Promoting Decent Work:
Confronting the challenge
of Informality through
Dialogue
Joni Musabayana
Deputy Director
ILO Pretoria
SALGA Gauteng Informal Trade Workshop
20 Setpember 2012
What is Decent Work
“Decent work sums up the aspirations of people in
their working lives. It involves opportunities for work
that is productive and delivers a fair income; it
involves security in the workplace and social
protection for families; better prospects for personal
development and social integration; freedom for
people to express their concerns, to organize and to
participate in the decisions that affect their lives and
equality of opportunity and treatment for all women
and men”. ILO DG 1999
The four Pillars of Decent Work
•
Respects the fundamental principles and rights at
work and International labour standards;
•
Provides better opportunities for women and men
to secure decent employment and income;
•
Extends coverage and effectiveness of social
protection –social security and labour protectionfor all
•
Strengthens tripartism and social dialogue
The Four Pillars of Decent Work
All four strategic objectives are recognized by the
ILO as inseparable, interrelated and mutually
supportive. Failure to promote any one of them would
harm progress towards the other.
(Declaration on Social Justice 2008)
Decent Work Deficits
Decent Work Deficits are:
gaps and exclusions in the form of unemployment and
underemployment,
indecent wages, insecure income
unsafe work, poor quality and unproductive jobs,
rights that are denied at work;
gender inequality; pay differentials between women and
men
Decent Work Deficits
Decent Work Deficits are:
lack of representation and voice;
shortcomings in social dialogue;
inadequate protection of the worker in the face of job
loss, disease, disability and old age;
discrimination at the workplace on the basis of sex, age,
perceived or real HIV/AIDS status; minority status;
child labour;
Decent Work Deficits
The informal sector, where the labour market is
largely unregulated is characterized by gross decent
work deficits. Women are more likely than men to
work in the informal economy with little or no social
protection and high degree of insecurity.
Implementation of DWA
Decent Work Country Programmes
(DWCP) are the tools
through which the pursuit of the DWA is
implemented at the country level.
Overview of the South Africa DWCP
• The formulation of the SA DWCP involved a series of
consultative meetings between the ILO and the NEDLAC
constituents.
• During these consultations, key decent work deficits were
identified and country priorities defined.
• The priorities for the SA DWCP give effect to the protection
of fundamental rights and freedoms guaranteed to all
citizens under the Constitution of the Republic of South
Africa in the bill of rights.
• South Africa’s first DWCP was launched on 29 September
2010.
9
Overview of the South Africa DWCP
South Africa DWCP Priorities:
10
Priority 1:
• Strengthening Fundamental
Principles and rights at work
Priority 2:
• Employment Promotion
Priority 3:
• Strengthening and
Broadening Social Protection
Priority 4:
• Strengthening Tri-partism
plus and Social Dialogue
Key Outcomes
Priority 1:
Principles
and Rights
Priority 2:
Employment
Promotion
• Up-to-date International Labour Standards are ratified, complied with and reported on.
• Labour Administrations apply up-to-date ILO conventions, both ratified and those earmarked
for ratification.
•More women and men, especially youth and persons with disabilities, have access to productive and
decent employment through inclusive job rich growth
•Sustainable and competitive enterprises (including cooperatives) create productive and decent jobs
especially among women, youth and persons with disabilities
•Skills development increases the employability of workers and the inclusiveness of growth
Priority 3:
Social
Protection
• More people have access to better managed and more gender equitable social security and
health benefits
• Workers and enterprises benefit from improved safety and healthy conditions at work
• The World of Work responds effectively to the HIV&AIDS epidemic
Priority 4:
Social
Dialogue
• Strengthened labour market institutions and capacitated social partners (tripartite
–plus) contribute to effective social dialogue and sound industrial relations
1
Tackling the Informal Economy in the
SA DWCP: BackgroundAnalysis
• Against the challenge of increasing, the ILO will do the
following;
• support on-going national initiatives to ensure the application
of labour standards to protect the rights of workers in the
informal economy;
•
• provide policy advisory support towards the adoption and
application of labour standards to address decent work deficit
•
• Mitigating the impact of the crisis in the informal sector
requires the involvement of local government authorities in the
economic recovery plan.
