Informality is widespread across both OECD and non-OECD countries to varying degrees. Globally, almost 60% of workers lack the protections granted to formal employees, but there are large differences across countries. While informality remains relatively low in most high-income countries, nearly 12% of labour input within the European Union remains undeclared, and in countries such as Türkiye, Korea, and Chile, over a quarter of workers are informal. In emerging and developing economies, informal employment is far more prevalent, accounting for more than half of jobs in Colombia, Mexico and Thailand, and exceeding 70% in Egypt, Morocco, Peru and Indonesia. These high levels of informality affect productivity, job quality, and social protection systems, and can create barriers to fair competition.
While informal economic activities provide livelihoods for many people, they also reinforce barriers to entering formal employment and economic opportunities. Vulnerable workers often turn to informal work as the only or most accessible way to earn a living and sustain household income. For some, informality offers the autonomy to balance paid work with family or other responsibilities, even if it comes at the cost of lower security and earnings. For own-account workers, family enterprises, and micro-entrepreneurs, informality can offer a path to self-employment and a means to participate in local labour markets. Many informal businesses are small-scale or home-based and play an important role in providing goods and services within their communities.
Informality is also closely linked to the dynamics of local economies and communities. It tends to be concentrated in specific places and sectors, such as rural areas, peripheral urban zones, agriculture, construction, and small-scale retail. Because the factors that sustain informality are often local, local actions are also key to addressing them. Local authorities (regions and municipalities), local employment services, business associations, microfinance institutions, fintech and social economy organisations can engage directly with informal workers and firms, build trust, and design integrated responses. Strengthening local capacities to do so can make policies more effective and contribute to more inclusive and resilient communities.
