Reprinted from Winter 2013
Informal employment is back on the policy agenda. Not only is it rising steadily in developed countries—it also already represents the majority of the workforce in most developing countries. Adding to policy concerns are the lingering impacts of the Great Recession on employment and the global crisis of youth unemployment. In all parts of the world, the reality is that the majority of informal workers are poor, and the majority of working poor are informally employed.
Historically, labor law, labor statistics, and labor organizing have all centered on the notion of a recognized employer–employee relation- ship. But in addition to self-employed workers, increasingly, many wage or salaried workers are no longer in a clearly recognized employer– employee relationship. These two groups are generally referred to as “informal workers” in developing countries and “nonstandard workers” in developed countries.
Following a decade of work by the International Labour Office (ILO) and its statistical partners,[i] the concept of “informal employment” has been expanded to include all forms of employment without legal and social protection both inside and outside informal enterprises.2[ii]
This expanded definition is of critical importance to everyone engaged in organizing informal workers and securing legal and social protection for them.
So defined, informal employment can be meaningfully disaggregated into subcategories according to status in employment, as follows:
Informal self-employment—including employers in informal enterprises, own account workers in informal enterprises, contributing family workers (in informal and formal enterprises), members of informal producers’ cooperatives (where these exist); and
Informal wage employment—employees or wage workers hired without legal or social protection by formal firms, informal enterprises, or house- holds, including employees of informal enterprises, casual or day laborers, temporary or part-time workers, paid domestic workers, contract workers, unregistered or undeclared workers, and industrial outworkers (also called homeworkers)
Globally, therefore, “informal enterprises” officially refer to unincorporated enterprises that may also be small or unregistered, and “informal employment” refers to jobs in which the employer does not contribute to social protection. Based on these official international definitions, national statistical offices specify what defines incorporation, registration, and social protection within the institutional and regulatory environment of their respective countries.
In most developing countries, the vast majority of rural workers—in agricultural artisan production, livestock rearing, fishery, and forest gathering—are informally employed, as are the majority of urban workers—in construction, manufacturing, trade, transport, and community or personal services. However, although a growing number of countries now use these definitions in the collection and tabulation of national labor force data,[iii] the data now available internationally are often limited to informal nonagricultural employment.[iv]
A look at these data indicates why informal employment is back on the agenda. In devel- oping regions, informal employment repre- sents a significant share of nonagricultural employment: ranging from 45 percent in the Middle East and North Africa to 51 percent in Latin America to 65 percent in East and Southeast Asia to 66 percent in sub-Saharan Africa (excluding South Africa and other countries in Southern Africa with a relatively low prevalence of informal employment) to 82 percent in South Asia.[v] In those countriesand regions where agriculture still employs a large share of the workforce, the share of total informal employment in total employment is likely to be higher still. In Ghana and India, for instance, informal employment in agriculture represents 90 percent or more of total employment.[vi]
In Ghana and India, informal employment in agriculture represents 90 percent or more of total employment.
Nonagricultural informal employment is about equally split between wage employment and self-employment in urban China and in Latin America and the Caribbean, East and Southeast Asia, and South Asia, but is dominated by self-employment in sub-Saharan Africa.
Although it is true that most of the working poor are informally employed and most of the informally employed are poor—even by local standards—there are significant differences in earnings and poverty. Informal employers enjoy the highest earnings and lowest poverty risk while casual day laborers and subcontracted workers have the lowest earnings and highest poverty risk. The earnings and poverty risk of informal employees and own account operators fall in between these two extremes.
Policy Responses to Informality
At the heart of the policy debates on the informal economy is the question of whether and how to formalize it—a concept that means different things to different people. Some regard formalization as shifting informal workers to formal wage jobs—but this requires creating more formal jobs. Others view it as registering and taxing informal enterprises. More importantly, many of those who call for formalizing informal enterprises also call for deregulating labor markets. So it is important to unpack the debate—and understand what formalization means to different categories of informal workers.
At the heart of the policy debates on the informal economy is the question of whether and how to formalize it.
Most of the self-employed in informal enterprises would like to receive the benefits of formalization. To them, benefits should include enforceable contracts, legal ownership of their place of business and means of production, tax breaks and incentive packages to increase their competitiveness, membership in trade associations, clear bankruptcy rules and protection against creditors, and social protection.
Most informal wage workers would welcome the benefits that come with a formal wage job, including a secure contract, worker benefits, membership in a formal trade union, and employer contributions to their social protection. It is important to highlight that formalizing wage work requires a focus on employers, as employers are more likely than employees to avoid compliance with labor regulations, and that many informal wage workers work for formal firms and households, not just for informal enterprises.
