Experimento Estrategias acentuales (A)

The economy is there to serve the needs of the people, it is not the other way around.

Manfred Max-Neef In a world in which, according to the UN general secretary Ban Ki-moon, for the most marginalized and vulnerable people in society exclusion and discrimination are some of the biggest obstacles for both collective and personal advancement; in which one in every five people are still living in extreme poverty and 58 million children do not attend school1; and where all of these people are forced to make a living in any possible way, ignoring legal barriers not by choice but out of need, it is hard not to ask oneself: Is it appropriate to exclude the marginalized and vulnerable workers –that is informal workers in emerging economies– of the possibility to formalize their work through establishing private and public entities which could be considered legal according to the laws of governments?

To try to answer this question throughout this chapter, I propose to begin by quoting some statistics that could allow us to understand in general terms what is meant by informality, which are the characteristics of the informal market and which is the structure of this market in emerging countries like Colombia.

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According to information released by the CUT (the Central Union of Colombian Workers), in 2012 the unemployment rate in Colombia was 10.4%, while the average rate for Latin America was 6.5%. Colombia is ranked as the fourth largest economy in the continent after Brazil, Mexico and Argentina, who are all considered ‘emerging economies’; but if we consider this high unemployment rate and add to it an economic informality rate of 68%, it turns out that Colombia also has the fourth largest informal economic sector in the region after countries such as Peru, Bolivia and Paraguay. Moreover, Colombia is the largest economy in the continent with the lowest legal minimum wage.2 This means that for a relatively large economy, Colombia has enormous levels of inequality, a very underdeveloped set of economic policies and a population that clearly depends on informality to overcome the government’s mismanagement of its economic legislation.

With such a high rate of informality, it would be pertinent to understand what informality means and what the characteristics that define informality in Colombia are. Regardless of whether informality is perceived as criminal or as a negative influence on the economy, a very appropriate definition –although not yet officially adopted by any government institution– for informal employment would be “the group of employees whose labor, in law or in fact, is not subject to national labor legislation, to income tax, to social protection or any other social security benefits related to employment.”3 _{According to} Castillo and Cubillos, based on information and data from the ILO (International Labor Organization) and DANE (National Department of Statistics) of Colombia, the following are some features that define the informal sector in Colombia:

 Informality exists basically because of the inability of the formal sector to generate enough jobs.

 Informality is not a real labor option but a possibility available against unemployment.

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 The informal sector is comprised of a minimum of illiterate people and mostly by people who have a low level of schooling.

 The informal sector becomes an employment alternative for families who are displaced from rural places to cities due to violence against the civilian population.  In the informal sector over 90% of people engage in sales and do not have a boss or

superior to whom they could be held accountable.

 In the informal sector monthly incomes range between as little as $300,000 Colombian pesos (around US$ 150) and as high as $500,000 pesos (around US$ 250), but rarely higher than that.

 If the average monthly income and the number of hours worked by a member of the informal sector are interrelated, an hour of work is worth about $ 1,250 pesos (US$ 0.50) on average for a person involved in informality.

 In the informal sector people find a high degree of satisfaction with the activities they performed and with their working conditions, which should be interpreted as complacency with a set of activities that allow them to cover their basic needs.4 For Galvis, in Colombia –where, we must remember, six out of every ten workers are in the informal sector– there are several factors associated with informality such as:

 In terms of the regional distribution of informality, cities which are most affected by the phenomenon, are those smaller suburban areas which are located outside the central Andean region, nearby bigger cities like Bogotá, Cali, Medellin and Bucaramanga.

 Informal workers have generally lower incomes than those involved in formal economic activities, and therefore also have living standards which are much lower.

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 In terms of gender, women are more susceptible to be in the informal sector than men and to occupy themselves as self-employed workers and family workers.

 Informal workers have low incomes; they are also young, poorly educated, work mostly in small establishments and live in suburban towns.

 Most informality corresponds to great amounts of poverty.

A response to the marginal effects of informality might be to improve the level of education of the population, to gradually increase the chances of workers to find formal employment. “This would indicate that improvements in the educational level of individuals can contribute to the reduction of informality, especially for that portion of the population comprised of young individuals, whose choices are in most cases to join the ranks of unemployment, or enter the informal sector, accepting jobs without social security.”5

Another issue that should be noted is that in Colombia a business or establishment is considered informal when it does not have a commercial registration issued by the Chamber of Commerce that must be renewed annually through a fee to avoid the risk of being sanctioned by the Superintendence of Industry and Commerce. The benefits of having a commercial registration, among others, are: to establish the existence, ownership and legal representation of the establishment; to have a source of commercial information available to potential customers about the business; to have referrals and financial solvency; to have access to the database of the Chamber of Commerce; to facilitate the acquisition of contracts with the public and private sectors, as well as obtaining credit from the financial sector.6

Apart from the lack of a commercial registration, an establishment is also considered Informal in Colombia when it does not keep account books, does not pay taxes and does not perform transactions for employee benefits. If, as mentioned above, 68% of the economically active working population –consisting of around 23 million people– in Colombia is informal,

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then most businesses in Colombia are operating without a proper registration and many economic activities are being kept off the record. But, more specifically:

[…] since the organizations that belong to the informal economy are not registered with the authorities, they cannot access certain essential public benefits, such as justice and government training programs. Moreover, when problems of protection of property rights or similar conflicts arise, they must resort to alternative mechanisms that, in general, are on the fringes of the law. Thus, this situation undermines the institutional capacity of the country and is a fertile ground for corruption and the deterioration of institutions.7

Despite the fact that inflation is being lowered in Colombia, that the unemployment rate is falling and that a high proportion of the new available jobs are formal, in the first half of 2014, informal employment –measured as the economically active population who do not pay social security– is still close to 70%. 8

At first sight, according to the research of Cárdenas and Mejia, Colombia seems to be in a trap of high levels of informality and low institutional capacity, which must be eradicated if it seeks to accelerate the rate of economic growth. The main reason for this, according to these researchers, is that, in most cases, informal sector enterprises do not have access to resources of the financial system, restricting its capacity expansion and investment in new technologies.9

What kind of economic, social and anthropological model could ensure that the informal market does not continue to be excluded from obtaining benefits such as financial resources, essential public assistance, training, investment and institutional protection?