Tackling the Informal Economy in the
SA DWCP: Outcome and Outputs
• PRIORITY 2: Employment Promotion
• OUTCOME 3: More women and men, especially youth and
persons with disabilities, have access to productive and
decent employment through inclusive job rich growth
• Output 3.5:
Policy options identified to improve working
conditions for the most vulnerable workers, with particular
focus on the informal economy.
• OUTCOME 4: Sustainable and competitive enterprises
(including cooperatives) create productive and decent jobs
especially among women, youth and persons with disabilities.
• Output 4.3:
Support for the upgrading and promotion of
Social Economy enterprises (including cooperatives).
Informal is not normal …
Growing concern as informal employment is:
•
•
•
•
•
A mass phenomena in Africa
The only access to employment for most new entrants (Youth issue
but also a peace building and social cohesion priority)
Persistent even in countries with good growth performance
Associated with working poverty and high vulnerability
Preventing households from increasing productivity and income to
escape poverty.
=> The recent global financial crisis have made policies to deal with
informal employment all the more urgent and relevant
Share of informal employment in total
non‐agricultural employment (%)
Source: OECD, 2009, Is informal normal? (Paris: OECD), based on data from the latest available
period in each region
Why is persistent informality worrying?
1. Employment growth in the formal segment of the economy in most
countries has lagged behind the growth of the labour force, and
these trends are likely to continue in a near future.
2. The level of informal employment into the formal sector is also
increasing in many countries
3. High exposure to risk combined with low social protection
coverage place most informal economy workers in a very
vulnerable situation.
 Supporting the transition to formalization appears to be one of the
main policy challenges to fight decent work deficits
Multiple factors of informalization
At the root of the problem of informal employment is:
•
The inability of many countries to create sufficient numbers of
formal jobs for a growing labour force, especially in rural areas
•
Global economy trends related to the reorganization of the
production at global level and the development of new
formal/informal economy linkages
=> Emerging forms of informal employment can be
complementary with economic growth and globalization
•
The lack of an appropriate environment for sustainable formal
MSEs
Informal employment and decent work
deficits?
Typically, though not in all cases, informal workers:
1. Are exposed to inadequate and unsafe working conditions, and
have high illiteracy levels, low skill levels and inadequate training
opportunities.
2. Have more uncertain, less regular and lower incomes than those in
the formal economy, suffer longer working hours and an absence of
collective bargaining and representation rights.
3. Their physical and financial vulnerability is increased by the very
fact of working in the informal economy, which is either excluded
from or effectively beyond the reach of social security schemes or
safety and health, maternity and other labour protection legislation.
Informal Economy: The ILO definition
• The conclusions of the general discussion on informal economy
that took place during the international labour conference in 2002
indicate that the “term “informal economy” refers to:
“ All economic activities by workers and economic units that are –
in law or in practice – not covered or insufficiently covered by
formal arrangements. Their activities are:
- Not included in the law, which means that they are operating
outside the formal reach of the law;
- Or they are not covered in practice, which means that – although
they are operating within the formal reach of the law, the law is not
applied or not enforced; or the law discourages compliance
because it is inappropriate, burdensome, or imposes excessive
costs” (paragraph 3)
Informal economy: A complex reality
• Informal employment comprises:
1. Own-account workers and employers employed in their
own informal sector enterprises,
2. Contributing family workers, irrespective of whether they
work in formal or informal sector enterprises
3. Employees holding informal jobs, whether employed by
formal sector enterprises, informal sector enterprises, or
as paid domestic workers by households
it encompasses very heterogeneous realities and
calls for differentiated and context specific policies
Informality, Poverty and Gender
Considering the heterogeneity of the
Informal economy
• Labour market segmentation with five employment
states:
1. Employment in the formal sector,
2. Employment in the upper-tier informal sector,
3. Employment in the easy-entry sector,
4. Employment in rural agriculture,
5. Unemployment.
Tackling the great diversity of
vulnerabilties in the informal economy
• The first step toward designing effective interventions to improve
conditions in informal forms of employment is to recognize the
heterogeneity of informal activities.