It is also important to recognize that extending the benefits of formalization is not a one-step procedure but an ongoing process, and to consult informal workers to see what aspects of formalization they would prioritize. Of course, some informal workers may prefer not to formalize. It is important in such cases to determine what, if any, dimensions of formalization they would welcome.[vii]
Organizing Informal Workers
In the global North, as the formal workforce and mass production expanded during the 1950s and 1960s, trade unions were able to negotiate a social compact between employers and employees, at least for many workers in mass production jobs. But since then, as unions and formal jobs have come under increasing threat, the trade union movement has had to fight hard to maintain the rights that formal workers, and their unions, once widely enjoyed.
Meanwhile, in the global South, the majority of the workforce never had formal jobs and continued to work in the informal economy. Some of those who do have formal jobs have been unionized, but their unions are also under threat. Recent organizing among informal workers in developing countries dates back, arguably, to the founding of a multisector trade union of women informal workers, the Self-Employed Women’s Association (SEWA), in India in 1972.[viii] In the following decades, a significant
number of organizations of informal workers were formed, including local and national cooperatives or associations of waste pickers in Argentina, Brazil, Colombia, Ecuador, and India; national associations of home-based workers in Bangladesh, Philippines, and Thailand; national associations of street vendors in many countries; a regional alliance of home-based workers in Southeast Asia; and a regional confederation of domestic workers in Latin America and the Caribbean.
Since 2000, there has been a steady increase in the numbers and geographic scope of such organizations, including a Latin America regional alliance of waste pickers; national associations of waste pickers in Bolivia, Brazil, Chile, Ecuador, Nicaragua, Peru, Uruguay, and Venezuela as well as South Africa; national associations of domestic workers in South Africa and the United States; a regional network of home-based workers in South Asia; and global alliances or networks of waste pickers and domestic workers. And, increasingly, unions in the South are organizing and/or supporting the organization of informal workers, in places such as Ghana and Zimbabwe.
Distinctive Organizing Challenges Organizing informal workers is different from organizing formal workers for several important reasons. To begin with, many informal workers are not considered workers: under the law, by policy makers, by trade unions, by other workers, or even by themselves. Globally, the “employment relationship” between a recognized employer and employee has historically represented the central legal concept around which labor law and collective bargaining agreements have sought to recognize and protect the rights of workers.[ix] This concept has always excluded the self-employed, but also excludes wage workers or employees who are hired by firms in ways that disguise the employment relationship or make it unclear and ambiguous, which is the case with most informal wage workers. Furthermore, many key stake- holders—policy makers, trade unions, other workers—do not perceive or recognize informal workers as workers. Also, some informal workers do not perceive themselves as workers, especially women who produce goods and services in their own homes (home-based workers) or in the homes of others (domestic workers).
Second, informal workers belong to various statuses in employment, making it difficult to organize around a single identity. Also, individual workers may be engaged in multiple activities and/or employment statuses within a single day, month, or year. In labor force statistics, “status in employment” delineates two key aspects of the labor arrangement: the allocation of authority over the work process and the outcome of the work done, and the allocation of economic risks involved.[x]The International Classification of Status in Employment includes five main statuses: employer, employee, own account worker, unpaid contributing family worker, and member of a producer cooperative. A very small percentage of informal self-employed are employers; most are own account workers who do not hire paid workers. A small share of informal wage employed are employees, most are casual day laborers or industrial outworkers who by definition do not work in a standard workplace and, often, do not work for a single employer, while a large percentage of informal women workers, especially in agriculture, are unpaid contributing family workers.
Organizing own account operators—who often invest more labor than capital into their enterprise and earn relatively little—is different from organizing informal employers who, on average, invest and earn far more. Organizing industrial outworkers who work under a subcontract for multiple employers and their intermediaries is different from organizing informal employees in an informal or formal enterprise; just as organizing informal day laborers who work for multiple employers at different times is different from organizing informal employees of a single employer. Also, unpaid contributing family workers need to be organized to bargain not only in the interests of the family enterprise or farm but also in their own interests within the family.
Third, most informal workers do not work in a standard workplace (i.e., the firm or factory of an employer), they work in public spaces (streets, markets, pastures, forests, waterways), in private homes (as home-based producers or domestic workers), or on private farms. There are special risks as well as organizing challenges associated with each of these. For example, “Where should domestic workers be organized?” Are there common places where they congregate on their day off (if any)? The same consideration applies with regard to day laborers and home-based workers, especially those who are prohibited by social norms from moving outside their homes.
Fourth, most informal workers—other than the fully dependent wage workers—have to deal with multiple points of control or multiple dominant players. The self-employed have to bargain with those from whom they buy supplies and raw materials or rent space and equipment, and to whom they sell goods and services. The industrial outworkers have to deal with one or more firms and their intermediaries who sub- contract work to them. Day laborers have to deal with both recruiters and employers, often different ones each day or season. Having to bargain with more than one counterpart makes it difficult to bargain effectively. Also, ideally, most informal workers would need to negotiate multiple collective bargaining agreements with both the public sector and private firms.
