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E-book The Job Ladder : Transforming Informal Work and Livelihoods in Developing Countries
In classical accounts of economic development, economic growth is seen to beaccompanied by a decline in informal employment.¹ Yet, in most developingcountries, particularly in sub-Saharan Africa and South Asia and less so in EastAsia and Latin America, informal forms of economic activity remain a persis-tent phenomenon in spite of rapid economic growth in recent decades (Kanbur2017). Informal employment now constitutes more than 60 per cent of total globalemployment (ILO 2018). In Africa, for instance, every 8 out of 10 work informally(ILO 2018). Micro, small, informal and household-run enterprises employ a largeshare of the workforce and provide livelihoods for the poor (La Porta and Shleifer2014). Women are more likely to engage in precarious forms of informal work,such as contributing family/unpaid workers in the enterprises headed by the malesin their households or in poorly paid casual jobs in the informal sector.However, it is important to note that informal economic activity takes manydifferent forms and plays different roles. In low- and middle-income countries,it is often a place of residual employment for impoverished, marginalized, andvulnerable workers, particularly at times of economic stress and crisis. It can,though, also act as a staging ground for household enterprises in their initialstage of growth. Accordingly, there is an increasing consensus in the existingliterature that the analysis of informality cannot be performed without recogniz-ing the extent of heterogeneity in informal work (see, inter alia,Chen 2012;DeVreyer and Roubaud 2013;Kanbur 2017). Informal workers range from multidi-mensionally deprived individuals in subsistence activities, including own-accountworkers, who are either single-person operators or heads of family units, andcontributing family workers at the lower end (lower-tierinformal workers andenterprises) to entrepreneurs and technical workers or professionals with high potential, who voluntarily choose to remain informal (non-registered) at the upperend (upper-tierinformal workers and enterprises).With ‘premature deindustrialization’ and the growth of the informal servicesector, it seems likely that the trajectory towards informalization in low- andmiddle-income countries may be intensified in the future (Rodrik 2016). The chal-lenge for policy-makers is then to find ways to encourage the movement of workersfrom informal to formal employment and, at the same time, to provide opportu-nities for more dynamic informal firms to grow and for those working in thesefirms to achieve remunerative work, even while remaining informal. However,in this effort, policy-makers are constrained by the lack of available evidence onthe causes of informality and the most effective mechanisms to reduce low-paid,informal employment.
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