Question

6. What are the benefits of promoting the urban informal sector? What is the role is women in the informal sector?

Answer 1

What are the benefits of promoting the urban informal sector?

The informal economy is generally understood to include economic activities that fall largely outside the purview of official regulation, whether because the regulations do not apply or through some combination of weak enforcement and evasion. The urban informal economy includes a wide array of activities, from street vending to domestic service, from home-based enterprises to the informal employees of formal enterprises, and from waste picking to urban agriculture. While those operating in the informal economy are often open to sanction for not conforming to official regulations, informal economic activities should not be confused with the illegal goods and services. There are four features of the urban informal economy that make it particularly important for building economies that are greener and more inclusive. Firstly, the informal economy is not only large, especially in terms of employment, but is growing. No serious attempt to transform the global economy, socially and environmentally, can ignore it. Secondly, relations between local authorities and the informal sector are usually strained, and often dysfunctional. Improving these relations is critical if green economy agendas are to be pursued inclusively. Thirdly, the informal economy displays enormous variation in environmental performance. While there is potential for engaging it constructively, engagement must be discriminating. Fourthly, the informal sector is not only critically important to many of the poorest households but is highly gendered, with important implications for the pursuit of both social and environmental agendas.

What is the role is women in the informal sector?

The informal economy is extremely diverse, and the informal economy is not generally amenable to the same sort of policies as the formal economy. Access to capital is very limited and existing regulatory systems are poorly adapted to the realities of the informal economy, and the needs of those who depend on it. If informal economies are ignored when attempts are made to green the formal economy, activities that undermine these environmental goals may be displaced to the informal economy, as it is less regulated. However, if the response is to impose regulations designed with the formal economy in mind, those working in or dependent on the informal economy are likely to suffer. The heavily gendered and largely unpaid care economy, not officially even considered part of the informal economy, is also likely to be adversely affected by policies that, whether intentionally or unintentionally, burden the informal economy and informal settlements. Engaging with the informal economy is likely to require a consultative and negotiated process, of the sort advocated by proponents of pro-poor urban planning and inclusive urban development. There are parallels here to the sort of formal private sector engagement advocated in relation to the green economy, but for reasons outlined above the appropriate processes and forums are likely to be quite different.

From street vendors and domestic workers to subsistence farmers and seasonal agriculture workers, women make up a disproportionate percentage of workers in the informal sector. In South Asia, over 80 percent of women in non-agricultural jobs are in informal employment; in sub-Saharan Africa, 74 percent; and in Latin America and the Caribbean, 54 percent.

Working in this informal, or grey economy, as it’s sometimes called, leaves women often without any protection of labour laws, social benefits such as a pension, health insurance or paid sick leave. They routinely work for lower wages and in unsafe conditions, including the risk of sexual harassment. The lack of social protections has a long-term impact on women. For example, fewer women receive pensions globally, and as a result, more elderly women are now living in poverty. Even in developed economies, such as in France, Germany, Greece, and Italy, women’s average pension is more than 30 percent lower than men’s.