The Informal Economy and low paid workers by ILO, WIEGO: Women in Informal Employment 4:21am 21st Nov, 2012   To inform economic and social policies, statistics on the size, composition, contribution, and other dimensions of the informal economy are needed. But, as a new area of statistical development, only limited data have been available on informal employment and the informal economy until recently.    What follows is a summary of available data on the size and composition of the informal economy in developing countries and non-standard work in developed countries.    Regional Estimates - Developing Countries    Informal employment is particularly significant in developing countries, where it comprises one half to three quarters of non-agricultural employment: specifically, 48 per cent in North Africa; 51 per cent in Latin America; 65 per cent in Asia; and 72 per cent in sub-Saharan Africa. If South Africa is excluded, the share of informal employment in non-agricultural employment rises to 78 per cent in sub-Saharan Africa.    If comparable data were available for other countries in South Asia in addition to India, the regional average for Asia would likely be much higher.    If informal employment in agriculture is included, as is done in some countries, the proportion of informal employment greatly increases: from 83 per cent of non-agricultural employment to 93 per cent of total employment in India; from 55 to 62 per cent in Mexico; and from 28 to 34 per cent in South Africa.    Throughout the developing world, informal employment is generally a larger source of employment for women than formal employment and generally a larger source of employment for women than for men.    Other than in North Africa, where 43 per cent of women workers are in informal employment, 60 per cent or more of women workers in the developing world are in informal employment (outside agriculture).    In sub-Saharan Africa, 84 per cent of women non-agricultural workers are informally employed compared to 63 per cent of men; and in Latin America the figures are 58 per cent of women in comparison to 48 per cent of men. In Asia, the proportion is 65 per cent for both women and men.    Developed Countries    During the second half of the twentieth century, it was widely assumed that most workers in developed countries had and would continue to have a standard job: that is, a full-time, year-round, permanent wage employment for one employer with adequate statutory benefits and entitlements.    However, since the 1980s, many once-formal jobs have been informalized or casualized in both Western Europe and North America. In the United States, for example, there has been a marked shift from long-term firm-worker attachment towards short-term employment relationships (Stone 2007).    Various concepts or definitions are used in developed countries referring to workers whose work arrangements deviate from the so-called “standard” norm, including:    1. those whose employment is arranged through an employment intermediary: temporary agency workers and contract workers    2. those whose employment is not full-time: part-time workers    3. those whose employment is not long-term: contingent workers    4. those whose employment is not protected: precarious workers    The most common concept or term is “non-standard” workers. As commonly used, the term “non-standard work” includes a) wage employment without a contract or only an insecure contract and without worker benefits or social protection for formal enterprises; and b) self-employment without employees. The common categories of non-standard wage work are temporary work, fixed-term work, and part-time work.    Increasingly, inter-firm sub-contracted work in the service sector (such as janitorial services and home care) and in the manufacturing sector (such as garment making and electronic assembly) is also included.    What follows is a brief summary of trends in three categories of non-standard work in Western Europe during the 1990s, based on research by Françoise Carré (ILO, 2002).    Part-Time Work: Since the early 1970s, there has been a marked growth in the proportion of part-time workers in total employment. By 1998, part-time workers accounted for 16 per cent of total employment in European Union (EU) countries and 14 per cent of total employment in Organization of Economic Cooperation and Development (OECD) countries.    In virtually all EU and OECD countries, the incidence of part-time work is much higher among women than men: in some countries it is twice as high. By 1998, women represented 82 per cent of all part-time workers in EU countries.    Further, rates of part-time work are high for women, but not men, in their prime working years. In terms of sectors, part-time workers concentrate in service-producing industries, notably the wholesale and retail trade sectors.    In terms of occupations, part-timers concentrate in service and sales, clerical, and manual labour. In terms of earnings, the median hourly earnings for part-time workers are lower than for full-time workers in most sectors.    Part-timers may be concentrated in different occupations than full-timers. The overall earnings of part-time workers are quite a bit lower than for full-time workers even within the same sectors.    Temporary Employment: For the EU as a whole, and for a majority of EU countries, the share of workers in temporary employment, including both direct hire and agency hire, increased from the mid-1980s to the late 1990s.    By 1998, temporary employment accounted for around 10 per cent of total employment in EU countries. Temporary employment, like part-time work, is primarily a female phenomenon, although there is wide variation among EU countries.    In all countries except Austria, the incidence of temporary employment among women is higher than among all workers. And, like part-time work, temporary employment is concentrated in the service-producing industries.    Interestingly, in regard to temporary agency employment, women account for the majority of temporary agency workers in countries where such employment concentrates in services while men account for the majority of agency temps in countries where such employment concentrates in manufacturing and construction: that is, “the gender composition of employment mirrors that of the sectors in which temporary agency assignments take place.”    A 2012 UC Berkeley Labor Center study examined the problems with temporary or subcontracted work in California.    