The informal economy consists of unregulated and unprotected economic activities, businesses, jobs, and workers.
Initially, the concept applied to self-employment in unregistered small businesses. It has been expanded to include unprotected wage employment.
Ending the “Shadow Economy” Myth
- Typically, the informal economy is stigmatized as “illegal,” “underground,” “black market,” or “grey market.”
- It is frequently referred to as the “shadow economy” and is considered illegal or unethical.
- The generalization is inappropriate. Most informal workers struggle against formidable odds to earn an honest living.
- Instead of working in the shadows, many people work in public spaces and contribute significantly to communities and economies.
How big is the informal economy?
The vast majority of the global labor force is informal.
In 2018, the International Labour Organization published the first-ever estimates of the world’s informal labor force: 61 percent of workers are employed in the informal economy.
More About the Informal Economy
Since its “discovery” in the early 1970s, the informal economy and its role in economic development have been the subject of intense discussion. History & Debates provides a brief overview of the informal economy and its subsequent debates and dominant schools of thought.
In recent decades, the expansion of statistics on the informal economy has shed light on the size and significance of the informal workforce – 2 billion workers worldwide. Visit the Statistics section for information, details, and analysis.
The informal economy is expanding in various contexts, manifesting itself in new locations and guises.
The [informal economy] is expanding in various contexts, manifesting itself in new locations and guises.
It contributes significantly to the global economy and, if supported, to reducing poverty and inequality.
However, the informal economy does not provide a “cushion” in times of economic crisis. Poverty & Growth Connections investigates these interrelated topics.
- The Occupational Groups report details the size, contributions.
- And working conditions of some of the most influential groups of [informal economy] workers. (Not every worker fits neatly into a single occupational category.
Unofficial economy: a perilous endeavor
- Diagonally all economic sectors – agriculture, industry, and services – [informal economy] workers frequently perform the most hazardous jobs, conditions, and circumstances.
- Typically, informal sector units are small-scale, employing primarily unpaid and unorganized workers in precarious work processes and labor arrangements, and are largely unregulated and unregistered.
- Thus falling outside of state regulations and control, including those about occupational safety and health and social protection.
- Also lacking are the necessary knowledge, technical means, and resources to implement OSH measures.
- Preventive measures to reduce workplace risks, such as OSH management systems and general safety culture, rarely reach the [informal economy].
Dangers of the Informal Economy
- Most workers in the [informal economy] are in a precarious position due to their high-risk exposure and low social protection coverage.
- Though not everyone in the [informal economy] is poor, a significant proportion of the poor is in the [informal economy].
- Because it is poor, the occupational risks are exacerbated by unstable housing, poor nutrition, lack of access to potable water and sanitary facilities, and lack of essential health services.
- Many informal sector workers’ residences and workplaces are in the exact location. Therefore, disease susceptibility and poor health result from undesirable living and working conditions.
- It is a well-established fact that gender inequality is more prevalent in the [informal economy], where women are concentrated at the bottom and earn considerably less than men.
- In addition, child and forced labor are most prevalent and difficult to eradicate in the [informal economy].
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