ANNEX XIII / ANEXO XIII
NOTES ACLARATÒRIES / NOTAS ACLARATORIAS
The degree to which social protection is provided to informal sector workers varies widely across Asia. The factors that account for this variation include (i) share of the informal sector in the total labor force, (ii) amount of resources devoted to social protection, (iii) nature and design of social protection policy, and (iv) level of effort devoted to providing social protection to the most
excluded members of society (Kabeer et al. 2010). There is similarly wide variation in the social protection programs and benefit delivery methods used to address the specific needs of informal sector workers.
Broadly speaking, the informal sector comprises all economic activity that remains outside of the official institutional framework. Given this definition, informalization of the workforce can occur through self-employment, wage work in enterprises in both the formal and informal sectors, or home-based work. In 2003, the 17th International Conference of Labour Statisticians broadly defined the informal sector to include (i) own-account workers who work in their own informal sector enterprises; (ii) employers who work in their own informal sector enterprises, and contributing family members; (iii) members of informal producers’ cooperatives; (iv) employees holding informal sector jobs as defined by the employment relationship; and (v) own-account workers engaged in the production of food for final use by their own household (Rys 2013). Such a definition encompasses all workers outside of the formal regulatory environment, and therefore outside of the typical coverage of social services, rather than workers who are simply employed by informal sector enterprises or who work without employment contracts. This definition has broad implications for the design and coverage of social protection systems.
There is wide variation in the level of informality in labor markets across Asia’s subregions and countries. East Asian countries have benefited from substantial economic growth in recent years, and have thus seen increasing levels of formalization of their labor markets. In contrast, while Southeast Asian countries are projected to experience substantial employment growth over the coming years, this growth has been coupled with a continued high incidence of vulnerable employment (i.e., 59.0% of all employment in 2013). Vulnerable employment comprises informal sector employment that lacks an income or employment guarantee, home-based work, and uncompensated household work, the latter disproportionately characterizing employment of women in the region (i.e., 63.1% for women as compared with 56.0% for men in 2013) (ILO 2014).
In South Asia, the informal sector accounts for a relatively large share of the total labor market. For example, during 2009–2010, informal employment comprised 83.6% of all nonagriculture employment in India, and 78.4% in Pakistan, with similar corresponding figures for other South Asian countries.5
Such heavy reliance on the informal sector suggests a high level of income and employment insecurity in South Asia, a situation further exacerbated by low
5 ILO. Women and Men in the Informal Economy—Statistical Picture. http:// laborsta.ilo.org/informal
labor force participation rates, in large part due to differences in rates between genders. For example, while the region’s total labor force participation rate was 56.1% in 2012, it was 80.6% for men but only 30.4% for women (ILO 2014). Such statistics demonstrate that women are more likely than men to engage in uncompensated work at home, which is a form of vulnerable employment since women’s autonomy within a household or community is lessened by their lack of an independent income source.
Thus, in tandem with expansion of the informal sector in many parts of developing Asia, the share of women and youth employed in the informal sector has increased. One component of the informal sector driving this trend is growth in subcontracted home-based work in manufacturing and services (Mehrotra and Biggeri 2002). While an increase in home-based work simultaneously encourages development of microenterprises by women, contractors looking to cut costs by outsourcing product manufacturing or service delivery also tend to exploit home-based workers. This outcome has caused the relative income and living standards of informal sector workers to deteriorate, as it diminishes their bargaining power with respect to wage offers (Kudva and Benería 2005). Youth are also disproportionately represented in the informal economy (Rys 2013). As individuals are increasingly able to work into their later years, fewer opportunities are left for youth who lack the requisite experience and skills for procuring formal sector employment. Their only alternative is work in the informal sector. However, engaging in low-skills activities may limit the opportunities available to youth for finding more productive forms of employment later in life.
The 90th Session of the International Labour Conference identified the lack of representation and rights in the workplace and lack of social protection as key decent work deficits in the informal economy (Shrestha 1991). These deficits are due to the informal sector operating outside of legislation, such as factory or commercial acts and tax or social security laws (Chen, Jhabvala, and Lund 2001). This causes informal sector workers to be more vulnerable to shocks arising from job and income insecurity and unsafe working conditions. It makes them more vulnerable to contingencies such as illness, injury, or death. From a fiscal perspective, ultimate inclusion of untaxed workers’ wages in the social protection system would greatly ease the financing of social protection, as an insufficient tax base can diminish both the number and coverage of social protection initiatives.
Although there are vast differences between most formal and informal sector enterprises, the two are often inextricably linked, as most segments of the informal economy have connections to production, trade, and services in the formal economy (Chen, Jhabvala, and Lund 2001). This notwithstanding,
informal sector workers do not benefit from the rights afforded to those who work in the formal sector.