Fifth, the control points and dominant players faced by informal workers are often sector- specific. Consider the urban informal workforce. Their activities are governed by industry- specific regulations (e.g., those governing fresh food) as well as by urban planners and local governments that set rules and determine norms and practices that govern who can do what, and where, in cities. Often the rules are framed or interpreted in ways that discourage—if not out- right ban—informal activities. Moreover, urban informal workers, like all informal workers, have to negotiate with dominant players in the sectors or value chains within which they operate. This means that they have to negotiate on several fronts with private businesses and with local authorities. It also means there is no immediate pay off—no equivalent to the “wage dividend” enjoyed by many organized formal workers. Often, they have to negotiate and bar- gain to simply be allowed to pursue their livelihoods—without being harassed, having their goods confiscated, having to pay bribes, and being evicted. In such situations, the hoped-for dividend of organizing is usually a reduction in the risks and costs of operating informally, rather than an increase in earnings.
Given all this, new and innovative approaches to organizing and collective bargaining are needed and no one model fits all. At the local level, organizing takes different forms, from trade unions to cooperatives to associations of various kinds to savings-and-credit groups or self-help groups, depending in part on the local political and legal environment. In many countries, there are unregistered associations that function like cooperatives or trade unions but find it difficult to register as such. But to some extent, organizational form follows organizational function. Domestic workers who need solidarity to bargain with their employers often form or join trade unions. Self- employed home-based workers often form associations to leverage skills training, product design, and marketing services. But industrial outworkers who work from their home need to form unions for collective bargaining with employers and their intermediaries. Street vendors who need to bargain collectively with local authorities often form unions or market-specific associations. Waste pickers who provide recycling services to cities or cleaning services to firms often form cooperatives.
Many organizations are being developed by informal workers themselves, often assisted by other organizations (unions and/or nongovernmental organizations) and carry out a range of functions, from collective bargaining to leader- ship development, policy advocacy, and service provision.
More than one hundred SEWA organizations constitute a sisterhood of institutions owned and managed by SEWA members.
To take one notable example, SEWA, the largest organization of informal workers, pursues what it calls a joint strategy of “struggle” and “development.” As a labor union, SEWA mobilizes its members to undertake struggles and to jointly advocate and bargain for their rights, while promoting a variety of member-based SEWA organizations, mainly cooperatives, which contribute to development by bringing members into the economic and social main- stream. More than one hundred SEWA organizations constitute a sisterhood of institutions owned and managed by SEWA members, all women workers in the informal economy.
All members belong to a relevant trade group and are voting members of the SEWA union; many also belong to one or more other membership-based organizations—cooperatives, producer groups, and (in rural areas) savings- and-credit groups, and/or producer companies. All these enterprises are run cooperatively with shares owned by SEWA members who elect their own boards. The development activities of the sister organizations include social protection, financial services (savings, loans, insurance), infrastructure services (housing, water, sanitation, electricity, and transport), capacity building, business development, and marketing services.
Clearly, not all organizations of informal workers can or should aspire to this full range of interventions. But the SEWA example illustrates what is needed to overcome the negative policy and regulatory environment faced by informal workers and to provide the supportive services needed to make their work more remunerative and secure.
Over the past three decades, local organizations of informal workers have formed national, regional, and international alliances or networks, mostly along sector lines (domestic workers, home-based workers, street vendors, and waste pickers). But within these sector-based networks are both self-employed and dependent workers, and different kinds of organizations (unions, cooperatives, associations). Most of the net- works seek to enhance the representative voice and official visibility of informal workers, and to build and enhance the collective bargaining and advocacy of their affiliates.
Relationship with Trade Unions and the International Labor Movement
Historically, trade unions and the international labor movement have been, at best, ambivalent toward informal workers, arguing that informal workers are not workers or informal employment should be abolished. But, increasingly, national trade union federations are playing an important role in organizing or supporting organizations of informal workers. For instance, across Africa, national centers have formed new unions or associations of informal workers (Angola, Mozambique), encouraged and supported affiliated unions to organize informal workers (Ghana, Nigeria), or built alliances with organizations of informal workers (Swaziland, Zambia, Zimbabwe).
The international labor movement is paying increasing attention to organizing in the informal economy.
While SEWA is still the only national trade union center of informal workers affiliated with the International Trade Union Congress (ITUC), the international labor movement is paying increasing attention to organizing in the informal economy and to organizations of informal work- ers. Several of the Global Union Federations, including the International Transport Workers’ Federation (ITF) and the Building and Wood Workers’ International (BWI), support organizing efforts among informal workers in their respec- tive sectors. Both Public Services International (PSI) and UNI Global Union have worked with StreetNet International, the global alliance of street vendors. The International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations (IUF) has partnered with the Women in Informal Employment: Globalizing and Organizing (WIEGO) network to support the formation of an International Domestic Workers’ Network and the network’s campaign for an international con- vention on Decent Work for Domestic Workers.
