4.4+Informal+employment

4. What is informal employment and why does it happen?
The official definition: **The informal sector** is largely made up of jobs over which there is little or no official control. It includes jobs such as child minding, domestic cleaning and bar tending. In HICs, this is the main area for the informal economy. Previously, in the UK for example, this also included something called the ‘Black economy’ or the ‘Lump’. A lot of building workers were paid by the day in cash and did not pay tax nor did they show up as being employed – in fact many claimed unemployment pay and worked illegally. Because of its illegal nature, pay rates were much lower than regular workers and so building contractors were only to happy to use them. But the minimum wage and the demand that building contractors withheld money, even from self employed people, to off-set tax has resolved many of these issues.

Another group are illegal immigrants who worked in sweat shops for long hours, poor and often unsafe conditions and very low pay. A new group giving rise to some concern are domestic workers brought in by Foreign Nationals, especially those affiliated to embassies. It has been found that often they are not paid, have their passports retained by their employers, are on call 24 hours a day with no days off and can often be beaten or sexually abused. As the Embassy staff have diplomatic immunity, often they cannot be charged for what amounts to kidnap, but there are moves in government to tackle this anomaly and to give these workers asylum status. Keep an eye on the press.

Officially, someone cleaning houses for a few hours a week or doing a bit of baby sitting should be registered as an employee but small infrequent jobs of work are largely disregarded by officialdom. However, they do form part of the informal economy.

In MICs and LICs the informal sector is far less controlled and involves a much greater variety of people and jobs. Most street workers in these countries do not appear on any statistics - these include street vendors, shoe-shine boys, car washers, litter pickers, as well as employees of back street workshops who work long hours in dangerous conditions. In some countries, children are sold by their parents to become ‘apprentices’ and so are virtual slaves until they reach adulthood and as it is for most part illegal to employ young children, they do not appear in any statistics either.

For example in India it has been estimated that the informal economy was responsible for 60% of net domestic product, 68% of income, 60 % of savings, 31% of agricultural exports and even 41% of manufactured exports! Some estimates say that as many as 80% of the population earn most of their money through informal means. In another example, Nigeria, it is thought that 40-45% of the GDP comes from the informal economy, even though Nigeria is a resource-rich country.