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.

References in periodicals archive ?
Tanjusay said the government could help informal economy workers by improving its social safety-net protection for them.
Hopefully, the 12th Five-Year Plan will unveil strategies to take the process of transitioning the informal economy forward.
El -Sewedy pointed out that the recent measures, such as by the establishment of the National Payments Council and the issuance of industrial licensing laws and companies, have helped create an atmosphere to convince workers in the the informal economy to transformshift the into the formal economy.
This views participation in the urban informal economy as a rational economic decision and as occurring when the pay-off is greater than the expected cost of being caught and punished (Allingham and Sandmo, 1972).
The monetary method is one of the most popular methods for estimating the size of the informal economy and is based on the ratio of currency and demand deposits.
It also aims to orient participants on the scope of informal economy; apprise the sector on the recent developments on the advocacy and activities spearheaded by various government agencies; and identify issues and challenges encountered by informal economy workers at the local level.
In turn, CONECT President Tarek Cherif expressed concern about the figures on informal economy, which accounts for more than 50% of Gross Domestic Product (GDP), which negatively affects national enterprises and jobs.
He said that the formal economy is shrinking since decades while the informal economy has been expanding over time and now it is bigger than the formal one.
More than half of the world's workforce is estimated to be involved in the informal economy, the ILO said.
40% of workers on a global scale are part of the informal economy, with Bulgaria occupying a prominent place in the ranking with a share of 30-35%, according to Plamen Dimitrov, President of the Confederation of Independent Trade Unions in Bulgaria (CITUB).
Despite notable positive economic growth achieved in recent years, the country has a high level of informal economy, which affects different sectors of the economy," research said.
According to the report, people choose to stay within the shadow of an informal economy because the cost of leaving comes at a higher rate compared to staying in.

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