Informal employment reaches record levels

Many people have lost their jobs due to the worldwide financial crisis. In developing countries with no unemployment insurance, they are now forced to work in positions with low pay and no protection, an OECD study says.

Some 1.8 billion people, or more than half of the global labor force, are working without formal contracts and social security, according to the Paris-based Organisation for Economic Cooperation and Development (OECD).

This level is expected to increase to two-thirds of the workforce by 2020 and could go even higher if more jobs are lost to the economic crisis and more migrants return home to informal sector jobs, said the OECD report “Is Informal Normal?” which was released on Wednesday. In comparison, 1.2 billion people are officially employed worldwide.

“Even during good times with robust growth rates, in many developing countries informal employment increased in some regions,” said Johannes Jutting, one of the study’s authors. “Though India grew during the last decade above five percentage points per year, people there feel better jobs are not being created.”

Jutting said nine out of 10 employees in India, or some 370 million people, did not have formal social security.

This informal employment had severe consequences for poverty in developing countries, the study said. Low pay, with no social benefits, increased the likelihood that the Millennium Development Goal of halving poverty worldwide by 2015 would not be met.

The OECD said “immediate and unconventional action” was urgently needed. It said measures were necessary to improve infrastructure, help develop skills, promote institutional reform and increase access to resources for informal businesses both in the formal and informal employment sectors.

These steps should be accompanied by public works projects and better access to micro loans.

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2 thoughts on “Informal employment reaches record levels

  1. From my point of view create informal jobs is easier and much cheaper for all companies and this can be said for developed as well as for developing countries. In Germany we have short time jobs which called 400 € jobs for which the companies don’t have to pay any insurance as long the salary of their employees don’t increase over 400 € per month and the number of this jobs is rising. Many workers especially immigrants even agree to make official contracts with the company for this short time job and work unofficial for a higher salary and without any insurance paid trough the company because the don’t see any other possibilities to find a better job.

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  2. I would like to draw the attention to micro-loans also called micro-credit. I have only recently discovered what it is, but it is a very succesful tool in decreasing unemployment. Also it will help to get people out of the informal sector and help them to eventually build up their own wealth. Public awareness for this concept should be increased more.

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