobs because they offer flexibility, even if they often pay lower wages than other formal types of employment. This type of gender disparity is expected to remain unless policies are created that offer protections and improve labor conditions.
Women are over-represented in some sectors of the informal economy, specifically the domestic workers who comprise 93% of the domestic workforce, and almost 80% of those jobs are under informal conditions (ILO, 2016). Other sectors with a high representation of women are at-home laborers. WIEGO has identified that women who work at home face severe issues of workplace inadequacy because the wages are not enough to equip the home as a suitable work facility. Challenges include the lack of space to store materials and therefore, an inability to grow their businesses, interruptions due to household responsibilities and irregular work schedules. The lack of regulations and protections that guarantee labor rights make women especially vulnerable to harassment and workplace-related violence (ILO, 2017). With an absence of means to file complaints, and often in jobs where they are personally dependent; these abuses usually go on without being reported or processed.
According to the Economic Commission for Latin America and the Caribbean (ECLAC), over one-third of the total population in Latin America lives under poverty. The prevalence of low wages across all sectors of the informal economy make women and the families they sustain more likely to be poor. Low wages lead to lower quality of life outcomes in health, nutrition, and education. Low wages also impede the access to quality childcare, and yet for many informal workers, this is not even an option because it may not be available. Studies by the World Bank and others, have identified GDP per capita as one of several factors associated with a high incidence in informality. The UN reports that in 2017, rates for extreme poverty increased to 12% in the region. Conditional cash transfer programs and non-contributory social protection transfers have a positive impact on the reduction of poverty, but they may also reduce the incentive to formalize employment status.
One of the most critical consequences of high levels of workers in the informal economy is that everyone suffers. With less money from income taxes, social contributions and other value-added payments; the governments face pressure to over-tax regulated companies or not being able to sufficiently meet the demands of the population through public services such as public hospitals. The burden to provide for a larger population than the proportion of contributions can lead to breakdown inefficiencies and less money allocated for social programs.
CEPAL studied the effects of high levels of regulation and intervention in the form of investments in social programs and found that they are positively associated with a decrease in the levels of informality. These protections help informal workers transition into the formal economy and in their economic mobility. For example, Uruguay saw an increase of 10% in its rate of informality over ten years after the implementation of laws that increased the minimum salary over 180% between 2005 and 2012, reinstated collective bargaining rights and incentivized the creation of formal jobs with tax reform in 2007. The state also introduced changes to the social benefits of unemployment, maternity leave, and health reforms that enabled more people to gain a stable social footing. Specific changes also were made to laws that addressed domestic workers and regulated their work environment and allowed them to create unions. In 2015, Colombia became the first country in the world to constitutionally recognize waste pickers as public workers. These protections allow them to be the only individuals who may access recyclables and dispose of them to earn a living.
Government intervention to address informality has proven to work at the community level too. In the United States, the city of Los Angeles estimated that over 83 million was lost in revenue to the simple work of street vendors (Yen Liu, Y., Burns, P., & Flaming, D., 2015). The city implemented policies to provide essential social services and protections to this population, and its legalized street vending. The result was improved working conditions for the workers, and the city recuperated income. Policies like the ones described in this article, support United Nations Sustainable Goal 8 to promote inclusive and sustainable economic growth, employment, and decent work for all.
Additional Sources that informed this report:
1. Women and Men in the Informal Economy: A Statistical Picture, 2nd Edition, published by ILO and WIEGO (2013)
2. Tackling employment in the informal economy: A critical evaluation of the neoliberal policy approach by Colin C Williams (2014)
3. Interview with Economist Julio Gamero by ILO