Protecting the informal sector
In developing countries, the informal employment sector generally suffers from various insecurities. Originally, the concept of ‘informal sector’ was produced by a British economist, Keith Hart. It came to be replaced by ‘informal economy’ due to the increase in economic activities by workers and economic units. Informal economic activities are conducted without following the procedures and rules established by the official legal framework, but it does not pertain to white collar crime.
Around the world, the working class goes through varied levels of informality depending on levels of protection and income distribution. Typical informal activities are observed in unregistered businesses and self-employed manufacturers and by temporary street vendors and casual retailers.
Informal employment comprises one-half to three-quarters of non-agricultural employment in the developing countries, i.e. 48 percent in North Africa, 51 percent in Latin America, 65 percent in Asia and 72 percent in sub-Saharan Africa. A survey report covering the economic situation of scavengers, street vendors and other informal workers from all these countries reveals a withheld economic recovery of this sector.
The rebound of the 2008 financial crisis has not been able to benefit the informal sector. On the one hand, the crisis deprived workers of decent jobs while the informal sector has no insurance for occupational hazards, contributory health schemes or social security pensions. The workers also face rising competition due to the hordes of new working poor created by persistent unemployment. The sector includes waste pickers, street vendors, construction workers and housemaids, as well as home-based workers who make clothes and other low-cost products for global brands.
There is an overall deteriorating impact observed on the well-being of employees in the informal sector. As revealed by the survey, they trim their food intake to cut costs, withdraw one or more children from school and reduce their social interactions to avoid any possibility of expenses.
Moreover, there is another important category of migrant workers, who face a specific set of problems. Workers in the Gulf states, UK, US, Malaysia and Singapore are a source of profitable remittances back to their home countries. However, as the building boom of multi-million dollar construction projects has slowed, construction workers are not being paid their full salaries.
Migrant workers in the informal sector thus become part of a vicious cycle, as they do not have knowledge of the terms and conditions of their work contract along with their debt and suffer at the hands of brokers. Experts of migration policies term the exploitation of migrant workers as inexcusable and say there should not be any opportunity for the recruiter to change the contract unlawfully. The labourer should go to work in another country under a fair and transparent contract.
The informal economy is also a large source of employment for women in the developing world. More than 60 percent of such women workers have informal employment, with a major concentration being in the domestic sector.
The International Labour Organisation (ILO) signed a landmark treaty in Geneva to safeguard the rights of workers in the domestic sector. The Director General ILO said, “Domestic workers are workers, they are neither servants nor members of the family.” The convention states that domestic work is still undervalued and invisible and is performed mainly by women and girls, who are often immigrants or members of disadvantaged communities and are particularly vulnerable to discrimination with respect to conditions of employment and work, and to other human rights abuses.”
The member countries of ILO that ratify the convention will be required to respect domestic workers’ rights to freedom of association and collective bargaining, and will have to take effective measures to eliminate all forms of forced labour, discrimination and child labour.
As a fresh perspective added to informal employment, there is an increasingly large number of young people around the world who are creating jobs for themselves which would otherwise not be available during an economic downturn. Young people have been badly hit by the recent political and economic unrest, particularly in the Middle East and North Africa. In 2010, ILO said 13 percent of youth under 24 were out of work.
It is commonly seen that many technology graduates are setting up tech-related start-up outfits with ambitions of global success, there has also been a rise in smaller businesses, such as cafes, handicraft companies and small retail shops. These smaller shops are building infrastructure for more cottage industries to retain craftsmanship and follow a unique philosophy of product designing. In this manner, these young people are defining their businesses as an extension of their personal identity.
One representative from a youth-focused consultancy, China Youthology, says, “The new generation is more educated, they are aware of their options and they want to get more out of life. There are also women who are very creative, and this is why they are becoming entrepreneurs as they feel that they have a lot to give and they want to produce something.” Thus, the idea of staying socially beneficial and making money too, reigns over the young entrepreneurial minds.
Ideally, governments should provide social security by regulating a minimum income or rather a social security grant for informal workers. But these additional grants remain unaffordable for developing economies. Planning ahead to build protection for informal workers, governments need to put more effort in diversifying the labour force. This may prevent the informal sector from suffering heavily in times of economic crisis