Self-Employment: Self-employment, including both employers and own account workers, has increased in many OECD countries over the past 25 years. Indeed, outside of agriculture, self-employment has grown at a faster rate than total employment in 14 (out of 24) OECD countries where data was available. Also, as self-employment has been growing, so has the share of own account self-employment within total self-employment.    As a result, in OECD countries today, more self-employed persons are own account workers than employers. In 1997, women comprised one in three self-employed persons in OECD countries and this proportion is growing. For EU countries as a whole, the incidence of own account work is greater for men (11%) than for women (7%).    But, in some countries, a higher proportion of women than men are own-account workers. Age is a factor in own account work: with workers aged 45 and above more likely than younger workers to be own account workers. Outside of agriculture, the self-employed as a whole are concentrated in wholesale and retail trade, repairs, hotels and restaurants. During the 1990s, however, the growth in self-employment was concentrated in financial intermediation, real estate, renting and business services, followed by community, social, and personal services.    More Recent National Statistics    More and more countries are collecting data on informal employment both inside and outside the informal sector. The available data are being compiled and analyzed for an updated version of the 2002 ILO publication called Women and Men in Informal Employment: A Statistical Picture, which will be published in late 2011.    For the 2005 UNIFEM publication, Progress of the World’s Women: Women, Work, and Poverty, national data in six developing countries – Costa Rica, Egypt, El Salvador, Ghana, India, and South Africa – was analyzed using a common tabulation framework. Informal employment is widespread in all five countries: ranging from just under half of total employment in Costa Rica to over 90 per cent in Ghana and India (Chen et al. 2005).    A recent tabulation of data from another six developing countries (including India) indicates that, in 2003/4, informal employment represented over three quarters of non-agricultural employment for both women and men in Ecuador (urban), India, and Mali; over half in Brazil and South Africa; around one third in Turkey; and less than one quarter in the Republic of Moldova.    In all countries, except the Republic of Moldova, the percentage of informal employment in non-agricultural employment was higher among women workers than men workers.    Feb 2013    While the developing world"s emerging “middle class” has more than doubled in size over the past decade – the number of people classified as near poor has also been on the rise, new ILO research shows.    The working middle class – defined as those living on at least $4 a day – now makes up more than 40% of the developing world"s workforce and is forecast by the ILO to account for more than half by 2017.    But the global financial crisis has meant that the pace at which the rate of working poverty is falling has slowed.    In its Global Employment Trends 2013 report, published last week, the ILO estimates that 397 million workers are living in extreme poverty (defined as living on less than $1.25 a day), and another 472 million "cannot address their needs on a regular basis" (or are "moderately poor", defined as living on $1.25 to $2 a day).    Countries with high working poverty are forecast to grow faster than average, helping the rate of working poverty to fall – but their populations will also grow, bringing the danger that the total number of people in working poverty may increase in some regions, the ILO warned.    The analysis by economic class is part of a forthcoming paper by Steven Kapsos and Evangelia Bourmpoula (release date still to be set), which was published in part in last week"s report.    Their research breaks down the developing world"s workforce into five classes, for the first time, defined as: the extreme working poor, moderate working poor, near poor ($2-4 a day), middle class ($4-13 a day) and above middle class (above $13 a day).    All the dollars figures are calculated at purchasing power parity (PPP) – a conversion rate that eliminates differences in the cost of goods and services between countries.    The number of workers in extreme poverty has fallen over the past 10 years – and this even continued during the global financial crisis.    The number of workers living with their families on less than $1.25 a day fell by 281 million between 2001 and 2011 – leaving a total of 397 million working poor in extreme poverty. This equates to 15.2% of the developing world"s workforce – down from 30.7% in 2001 and 45.2% in 1991.    The number of workers in moderate poverty also fell – by 35 million to 472 million – which equates to around a third of the total developing world workforce (from 53.7% in 2001 and 66.7% in 1991).    But Kapsos and Bourmpoula"s regional breakdown shows that much is due to the influence of China"s emerging economy.    Excluding China, the number of workers in extreme poverty actually rose by 26 million between 1991 and 2001, before falling by 115 million over the next decade. Excluding China again, the number of workers in moderate poverty actually rose in both decades.    The Kapsos and Bourmpoula analysis also shows that, as well as the 868 million workers living with their families below the poverty line of $2 day, there are a further 661 million "near poor" workers. This group accounts for more than a quarter (25.2%) of the developing world"s workforce.    In south Asia, 92% of the workforce is either poor or near poor, while in sub-Saharan Africa, 86% of workers are in these categories.    The number of near-poor workers has increased by more than 140 million over the past 10 years, with virtually all of this increase happening outside China. In total, 58.4% of the developing world"s workers remain poor or near poor.    Many of these near-poor workers are not covered by social insurance, and risk slipping back into poverty in the event of an economic crisis.    "Much work remains to be done to raise productivity levels and expand the number of quality jobs, in order to spur the growth of the developing world"s middle class. Unfortunately, the crisis affecting global labour markets threatens to slow progress," said Kapsos.    As the total proportion of poor and near poor workers fell (ie to 58.4%), the remaining 41.6% are defined as middle or upper-middle class – up from 23% a decade earlier.    