Informal Employment and Vulnerability in Less Developed Markets

Abstract

Less developed markets refer mainly to developing countries or countries in transition, but we find less developed market segments also in emerging markets and highly developed countries. During globalization informal work has not shrunk: the outflow of surplus labor from subsistence farming is directed towards informal employment, the demise of the formal employment in countries in transition increased the share of informal employment, and migration tends to contribute to informal employment. Informal employment is related to various vulnerabilities. The reasons for this are inadequate or lacking social protection including occupational health and safety. Only 20 % of the world’s workers have adequate social protection and more than 50 % of all workers and their dependents are excluded from any type of social protection. This entails higher poverty risk, various health risks and increased vulnerability to idiosyncratic or covariate catastrophic risks. Informal employment is mostly involuntary, but it can also be a start-up strategy for a small business and a means to supplementary income. The article looks at informal employment in general and in five country cases. Nepal, Vietnam, Argentina, the Russian Federation and Finland serve for cases describing developing, emerging and developed markets. In developing markets the main problem is inadequate regulation of work, in emerging markets the regulation is largely there but there are problems of law enforcement and good governance. In developed markets there are market segments with informal employment and related vulnerability. The chapter ends with discussing the ways forward and focuses here on policies and research.