Informal employment in developed and developing economies: Perspectives and policy responses

• Date: 01 December 2013
• Published date: 01 December 2013
• DOI: http://doi.org/10.1111/j.1564-913X.2013.00196.x
• Author: Mark A. LANSKY,Colin C. WILLIAMS

International Labour Review, Vol. 152 (2013), No. 3–4

Copyright © International Labour Organization 2013

Journal compilation © International Labour Organization 2013

Informal employment in developed

and developing economies:

Perspectives and policy responses

Colin C. WILLIAMS* and Mark A. LANSKY**

Abstract. The aim of this introductory article is to provide a critical overview of

how informality has been dened and measured, together with selected ndings

on its extent and character, and a summary of competing views regarding its role

in contemporary economies and how it can be tackled. The outcome is a set of

conceptual frameworks for understanding both the burgeoning literature on infor-

mal employment and how each of the perspectives presented in this Special Issue

contributes to the advancement of knowledge on this subject so as to set the scene

for the articles that follow.

In the past two decades, according to Google Scholar, 3,170 outputs have

been published with the “informal sector” in the title and a further 1,550

with the “informal economy” in the title. Making sense of this voluminous lit-

erature is a difcult task. Accordingly, the aim of this introductory article is

to provide some conceptual frameworks to understand the various denitions

and measurement methods used in the literature, the differing perspectives on

the role of informality in contemporary economies, and the varying policy ap-

proaches regarding how it should be tackled. In doing so, the intention is not

only to provide some heuristic devices for understanding this voluminous lit-

erature, but also to show how the ten articles in this Special Issue contribute

to advancing knowledge on patterns of informality and its dynamics across the

global economy – from labour law violation in developed countries to surviv-

alist strategies in developing and emerging economies.

The remainder of this article is organized into ve main sections. The rst

addresses the perennial challenges of dening and measuring informal employ-

ment by reviewing the range of denitions and diverse measurement methods

that are being used. The second section then considers the emergence of more

* University of Shefeld, email: c.c.williams@shefeld.ac.uk. ** Managing Editor, Inter-

national Labour Review, ILO, email: lansky@ilo.org. The authors would like to express special

thanks to Uma Rani, Jayati Ghosh and Guy Mundlak for their helpful suggestions.

Responsibility for opinions expressed in signed articles rests solely with their authors, and

publication does not constitute an endorsement by the ILO.

International Labour Review356

nuanced understandings of the variable magnitude and character of informal

employment across the globe, along with current patterns of informality. This

is followed in the third section by an overview of the contrasting theorizations

of the role of informal employment in contemporary economies, whilst the

fourth section provides a conceptual framework for understanding the vari-

ous ways in which informal employment can be and is being tackled. Against

this background, the fth section then reviews how each of the perspectives

presented in this Special Issue contributes to the advancement of knowledge

on informal employment, thus setting the scene for the articles that follow.

Dening and measuring informal employment

How to dene informal employment and distinguish it from formal employ-

ment has been an ongoing debate ever since Keith Hart rst introduced this

concept in his work on Kenya and Ghana four decades ago (respectively ILO,

1972, and Hart, 1973).1 Across the vast literature that has ensued, all den-

itions delineate informal employment in terms of what is absent from it or

insufcient about it relative to formal employment, although what precisely

is denoted as lacking or missing differs depending on whether an enterprise-,

jobs- or activity-centred denition is used.

Informal enterprises, informal jobs and underground activities

Starting with the enterprise-centred denition, the 15th International Confer-

ence of Labour Statisticians in 1993 adopted a Resolution concerning statistics

of employment in the informal sector that attempted to solve the ambiguities

in meaning by dening “employment in the informal sector as comprising all

jobs in informal sector enterprises, or all persons who, during a given reference

period, were employed in at least one informal sector enterprise, irrespective

of their status of employment and whether it was their main or a secondary

job” (Hussmanns, 2005, p. 3).2 Focusing upon the type of rm and its legal sta-

tus, this Resolution dened informal enterprises as “private unincorporated

enterprises ... i.e. enterprises owned by individuals or households that are not

constituted as separate legal entities independently of their owners, and for

which no complete accounts are available that would permit a nancial sep-

aration of the production activities of the enterprise from the other activities

of its owner(s)” (ibid.). Since this denition was aimed primarily at improv-

1 Hart was a member of the ILO mission that visited Kenya and one of the drafters of the

cited report (headed by Hans Singer and Richard Jolly). His conceptualization of the “informal

sector” was soon to be used again in his study on Ghana (Hart, 1973). It should be noted, how-

ever, that an earlier strand of the literature had already come up with a similar characterization of

activities, which were described in terms of “instability”, “lack of organization”, being “disorgan-

ized” (see Geertz, 1963).

2

For the full text of the 1993 Resolution, see www.ilo.org/wcmsp5/groups/public/---dgreports/

---stat/documents/normativeinstrument/wcms_087484.pdf .