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Informal Economy & Decent Work: Challenges for Trade Unions. Arun Kumar, Actrav-ILO-Turin. What is Informal Economy?. Activities (&employment) outside the purview of fiscal & labour laws?

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Informal Economy & Decent Work: Challenges for Trade Unions

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Informal Economy & Decent Work:Challenges for Trade Unions

Arun Kumar, Actrav-ILO-Turin

What is Informal Economy?

  • Activities (&employment) outside the purview of fiscal & labour laws?

  • Large & growing fast, with millions dependent on it for livelihoods; accounts for 50-75% of non-agricultural employment in developing countries, in some countries more;

  • Not a homogenous sector; highly diverse depending on the nature of enterprise & the kind of employment offered; covers a wide variety of activities, enterprises and different types of workers with diverse employment relationships (Examples?)

  • Very difficult to arrive at a universally accepted 'definition' of informal sector or informal economy that would be applicable in all cases.

Definition of Informal Economy?

Definition based on legal status of the enterprise sees - Informal economy as part of the household sector of unincorporated enterprises owned by households (includes own account workers, unpaid family labour, besides employees in informal enterprises).

…this however leaves out a large number of workers in other informal low paid, low productivity work situations such as home workers, domestic workers, casual daily wage labour not declared by employers in formal and informal enterprises.

Some characteristic features of informal economy workers

  • Engaged in enterprises & activities for which data is not regulated & which do not maintain any regular accounts;

  • Casual, part time, irregular or seasonal employment;

  • Frequently changing work places as also employers;

  • Unclear (or denied) employer-employee relationship;

  • Although entitled to but generally not covered under the labour laws;

  • Poor working conditions, Unorganized; No collective bargaining;

Some characteristic features of informal economy workers

  • Minimum wage or piece rate work - low earnings (exceptions exist);

  • Little or no access to formal sector credit, or skills training facilities;

  • Unpaid workers in family business;

  • Home workers; &/or Self employed; &/or Artisans;


    Informal economy work linked with formal sectors

Why is Informal Economy Growing?

  • Lack of growth of employment in the formal sector – due to slow growth of economy &/or faster growth of population

  • Due to economic crisis & economic restructuring policies – declining public investments on social & economic sectors - adversely impacts on workers chances of finding employment in modern/ organized sectors, leaving people with no choice but to seek survival in informal sector activities

  • Restructuring in production & services sectors (decentralizing of production, sub-contracting & outsourcing, downsizing of employment, encouragement of self employment, home working, part time work, etc.)

  • Other reasons - ???

TUS & Informal Economy

  • Large no. of efforts being made to organize & improve conditions of work in informal economy

  • Unions campaigns generally focus on - Organizing, minimum wages, inflation compensation, social security & recognition of trade union rights

  • Participants views…. What are their unions doing?

Hurdles in Organizing

  • Attempts to organize often pose risk of denial of work & threat to livelihoods;

  • Traditional form of organizing against a well-defined employer does not work since in the informal sector the employers keep changing as does the work place and often the nature of work;

  • Often the identity of the employers is hard to establish as per the existing requirements of the labour law;

  • The law often does not cover home based workers (a major form of employment in the informal economy) who are often thought of as self-employed workers;

  • Trade unions have shortage of resources (cadres and finances);

Hurdles in Organizing

  • Trade unions, being male dominated, have little access to the women workers (who constitute a sizeable part of the informal economy workers);

  • Inadequacy of the labour law administration also hinders the efforts of the trade unions to improve the situation in the informal sectors.

  • In the informal sector, often it is more a case of providing social protection services (such as micro-insurance, health care, access to markets, schemes for training & welfare rather than negotiating against any one particular employer (though in many cases this too can be done).

    Very few trade unions play these roles or provide such services (although the unions are beginning to recognize the necessity for these new functions);

  • What else?

  • Why should unions organize informal economy workers?

  • There cannot be any one strategy for organizing in the informal economy, given the diverse nature of activities and the organization of work in the informal sectors as also the needs of the workers.

  • What kind of initiatives have been taken by unions for informal economy workers?

Issues that need TU’s Attention

  • Organizing!

