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Tackling Vulnerability in the Informal Economy - Most workers in the world still go without social protection

 

With informality affecting 61% of the world’s employed population, it is crucial to secure the livelihoods of workers and families who rely on the informal economy, according to Tackling vulnerability in the informal economy.

The joint report by the Development Centre of the Organisation for Economic Co-operation and Development (OECD) and the International Labour Organisation (ILO) examines the diverse reality and multiple faces of informality, based on a large sample of countries representing various conditions, locations and stages of development. It uses recent ILO individual-based indicators of informality, available for 119 developing and developed countries, and the new OECD Key Indicators of Informality based on Individuals and their Household (KIIbIH), available for 27 emerging and developing countries.

The report finds that informality occurs in all types of employment and globally affects more than 4 in 5 own-account workers, 1 in 2 employers, 2 in 5 employees and all contributing family workers. The agriculture and industry sectors are the most exposed: nearly 94% of agriculture workers and 57% of industry workers are informal.

Furthermore, informality represents 70% of all employment in developing and emerging economies, compared with about 18% in developed countries. Globally, 81% of all enterprises are informal. While globally, informal employment is a greater source of employment for men, in a small majority of countries (55%), the share of women is higher.

The level of informal employment also varies substantially over the lifecycle, with youth and older workers more exposed. Informal employment absorbs less-educated workers: globally, about 94% of workers with no education are in informal employment, compared with 52% of those with secondary education and 24% of those with tertiary education.

The report, which for the first time adds a household dimension to the profiling of informal workers, shows that working individuals within households may be informally or formally employed. A majority of households are completely informal (all working members in informal employment) in most countries for which data are available. The share of completely informal households also varies greatly across countries and regions, from 3% in Chile to 92% in Burkina Faso.

A large number of children and older individuals are indirectly exposed to informality: on average among the 27 countries covered, around 60% of all children (under age 15) and older individuals (over age 60) in developing and emerging economies live in completely informal households. The figure is 80% or above in some African countries.

The report shows that contrary to common belief, informal workers and firms contribute somewhat to tax collection efforts both directly, through indirect taxes and presumptive taxes, and indirectly, through the links between formal and informal outputs. Furthermore, the informal economy also contributes to economic growth in several direct and indirect ways that go unrecognised, including the systematic transfer of hidden subsidies to the formal economy. Recent estimates point to a large contribution by the informal sector to GDP: as high as 30% with agriculture and 17% without agriculture.

The goal of universal social protection can only be reached if it is effectively extended to workers in the informal economy. This requires expanding both social insurance, which relies on employment-related contributions and thus may not reach the poorest, and social assistance, which targets the poor but relies on scarce public finance. Ensuring that both social insurance and social assistance are designed and implemented in a gender-responsive way is indispensable to promote gender equality and achieve universal social protection.

For more information or to request a copy of the report, journalists are invited to contact :

‒         Bochra Kriout (Bochra.Kriout@oecd.org; Tel: +33 145 24 82 96) at the OECD Development Centre

‒         Victoria Giroud-Castiella (giroud@ilo.org ) at the International Labour Organisation

 

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