Informality: Exclusin and Precariousness

Victor E. Tokman Geneva, November 2007

Informality from sector to economy

The ILO original contribution: working poor Inadequate government intervention and regulations

Globalization and disguised wage labor

The ILO 2002 contribution: informal economy

The Informal Economy in Latin America

Large and expanding size of the informal economy Main component informal sector, but precarious labor expanding faster

Structure of the informal economy, 1990-2005

70 60 50 40 30 20 10 0 1990 Informal Sector 2005 Precarious formal w orkers 47.5 50.3 9.5 13.8

Peru Bolivia Ecuador Guatemala Nicaragua Paraguay Venezuela El Salvador Latin America Argentina Brasil Mexico Domin. R. Uruguay Panama Costa Rica Chile 0 10 20 30 informal sector 39.4 40 50 60 70 80 45.5 44.7 51.0 65.1 64.1 60.2 60.0 59.7 57.8 75.7 74.2 73.6 73.0 70.5

83.8 83.0

90

precarious formal w orkers

The Informal Economy in Latin America

Large and expanding size of the informal economy Main component informal sector, but precarious labor expanding faster Income gaps within informal sector. Evidence of exclusion Informality and labor contracts matter: differences in social protection

FORMAL
84.8 89.3

90 80 70 60 50 40 30 20 10 0 w ithout contract w ith contract 25.9 28.7 74.1

65.0

Total coverage by work contract

40.8 33.2 coverage w age w orkers permanent contract other contract

90 80 70 60 50 40
46.8

80.3

85.7

57.1
53.2

INFORMAL

30
70 60 50 40 30 20 10 0 w ithout contract w ith contract permanent contract 10.0 32.1 22.6 9.5 coverage w age w orkers other contract 34.5 67.9 50.4 62.8

41.8

20 10 0
w ithout contract

14.9

11.4
w ith contrat permanent contract

coverage w age w orkers

other contracts

Towards a strategy for inclusion and opportunities

Five pillars
1. Regulation of informal activities
Reduction of formality entry costs for all Simplify rules an procedures Redesign mechanism of access to formality

2. Labor regulations of informal enterprises

Recognition of labor relation Progressive minimum labor rights floor (declaration plus) Redefined labor inspection

Towards a strategy for inclusion and opportunities

3. Informal workers under precarious labor
In search of labor flexibility: a misguided reform based on a-typical contracts The return of the permanent labor contract adapted to present requirement Spain from 1981 to 1997-2006 Argentina from 1981-1985 t0 1998-2000) Negotiated flexibility: Spain, Argentina and Brazil

4. Diffused labor relations: multi-enterprises relations

Identification of labor relations Labor obligations and responsibilities under subcontracting Home-work: a grey zone

5. Social protection for informal workers

Health and pension coverage: non-contributory universal guarantees Maternity and child care

From informality to economic citizenship

Formality as a way to foster development of informality
Tax-registrationaccountingbusiness improvement Labor contract recognitionprotection--improved labor relations management

A different approach to formality

From the interest of the insiders to the benefits of the outsiders From obligations to entitlements: reversing the sequence

Cultural change required

Productive cooperation instead of invidualism Different relations with markets and institutions Collective action rather than isolation: Voice and representation