  • Improving conditions of work

  • Promoting Income Security, Employment Security & Social Security

  • Legislative protection

  • Promoting rights & protection of women workers, in particular non-discrimination in employment, education, skills training, credit availability & working conditions - Organizing & integration of women in the trade union movement

  • Elimination of Bonded & Child Labour

ILO & Informal Economy

  • Informal Economy refers to - all economic activities by workers & economic units that – in law or in practice – are not covered or insufficiently covered by formal arrangements

  • Activities that are not – recognized, recorded, protected or regulated by public authorities

  • Unregulated wage, self and home based workers with little or no social protection, organization or voice at work

  • Informal Sector – term first used in 1972 by ILO – it was expected to disappear as economy developed

  • Dilemma of the informal sector (1991 ILC) – utility of informal sector as provider of employment & incomes v/s regulation – conference sought comprehensive & multifaceted strategy to support employment creation role of informal sector while eliminating progressively the exploitation & inhuman working conditions

  • Dilemma continues – flexibilization & informalization of production and employment relations grew so much so as to give rise to informal economy concept – most new employment is in informal economy

What is Informal Employment?

  • Own-account workers employed in their own informal sector enterprises;

  • Employers employed in their own informal sector enterprises;

  • Contributing family workers, irrespective of whether they work in formal or informal sector enterprises;

  • Members of informal producers’ cooperatives;

  • Employees holding informal jobs, whether employed by formal sector enterprises, informal sector enterprises, or as domestic workers employed by households;

  • Own-account workers engaged in the production of goods exclusively for own final use by their household.

    Source: 17th International Conference of Labour Statisticians (ICLS) in 2003

‘Informal’ does not mean there are no rules or norms regulating the activities of workers or enterprises - informal economy activities have their own political economy, their own rules, arrangements, institutions & structures for mutual help, trust, providing loans, training, enforcing obligations, etc

Securities/Rights denied in Informal economy

  • Labour market security – employment opportunities

  • Employment security – protection against arbitrary dismissals, regulations on hiring & firing, etc

  • Job security – secure occupation &/or opportunities for career development

  • Work security – protection against accidents, illnesses at work, safety &health regulations, working hours, etc

  • Skill reproduction security – opportunities to gain/ retain skills (formal apprenticeship, emp trg)

  • Income security –

  • Representation security (FoA, collective bargaining)

Decent Work Deficits

  • Poor quality, unproductive & unremunerative jobs

  • Un recognised &/or unprotected by law

  • Absence of rights at work

  • Inadequate social protection

  • Lack of representation and voice at work

    These aspects are also true of formal sector jobs in many cases.

ILO’s Response – Decent Work For All!

  • All those who work, have rights at work!

  • Decent Work approach conceptualized to cover all workers

    • Addresses all workers (w/m) in all economic sectors (formal, informal)

    • Participatory & progressive goal – sets floor of social & labour standards that should apply to all;

    • Interventions in different but connected aspects of the world of work


  • Restatement of ILO’s historical mandate in today’s context; represents tripartite consensus within ILO as a way to respond to the challenges posed by the globalizing world;

  • It is a development strategy that reflects people’s aspirations for decent jobs, better opportunities, voice & representation;

  • Although it puts forward a global social floor, it is a dynamic & a participatory strategy that raises standards with country’s development;

What is Decent Work?

Work that is productive,

gives fair income,

security in the workplace & social protection for the family,

equal opportunities & treatment,

better prospects for - personal devt & social integration,

freedom to organize and participate in decision making

How is it to be achieved?

  • Creating productive jobs – thru sustainable economic & social devt;

  • Guaranteeing basic rights at work to all workers;

  • Providing basic social protection for all – a minimum protection against low or declining living standards;

  • Promoting social dialogue and conflict resolution;

Fundamental Principles and Rights at Work (1998)

  • Freedom of association & recognition of the right to collective bargaining

  • No forced/compulsory labour

  • No child labour

  • Elimination of discrimination in employment and occupation

    …. a global social floor

What needs to be done?

  • Recognize & improve labour rights of workers

  • Enhance social protection

  • Invest in knowledge & skills of workers

  • Provide access to credit & support services

  • Provide legal & institutional support

  • Give economic incentives to promote formalization of informal economy activities

  • Remove barriers to employment creation in formal sectors

  • Regulate labour supply – rural-urban migration

  • Promote organizing

  • What else? (participants views)

Group Work

  • What, according to you, are the needs of workers in informal economy?

  • What initiatives has your union taken to organize informal sector workers? Give two examples

  • What steps need to be taken by TUs to organize home based women workers?

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