From street vendors to unregistered ride shares, domestic workers to handicraft makers – working in the informal economy is the only way to make ends meet. Understanding the scale, impact and challenges of informal work is crucial for creating inclusive policies and sustainable development.
What is the informal economy?
The International Monetary Fund (IMF) defines the informal economy as; “activities that have market value and would add to tax revenue and GDP if they were recorded”. Another definition, from the women’s advocacy organization WIEGO, describes the informal economy as “a diversified set of economic activities, enterprises, jobs and workers that are not regulated or protected by the state”.
It’s also important to understand what the informal economy does not cover. Despite the stigma attached to informal work, illegal activities such as drug running or people trafficking are not included. In fact, WIEGO and other organizations are working to dispel what they term “the myth of the shadow economy”, where informal work is associated with crime and unethical activities.
How big is the informal economy?
It can be tempting to think that unregulated work only happens on the margins of society – but in many regions it accounts for the bulk of economic output.
According to the International Labour Organization (ILO) – more than half of the global labour force is engaged in informal work. The IMF says 60% of all workers are involved in unregulated jobs. That amounts to around two billion workers employed in informal jobs and four out of every five businesses are not formally registered.
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