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Tackling Vulnerability in the Informal Economy

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A majority of workers in the world are informally employed and contribute to economic and social development through market and non-market activities that are not protected, regulated, well-recognised or valued. This study provides an in-depth diagnosis of informality and the vulnerability prevailing in the informal economy. It explores new ideas to improve the lives of workers in the informal economy based on the ILO indicators of informality and the new OECD Key Indicators of Informality based on Individuals and their Household (KIIbIH).

The report contributes in four ways to the global debate on the transition from the informal to the formal economy: 1) by examining the multiple faces of informality in a large sample of countries representing diverse conditions, locations and stages of development; 2) by presenting new empirical evidence on the links between informality and the development process; 3) by assessing risks and vulnerabilities in the informal economy, such as poverty and occupational risks, which can be mitigated with social protection and appropriate risk management instruments; 4) by showing that the transition to formality is a complex issue that touches on a wide range of policy domains.

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Definitions of informal economy, informal sector and informal employment

The concept of “informality” was first introduced in the 1970s (Hart, 1973[1]; ILO, 1972[2]). For more than four decades, there has been much discussion on the causes of informality around the world but also about the definition and the measurement of informality. In 2015, the ILO Recommendation n°204 concerning the transition from the informal to the formal economy describes the “informal economy” as referring to all economic activities by workers and economic units that are – in law or in practice – not covered or insufficiently covered by formal arrangements. The informal economy does not cover illicit activities. The Recommendation refers to the guidelines concerning the statistical definition of informal employment adopted by the 17th International Conference of Labour Statisticians in 2003 that themselves refer to earlier guidelines related to the informal sector. These guidelines are applied by many emerging and developing economies to measure informal employment, while developed economies typically do not measure such employment.

English

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