informal economy

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Fig. 15 Informal economy. Different types of work and economy.

informal economy


black economy

that assortment of paid work which takes place outside the formal structure of paid employment. It is not subject to the normal constraints of registration and taxation, and generally, therefore, is supported by cash-in-hand payments.

It is now realized that the study of formal employment does not exhaust the scope of the SOCIOLOGY OF WORK. Sociologist, Ray Pahl, and economist, Jonathan Gershuny published a provocative article (1980) in which they put forward the idea that there were in fact three different economies – the formal, the informal and the household. In the formal economy, the one recognized by governments, people sell their ability to work for wages and salaries; in the informal economy people might do work ‘off the books’, i.e. receive cash but not declare it to the state (the real ‘black economy’), or they might do a job for a neighbour or relative which would be repaid ‘in kind’; in the household economy the role of women in performing routine cooking, cleaning and caring in the home is recognized, as well as ‘do-it-yourself jobs carried out by both men and women.

Since 1980, conferences have been held, research has flourished, and books and articles have been published on activities ‘outside employment’. Fig. 15 summarizes different types of work and economy that have been identified by researchers.

A useful way of clarifying the differences (Pahl. 1984) is to imagine a woman ironing a garment at home. She could be ironing the garment before she delivers it to her employer for wages as an ‘out-worker’ (wage labour in the formal economy). She could be ironing the garment which she proposes to sell to get some extra cash with out declaring it to the state (wage labour or self-employment in the ‘black economy’). She may be ironing the garment as a housewife for her husband upon whom she is financially dependent (domestic labour in the ‘household economy’). Finally, she may be ironing the garment, with no expectation of payment, for a friend, neighbour or relative, or out of some obligation to the local church, club or other voluntary organization to which she belongs (work outside of employment in the ‘communal economy’).

Although some research suggests that the ‘black economy’ has grown during the economic crisis of the 1980s, it is important to keep its size and significance in perspective. In sum, work ‘outside’ formal employment needs to be studied in relation to that which goes on ‘inside’. Researchers need to consider the interconnections between the two, and examine both how wage-labour relations penetrate unpaid work, and how socially generated ideologies shape patterns of waged work. There has been much discussion of the use of the term to account for economic activities in THIRD WORLD cities where many people do not have access to permanent employment. See also DOMESTIC LABOUR, DOMESTIC PRODUCTION, PRIVATE AND PUBLIC SPHERES.

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