Developments and Best Practices in Informal Employment

Informal employment and informal economy are recent issues that have been targeted by emerging economies around the globe. Informal employment, in short, is the employment of individuals illegally without providing them with basic labor rights such as health insurance, social security, minimum wages, etc. Informal employment can take place in both the informal and formal economies. Informal economy consists of businesses that do not fall under the government rules due to unregistered enterprises and do not follow any of the government rules in respect to their operations. Countries around the globe have been making gains in formalizing their economies. However, under-developed and developing economies need to focus more on this issue and create better policies in order to decrease informal employment and informal economy. In terms of policies to decrease informal employment and informal economy, many countries have taken innovative initiatives to tackle the problem.

The European Union has used two strategies in decreasing the undeclared work within which several methods are applied.

  • Deterrence
    • Improved detection
    • Penalties
  • Enabling Compliance
    • Prevention
    • Legitimizing undeclared work
    • Changing attitudes

The International Labor Organization (2014a) has also introduced a set of policies that can be followed to transform the informal economy into a formal economy. The policies are as following:

  1. Quality employment generation: Pro-employment macroeconomic and sectoral policies.
  2. Governance, sustainable enterprises, and productivity.
    1. Working conditions and labor inspection.
    2. Promoting an enabling environment for sustainable enterprises.
    3. Access to finance.
    4. Skills development.
  3. Organization, representation, and social dialogue.
  4. Local development strategies, cooperatives, and the social economy.
  5. Promoting equality and addressing discrimination.
  6. Extending Social Protection

Both of these approaches along with other strategies applied by countries around the globe can be combined to create innovative approaches towards decreasing informal employment and informal economy.

Informal Employment_pdf
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