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.


Portraits of informality

Many of us may think we know what informality really is. Yet, the reality it captures is often less obvious than it seems. This chapter presents the informality profile of individuals and households across countries and regions. It relies on International Labour Organization (ILO) individual-based data on informal employment for 119 developing and developed countries, and the new Organisation for Economic Co‑operation and Development (OECD) Key Indicators of Informality based on Individuals and their Household (KIIbIH) database, available for 27 developing and emerging countries. Both refer to the ILO definition of informal employment, which includes employment in the informal sector, informal employment in the formal sector and informal employment in households. The resulting comprehensive portrait of informally employed individuals and their dependents shows distinct patterns that policy makers must take into account to effectively tackle the challenge of vulnerability in the informal economy.


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