Pressures towards and against formalization: Regulation and informal employment in Mozambique

• DOI: http://doi.org/10.1111/j.1564-913X.2014.00014.x
• Date: 01 September 2015
• Published date: 01 September 2015

Copyright © The authors 2015

Journal compilation © International Labour Organization 2015

International Labour Review, Vol. 154 (2015), No. 3

* Professor, Management School, University of Shefeld, email: p.dibben@shefeld.ac.uk

(corresponding author). ** Professor, Essex Business School, Essex University, email: gtwood@

essex.ac.uk. *** Professor, Management School, University of Shefeld, email: c.c.williams@

shefeld.ac.uk.

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

publication does not constitute an endorsement by the ILO.

Pressures towards and against

formalization: Regulation and informal

employment in Mozambique

Pauline DIBBEN,* Geoffrey WOOD** and Colin C. WILLIAMS***

Abstract. The informal economy accounts for the bulk of employment in many

emerging economies. Regulation theory suggests that all economic activity is char-

acterized by a complex combination of formal and informal regulation. Looking

at the case of Mozambique, this article explores the pressures towards and against

formalization, and the forms regulation can take, drawing on qualitative research

based on in-depth elite interviews and observation. The ndings highlight how the

State’s role in promoting formalization of the informal economy is ambivalent; its

approach incorporates both “progressive” elements, which focus on the modern-

ization of regulations and institutions, and “conservative” elements, which inhibit

this process of change.

This is a study of regulation, formalization and persistent informality,

examining the informal economy in Mozambique. It is commonly as-

sumed that the informal economy in Africa is an unregulated realm (see

Castells and Portes, 1989). However, in contrast to much of the mainstream

development literature, regulation theory suggests that informal economic ac-

tivity is not characterized by weak or absent regulation, but is regulated in

informal ways (Coetzee et al., 2001; Jessop, 2001). This article explores the

forms that regulation of the informal economy can assume, and the pressures

towards and against formalization. The term “formalization” is complex and

value laden: it implies that the logic of state intervention is towards formali-

zation, when in practice the State may promote or sustain “informalization”,

according to vested interests (Harriss-White, 2010).

International Labour Review374

The remainder of this article is divided into ve sections. The rst de-

scribes the situation regarding the informal economy in Mozambique, a

southern African developing economy. The second section explores differing

accounts of the relationship between regulation and the informal economy.

The third contains an evaluation of informal employment in Mozambique,

which draws on in-depth elite interviews and observational research, building

on existing literature on employment and institutional development in Mo-

zambique.1 The fourth section presents the ndings, which highlight the com-

plexities of regulating to promote formalization, given the ambivalent role of

the State in promoting and inhibiting formalization: the State’s approach in-

corporates both “progressive” elements, which focus on the modernization of

regulations and institutions and the development of infrastructure, and “con-

servative” elements, which inhibit this process of change.2 The fth and nal

section presents our conclusions. In highlighting the challenges inherent in the

process of formalization, this article has wider implications for those econo-

mies attempting to move from emerging to advanced economy status. Mo-

zambique is a useful case study in this regard, due to its relative economic

success and progressive employment regulation, yet persistently high levels

of poverty, with much reliance on informal employment (AfDB and OECD,

2008; World Bank, 20 09).

In this article, employment in the informal economy is understood to in-

clude both “employment in the informal sector” and “informal employment”,

as dened in the Resolution concerning statistics of employment in the infor-

mal sector adopted by the 15th International Conference of Labour Statisti-

cians (ICLS) in 1993,3 and the Guidelines concerning a statistical denition of

informal employment adopted by the 17th ICLS in 2003,4 respectively (see also

ILO, 2012a, Annex 2). Employment in the informal sector is an enterprise-

based concept which is dened as jobs in unregistered and/or small unincorp-

orated private enterprises; such enterprises are not constituted as separate

legal entities (and are thus not ofcially registered) and do not maintain a

complete set of accounts. Informal employment is a job-based concept and

encompasses those jobs that generally lack basic social or legal protections or

employment benets and may be found in the formal sector, informal sector

or households (ibid.).

1 See, for example, Webster, Wood and Brookes (2006); Cramer, Oya and Sender (2008);

Lindell (2008); Wood et al. (2011); Dibben (2010); Dibben and Nadin (2011); Dibben and Williams

(2012); Dibben and Wood (2013).

2 In this article, we are not suggesting that modernization necessarily implies the adoption of

a Western (e.g. United States model), Asian (Korean, Japanese), or any other existing approach to

the organization of work. The focus is on the regulation and institutions necessary for promoting the

formalization of work and, conversely, the conservative tendencies inhibiting change in this respect.

3

The full text of the 1993 ICLS resolution is available at: www.ilo.org/wcmsp5/groups/public/

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

4 The full text of the 20 03 Guidelines concerning a statistical denition of informal em-

ployment is available at: http://www.ilo.org/wcmsp5/groups/public/---dgreports/---stat/documents/

normativeinstrument/wcms_087622.pdf.