Question

• Should the informal sector be repressed or encouraged by policy makers

Answer 1

Informal sector should be repressed by policy makers. Informal sector has more disadvantages than advantages to a society. Moreover, informal sector is degrading to a nation's economy. Following are some of the major reasons for repressing informal sector:

1. Informal sector involves illegal activities like smuggling of goods, drugs, gold and weapons.
2. Informal sector has no job security for the employees since employers are not under government's regulation.
3. Most of the employees in informal sector are highly underpaid and work in poor environment because of absence of government regulation.
4. No pension, life and insurance for employees and hence no social security employee and his/her family.
5. People doing business in informal sector do not declare their income and do not give taxes to the government.
6. Informal businesses are deprived of taking advantage of government schemes and are not protected by the government.
7. Business in informal sector can never grow to a large scale because of unorganized business.
8. Business in informal sector never get global recognition and has very limited growth.

However, since informal sector is very large globally, it is not advisable to aggressively repress informal sector because it will discourage small scale informal and legal business to continue. Policy makers should slowly and steadily make policies to convert informal sector into formal sector to improve condition of both business as well as working employees.