ILO forecasts show the number of workers classified as middle class and above could grow by another 309 million by 2017, with the share of middle-class workers rising to 51.9%.    Economists hope this rising middle class will boost consumption and investment, and be an important driver of economic growth in the developing world. And the ILO says there is evidence that growth in the middle class means more spent on health and education – leading to a "virtuous circle" of higher productivity and faster development for wider society, and helping create more political stability through an increased demand for accountability and good governance.    Slow growth means slow structural change    But five years into the global financial crisis, economic growth has slowed in many countries and unemployment is on the rise again around the world.    The ILO report shows 197 million people were unemployed globally last year, up 4.2 million from 2011. Despite forecasts of a recovery in global growth over the next two years, the ILO predicts that global unemployment will increase by 5.1 million this year and 3 million in 2014 – predictions made on the assumption that the eurozone crisis will not deteriorate and US politicians can avoid another debt ceiling debacle.    Even under that relatively benign scenario, the global unemployment rate is forecast to stay around 6% for the next five years – not far off the peak it hit at the worst of the financial crisis.    China GDP growth slowed to 7.8% last year (its slowest growth since 1999), and India slowed to 4.9% (its slowest in 10 years). In sub-Saharan Africa, GDP grew by 5.3% in 2012 (from 5.2% in 2011) and is forecast to match that again this year – although this continent-wide figure masks differing national fortunes: with Niger and Sierra Leone boasting double-digit growth; Ghana, Ivory Coast, Liberia, Mozambique, Nigeria and Rwanda posting growth above 7%; Gambia, Guinea-Bissau, Mail, South Sudan, Sudan and Swaziland recording negative growth; and growth in the largest economy in the region, South Africa, coming in at only 2.6%.    Despite the focus of the financial crisis on banks and sovereign debt problems in the eurozone and uncertainty stemming from the fiscal cliff debate in the US, the effect has spilled over into the developing world, the ILO warned. Only a quarter of the 4 million rise in joblessness last year hit advanced economies – and three-quarters fell on other regions – with east Asia, south Asia and sub-Saharan Africa hit the hardest.    The ensuing slow recovery in investment has also cut the pace of structural change (from agriculture to higher productivity sectors) in developing and emerging economies – leaving more people than expected in vulnerable employment and working poverty.    The slowdown in structural change is likely to mean less progress in cutting the numbers of people in vulnerable employment – who are far less likely than wage-earners to have the safety of adequate social protection. In the developing world, an estimated 1.49 billion workers (56% of all workers) were in vulnerable employment in 2012, up 9 million on a year earlier.    "In developing countries, there is evidence that productive structural change – the shift in employment out of lower productivity sectors into higher productivity ones – has slowed, weakening a key driver of job quality growth that has been associated with poverty reduction, falling shares of vulnerable employment and growth in the developing world"s emerging middle class," the ILO report said.    "The slowdown in structural change during the crisis and the only moderate acceleration in productive transformation expected to take place until 2017 is likely to lead to a slower rate of progress in reducing working poverty around the world. Together with data on vulnerable employment, this shows a clear need for improvements in productivity, sustainable structural transformation and expansion of social protection systems to ensure a basic social floor for the poor and vulnerable."    Part of the reason for the divide in the unemployment picture between developed and developing countries is due to better economic growth in the developing world.    But it is also caused by the large shares of workers outside formal, wage employment – meaning unemployment rates are less strongly correlated with macroeconomic changes, the ILO"s economists say.    Sub-Saharan Africa    In contrast to proponents of the idea that sub-Saharan Africa"s generally strong economic performance over the past decade marks a turning point, and will lead to long-term improvements, the ILO argues that the region"s growth "does not necessarily signify the beginning of sustained structural transformation in the region … [which] continues to suffer from large decent work deficits and the highly unequal distribution of the fruits of growth".    The ILO report concludes that strong economic growth in the region since 2001 "has not led to a significant improvement in labour market outcomes and poverty reduction": "Labour productivity in sub-Saharan Africa is still very low, particularly in the informal economy where many workers eke out a living, and the region continues to be at the bottom of the global chart in terms of labour productivity."    Sub-Saharan Africa"s labour productivity was 1.3 times greater than that in east Asia in 1991 – but is now almost three times lower (although it has shown steady growth over the past seven years, and the trend is upwards).    This is partly due to a structural shift away from agriculture – but most of that movement has been towards informal service sectors, with a "quite limited" shift towards manufacturing. In the two decades to 2012, the share of employment in agriculture in the region fell from 67.5% to 62%; while industrial employment was stagnant at 8.6%.    "Consistent with this, the basic jobs story is one of persistently high levels of vulnerable employment that declined only modestly over the past two decades, despite high growth," the report said.    In 2012, there were 247 million workers in vulnerable employment in sub-Saharan Africa – 62 million more than in 2000 and 100 million more than in 1991 – although as a proportion this declined, from 83% in 1991 to 82% in 2000 and 77% in 2012. The chart above also shows evidence of a large and widening gender gap in vulnerable employment.    http://www.guardian.co.uk/global-development/datablog/2013/jan/30/developing-world-middle-class-growing    http://www.ilo.org/global/research/global-reports/global-employment-trends/2013/lang--en/index.htm Visit the related web page
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