informality in latin america: interpretations, facts and opportunities victor e. tokman south...
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Informality in Latin America: Interpretations, facts and opportunities
Victor E. TokmanSouth Africa, June 2008
Informality from sector to economy
The ILO original contribution: working poor
Inadequate government intervention and regulations
Globalization and disguised wage labor
The ILO 2002 contribution: informal economy
The World Bank 2007: exit and exclusion
The Informal Economy in Latin America
Large and expanding size of the informal economy
Main component informal sector, but precarious labor expanding faster
Structure of the informal economy, 1990-2005
The Informal Economy in Latin America
Large and expanding size of the informal economy
Main component informal sector, but precarious labor expanding faster
Structure of the informal economy
Informal Economy: Employment StructureLatin America 2005
(%)
5.79.0
21.5 20.1
42.9
0.0
10.0
20.0
30.0
40.0
50.0
micro - employer domestic service worker - micro inf worker - formalfirm
self employed
The Informal Economy in Latin America
Large and expanding size of the informal economy
Main component informal sector, but precarious labor expanding faster
Income gaps within informal sector. Evidence of exclusion
Structure of the informal economy
The Informal Economy in Latin America
Large and expanding size of the informal economy
Main component informal sector, but precarious labor expanding faster
Income gaps within informal sector. Evidence of exclusion
Informality and labor contracts matter: differences in social protection
Structure of the informal economy
w ithoutcontract
w ithcontract
permanentcontract
othercontract
w age w orkers
coverage
28.7
84.8 89.3
65.0
25.9
74.1
40.8
33.2
0
10
20
30
40
50
60
70
80
90
FORMAL
w ithoutcontract
w ithcontract
permanentcontract
othercontract
w age w orkers
coverage
10.0
50.4
62.8
34.5
67.9
32.1
22.6
9.50
10
20
30
40
50
60
70
INFORMAL
w ithoutcontract
w ith contrat permanentcontract
other contracts
w age w orkers
coverage
19.3
80.485.5
61.4
37.7
62.3
46.2
16.1
0
10
20
30
40
50
60
70
80
90
Total coverage by work contract
Towards a strategy for inclusion and opportunities
1. Regulation of informal activities
Reduction of formality entry costs for all
Simplify rules and procedures
Redesign mechanism of access to formality
2. Labor regulations of informal enterprises
Recognition of labor relation
Progressive minimum labor rights floor (declaration plus)
Redefined labor inspection
Five pillars
Excessive and inadequate regulations for micro enterprise development
Insufficient capacity to absorb labor costs
Towards a strategy for inclusion and opportunities
4. Diffused labor relations: multi-enterprises relations
Identification of labor relations
Labor obligations and responsibilities under subcontracting
Home-work: a grey zone
5. Social protection for informal workers
Health and pension coverage: different modalities
Non-contributory universal guaranteesMixed systems: solidarity and contributory
3. Informal workers in formal enterprises In search of labor flexibility: a misguided reform based on a-typical contracts
The return of the permanent labor contract adapted to present requirementSpain from 1981 to 1997-2006Argentina from 1981-1985 t0 1998-2000) Negotiated flexibility: Spain, Argentina and Brazil
Spain 1981, Argentina 1991-1995, Peru 1993
Coverage of independent workers
Supplementary contributions From voluntary to compulsory Mono-taxes and special incentives
From informality to economic citizenship
Formality as a way to foster development of informality Tax-registration—accounting—business improvement
A different approach to formalityFrom the interest of the insiders to the benefits of the outsiders
From obligations to entitlements: reversing the sequence
Cultural change required
Productive cooperation instead of invidualism
Different relations with markets and institutions
Collective action rather than isolation: Organization, voice and representation
Labor contract recognition—protection--improved labor relations management
Capital recognition-collateral-access to credit