(H)alf of the world’s population has no social security coverage at all. In many least developed countries, more than nine out of ten workers live and work without any type of safety net … The need for the expansion of social security coverage is greater than ever before. The gap in social protection, really in human protection, is just one dimension of a world full of imbalances. (Juan Somavia, Director General, International Labour Organisation)
The persistence of poverty worldwide is a major challenge of the twentieth century. More than one billion people struggle to survive on less than $1 a day (United Nations 2005). Of these, roughly half – 550 million – are working (ILO 2005). By definition, these working poor cannot work their way out of extreme poverty. They simply do not earn enough to feed themselves and their families, much less to deal with the economic risks and uncertainty they face. The majority of them earn their livelihood in the informal economy where, on average, earnings are low and risks are high.
Poverty reduction is not possible without addressing the root causes of the low level of incomes and the high level of risks faced by the working poor in the informal economy. The root causes include not simply the lack of productive resources and economic opportunities. What the working poor lack, more fundamentally, is labour rights (if they are wage workers), business rights (if they are selfemployed) as well as social protection, property rights, and the right to organisation and representation. The Institute of Development Studies–Women in Informal Employment: Globalizing and Organizing (IDS–WIEGO) workshop was designed to explore the challenge of social protection for the working poor in the informal economy through the lens of macroeconomic trends and policies.
Over the past decade, there has been renewed interest in the informal economy and those who work in it. There is now an expanded official international definition of the informal economy designed to incorporate all forms of informality. And there are efforts to improve the collection of labour force statistics using this expanded definition. However, the definition of the informal economy is still debated in some circles and labour force statistics in most countries do not include all categories of informal work. Furthermore, most policy prescriptions regarding informality have been framed in response to one or another category of informal workers without considering the full range of informal workers.
This article seeks to address the gaps outlined above. Section 2 presents the official international definition of informal employment and recent national data on informal employment so defined, including its links with poverty and gender inequality. Section 3 summarises the dominant causal theories of informality and proposes an integrative theory. Section 4 examines the social protection coverage gap in the informal economy and Section 5 provides a framework for considering what should be an appropriate policy response to this coverage gap in different countries.
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This article comes from the IDS Bulletin 39.2 (2008) Informality and Social Protection: Theories and Realities
