Informal sector

As the informal sector of the economy that part is called, whose economic activities are not reported in the official statistics. In industrialized countries, is spoken of economy and undeclared work. In developing countries include the manufacture and sale of products on local markets and simple services to do so. Due to the informal sector, the GDP of a country does not increase, or only indirectly, as it may also have sales increases in the formal sector by the value in this field.

  • 5.1 dissemination
  • 5.2 Importance for developing countries

Institution Economic Origin of the term

Under institutional economic perspective, the economy is seen as a construct of different rules. A distinction is made according to formal rules that are codified in some way - that is, here it is said visible and enforceable by any law. Informal rules, however, are not codified - these are, for example, verbal agreements, taboos or rituals. Now, when one speaks of " informal sector ", so it is first of all an economic area which is not settled by the right general - who sometimes even contravenes. Naturally lead informal workers are no direct taxes or other charges (income tax etc); however, they can pay very well indirect taxes ( such as VAT).

Legality vs.. Illegality: Institutional balance

During all operations that follow the formal rules of a business, getting even "legally", are all informal activities need not be "illegal". Where the common law does not provide for regulation or a ( general ) rule may not be useful, there is a loophole that of informal institutions (rules) will be filled out. So there are employment relationships in general from both formal and informal arrangements made ​​( for example, from the formal, statutory minimum holiday and informal, granted voluntarily by the employer additional vacation days ). If formal rules sensibly supplemented by informal rules, is the talk of the institutional balance.

Because illegal acts against valid ( formal ) violate law, they are also always informal.

Employment

A precise detection is hardly possible, because those who are employed in the informal sector, make surveys and researches false information to their employment in order to go further consequences and inconvenience out of the way. In the informal sector, a variety of heterogeneous activities are summarized. These include simple services such as shoe shiners, ice cream vendor or disc cleaner at traffic lights and urban survivalists, but also large parts of domestic workers, home workers and micro-entrepreneurs with fewer than five employees. Therefore, the majority of employees of the layer must be attributed, but work quite well middle class members in the informal sector.

Industrial relations in the informal sector therefore differ fundamentally from those of the formal sector:

  • Little or no separation of the production factors labor and capital: cuenta propia independence and (works on own account) are common.
  • No separate legal personality of the company; Owners are households or individuals
  • No formalization of labor relations: employment contracts are usually orally and closed only for extremely short duration.
  • Withdrawal of state control: labor laws, sick pay in case of illness, protection against dismissal or minimum wage do not apply for lack of employment contracts.
  • Social security such as pensions, health, unemployment or accident insurance hardly exists.
  • Statistically, can be informal working relationships capture both their quantity, as well as in their income barely.
  • Low level of organization and small production units, employment of family members

Therefore, a precise assignment to informality is also not possible, because there are several overlaps between formal and informal economy. Also note that not all places where work is informal, it is also each is illegal work. Practically include kinship domestic helpers, Honorary Appointments ( etc.) to the informal sector. However, these activities can not always be quantified and generally follow other " laws " - from socio-political and ethical point of view it is questionable whether such activities should always be assessed in purely economic terms.

Effects

Consequences for those affected

A large proportion of the population working in the informal sector is attributable to the lower class. Due to uncertain income prospects, non-membership in social insurance systems, and low -wage informal work exacerbate this trend. Frequently perpetuate ( solidify ) precarious housing situations and unaffordable health care and education system, the situation for the victims themselves and the next generation.

Economically particularly relevant is the uncertainty with which the persons concerned are facing, because their actions are not just "secured" by the formal right. This leads among other things to less willingness to invest - particularly in relation to their own human capital.

Impact on the economy

Informal enterprises and Subsistenzunternehmer are characterized by

  • Mostly small production units
  • Focus on the service sector ( non- shift out ) and the internal market
  • No accumulation of physical capital
  • Little accumulation of human capital and technology

As a result, the informal sector usually works very unproductive. For this reason it is also called low- productivity sector. Not only for patients, even for the whole economy, this has drastic consequences:

  • The lack of capital accumulation, the long-term productivity will greatly weakened. For future growth, prosperity and consumption possibilities of the economy are reduced.
  • This is reinforced by focusing on the service sector and thus the local or domestic market. Neither can such technological impetus is coming from the world market, nor can be financed with export earnings of capital goods imports.
  • The absence as contributors to the social security and as taxpayers they reduce the intake capacity of the state

In contrast, positive aspects can be seen.

  • The informal economy grants in different areas at least a kind of basic services, which means there is a ( minimal ) social equality instead; strictly speaking, the informal sector allows a kind of subsistence and thus independence. In times of economic crisis, the informal sector tw. take over some functions of the formal "normal" economy and thus to resistance and survivability of the socio - political order help (example: collapse of the Soviet Union and the Soviet command economy in late 1991, without this leading to a larger mass misery led ).
  • It provided rules and structures in question currently applicable regulatory ( = formal ); an institutional change can be initiated.
  • A greater variety of products for people with lower income may be the result, if not a primary care at all.
  • Due to the limited resources sector actors may find creative alternative solutions, for example, to access funds for the financing of specific projects - this applies, for example so-called informal banking systems, in which money is lent from a private collection. Here, then, certain resources are in turn used in a directed and effective, which can be understood prosperity promoting economically.

Consequences for the political system

Along with the detachment of government influence (control, Sozialversichungssysteme ) is also a decoupling of political intermediary organizations. Parties and trade unions play in the informal sector hardly matters. This allows the person concerned did not win the political influence that is necessary to move the state to improve the situation.

Nevertheless arise in the informality but also forces that are able to provide the state as such in question. There is therefore the one hand, the danger of "parallel societies", on the other hand also a " social pressure " of (political ) change. This is evidenced by, among others, in the efforts to legalize certain goods (eg drugs), or in the reduction of bureaucracy.

Neo-populism as a political supremacy concept is closely linked to the massive spread of informality in Latin America since the early 1980s and the concomitant decline of the mediating actors. President Alberto Fujimori, Hugo Chávez and Evo Morales strongly emphasize their roots in the people and their direct contact with the masses. Quite to interpret as a charismatic ruler in Max Weber's sense, they differ from " classical" populists like Juan Perón ( which particularly support to union workers) by their followers in the informal sector.

Importance

Dissemination

Developing countries are often characterized by an informal sector, which feeds a large part of the population. In Latin America and North Africa, he has about half of the working population. In some Asian countries and almost the entire sub-Saharan Africa more than two -thirds of the population works in the informal sector. But even in OECD countries, the degree of informality of up to 15 percent.

It should be noted that the informality not just have negative effects - with her people to be fed and bypassed bureaucratic hurdles. Because the latter illegal informality is often linked to corruption, which is, strictly speaking, and also classify themselves as informal activity.

Importance for developing countries

Most enterprises in the informal sector are family, as it is also tradition for developing countries. Because of poor professional training and lack of money easiest technique. The activities in the informal sector include the waste of the collector, sorter, and - recycler, trader status, the carrier that the village blacksmith, the women sell the collected their children continue to intermediaries. The women work as domestic servants (under the hand mediated ) or selling fresh fruit, vegetables and flowers on regional markets for offerings. Your money earned contributes to the family income. However, the work of the former rural women does not appear in the official statistics, since their activities are considered household work. The wages in these occupations is very low, the production of very labor intensive. The poor working conditions be accepted because there are no alternatives and the people need the money to survive. In the past, again and again came up with a discussion on how they could assist by ( vocational) training people in the informal sector (see Over Vienna / Lindemann 2003).

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