According to the ILO, in 2020 more than 2 billion people – 62 per cent of the global workforce – were employed in the informal sector, the vast bulk of them in developing countries. The ILO defines the informal sector as consisting of employees who do not pay into social security programmes; more generally, the term can refer to businesses and workers that operate off-books, often without formal contracts or recognition, and without labour protections or benefits such as unemployment insurance and pensions. The sector is heterogeneous. It comprises, among many others, street vendors, domestic workers, undocumented farm workers and individual entrepreneurs (who in many cases themselves employ workers off-books). In emerging economies, the informal sector is massive, constituting an average of 85 per cent of the workforce in Africa, 53 per cent in Latin America, and 59 per cent in Asia and the Pacific. In developing countries, on average more than 95 per cent of economically engaged young people are in informal employment. Women make up the majority of the informal workforce in much of Latin America, sub-Saharan Africa and South Asia. In many cases, rigid labour laws have forced new labour market entrants into shadow or part-time employment.
But the phenomenon is not limited to developing economies. The growing ranks of the self-employed and ‘gig economy’ workers in Europe and North America also represent a new under-protected, and often underemployed, sector. In the past 20 years, most OECD countries have seen an increase in the share of ‘solo self-employed persons’ (defined as those who operate on their own without having dependent workers on their payroll) relative to other types of self-employment. And gig workers are estimated to make up 5 per cent of active workers in Italy, 7 per cent in the UK and 14 per cent in the US. According to Boeri et al., ‘… one-third of OECD countries do not have an unemployment benefit system for self-employed workers’. Also, maternity, sickness, invalidity and injury benefits are often less secure, and pensions often lower, for self-employed and informal workers.