The IUF has partnered with the WIEGO network to support the formation of an International Domestic Workers’ Network.
Advocacy by informal workers’ organiza- tions—and their allies—has resulted in impor- tant breakthroughs in policy support at the international level. The first was the ILO Convention C177 on Home Work in 1996, fol- lowed by the International Labour Conference (ILC) Conclusion and Resolution on Decent Work and the Informal Economy in 2002, and most recently the ILO Convention C189 on Decent Work for Domestic Workers in 2011. Informal workers’ organizations are actively engaged in ongoing efforts to translate these international victories and other demands into local and national legal and policy realities.
Work today takes many forms, and is central to people’s lives, to economies and societies. Yet labor laws and employment laws are premised on the central notion of an employer–employee relationship, while the majority of the global workforce is not in such a relationship. Given the sheer size of the informal workforce and the fact that workers with once-formal jobs are seeing their jobs informalized, the policy goal must be to overcome the formal and informal divide by providing appropriate recognition, protection, and support to all workers.
While organizing informal workers has taken place mainly outside the mainstream labor movement, this too is beginning to change, as formal and informal workers join hands. In today’s global economy, those who work in a particular industry—even for a sin- gle firm—include not only the core formal employees but also all of the workers down the supply chain, including the contracted daily or seasonal workers and the subcontracted out- workers. Rather than being divided by big business, formal and informal workers along specific global supply chains or in specific industries should forge a joint united front. Then only, in today’s global economy which privileges capital over labor, will workers be able to improve their situation.
[i] The main partners include the International Labour Office (ILO), the International Expert Group on Informal Sector Statistics (called the Delhi Group), and the global network Women in Informal Employment: Globalizing and Organizing (WIEGO).
[ii] This expanded concept was endorsed by the International Labour Conference (ILC) in 2002 and the International Conference of Labour Statisticians (ICLS) in 2003.
[iii] The ILO-WIEGO database on informal employ- ment now contains data for nearly fifty countries. See www.ilo.org/global/statistics-and-databases/ WCMS_179795/lang–en/index.htm.
[iv] Owing to shortages of financial and human resources, few countries currently collect data on informal employment in agriculture.
[v] All of the statistical data presented in this section are from Joann Vanek, Martha Chen, Ralf Hussmanns, James Heintz, and Francoise Carre, Women and Men in the Informal Economy: A Statistical Picture (Geneva, Switzerland: ILO and WIEGO, 2012). The summary of findings on earnings and income is from Martha Chen, Joann Vanek, Francie Lund, James Heintz with Renana Jhabvala and Christine Bonner, Progress of the World’s Women 2005: Women Work and Poverty (New York: UNIFEM, 2005).
[vi] There are also differences within regions: the share of informal employment in total employment among countries in the Middle East and North Africa ranges from 31 percent (Turkey) to 57 percent (West Bank and Gaza), from 40 percent (Uruguay) to 75 percent (Bolivia) in Latin America, from 33 percent (urban China) to 42 percent (Thailand) to 73 percent (Indonesia) in East and Southeast Asia, from 33 percent (South Africa) to 82 percent (Mali) in sub- Saharan Africa, and from 62 percent (Sri Lanka) to 83 percent (India) in South Asia.
[vii] A comprehensive policy framework can be found at http://wiego.org/informal-economy/ policies-programmes.
[viii] There are several books and multiple articles on the Self-Employed Women’s Association by, among others, Ela Bhatt (2006), Martha Chen (2008), Kalima Rose (1992), and Jennefer Sebstad (1982). But there is very little documentation and analysis of other organizations of informal workers. This section draws on recent documentation and analysis commissioned by the global network WIEGO, including a database (the WORD data- base) of more than 600 organizations, an analysis of that database by Shirley Miller (2012), an annotated bibliography of organizing in the informal economy by Antti Vainio (2012), and two recent articles by Chris Bonner and Dave Spooner (2011) and Celia Mather (2012). See also Dan Gallin’s “Organizing Informal Workers: Historical Overview,” a speech at a WIEGO Workshop on Organizing Informal Workers: Building and Strengthening Membership-Based Organizations held in Bangkok in March 2011. All of these publications are available on the WIEGO website: www.wiego.org.
[ix] The Scope of the Employment Relationship (Geneva, Switzerland, ILO, 2003).
[x] Resolution Concerning the International Classification of Status in Employment, adopted by the Fifteenth International Conference of Labour Statisticians (Geneva, Switzerland: ILO, 1993).