• For example, consider the case in which informal workers are able
to capture the majority of the value-added they produce. Under
such conditions, interventions that increase labor productivity will
raise living standards, since workers will be able to capture the
gains of the productivity improvements.
• However, for wage workers in the informal economy a focus on
productivity improvements as a strategy to raise living standards
could be far less successful than extending social protection, skill
development or enforcing core labour rights or minimum wages
Towards a pragmatic approach to
facilitate transition to formality
1.
•
•
•
Promoting formal employment:
Proemployment macroeconomic policies
Proemployment sectoral policies
Supporting formal sustainable MSMEs development
2.
•
•
•
Reducing informal employment:
Reducing the cost of the transition to formality
Increasing the benefits of being formal
Increasing the cost of being informal
3. Promoting decent work in the informal economy:
• Increasing productivity
• Increasing the capacities of workers to organize themselves
• Providing a minimum social protection floor, etc
Facilitating transition to formality
• Prevailing policies to this effect generally favour a
multidimensional approach which focuses on:
1. Providing support to foster the productive development of MSMEs
by facilitating their access to the market and productive
resources: credit programs, as well as training and promotional
programs to up-grade informal economy units and facilitate their
access to more dynamic markets.
2. Improving the social protection and working conditions of informal
workers. At this level, policy options tend to get mixed with
poverty-alleviation and social protection policies.
3. Reforming the regulatory framework.
The enterprise-upgrading policies for the
informal economy
• It should include:
1. Promoting a greater awareness of the benefits and protection that
come with formalization,
2. Creating an enabling policy and regulatory environment that
reduces, both at the national and local levels, the barriers to
formalization while protecting workers’ rights,
3. A particular focus on women entrepreneurs,
4. Fostering linkages between enterprises of different sizes in value
chains and clusters to improve market access,
5. Access to finance and business development services, and
6. Encouraging informal enterprises to join together in production
conglomerates or cooperatives.
Do not forget that Informality is costly too
The opportunity costs of operating in the informal economy are as
follows:
• Limited access to public services and high transaction costs related
to vulnerability to corruption, absence of rules of law and high
opportunism from business partners;
• Avoid profitable expansion. The majority of informal enterprises do
not expand or invest in modern equipment for they wish to minimize
their visibility and avoid attention from government institutions.
• Limited access to financial and BDS. Besides this, financial
institutions view MSEs as costly and risky.
• Limited possibilities to cooperate with formal enterprises. The
participation of informal firms in bilateral vertical linkages with formal
ones depends on their degree of formality
Accelerating the Formalization of Informal
Enterprises: A pragmatic approach
• Measures for encouraging the formalization of informal enterprises
need to address:
- The factors hindering their growth (productivity, skills, access to
resources and markets)
- The costs of formalization which discourage their participation in
formal societal institutions.
• Regarding labour regulations, the formalization of informal firms
may require review of labour regulations (i.e. specific regulations
for specific informal sub-categories) so as to enable those who can
meet part of the social contributions to do so instead of not
complying at all or closing up their businesses and in that way
increasing unemployment and poverty.
Innovative strategies for the enforcement
of labour law
• States should search for innovative forms of regulation based
more on “carrot and stick” approaches than “command and
control” to avoid unnecessary rigidity.
• Some of the more effective innovative regulatory approaches
have succeeded precisely because they have been inclusive
and participatory in their design and implementation.
• Three different regulatory techniques may prove particularly
fruitful:
1. Education, information and social dialogue.
2. Provision of financial subsidies and other incentives.
3. Innovative procedural regulation
There is not a stand-alone solution
• The State should use a wide range of regulatory and
enforcement techniques to achieve its policy goals.
• Techniques to design regulatory systems can, and should:
- Include hybrid strategies, using both governmental and nongovernmental actors;
- Be multi-faceted, using a number of different strategies
simultaneously; and may be indirect.
=> Core labour rights and standards as non-negotiable minima,
with non-compliance being subject to non-discretionary
punishment… But assumption that regulations are more likely
to be effective when there are different options available to
enforce laws.
Improving labour administration and
labour inspection
• In most situations, laws exist but the lack or limited compliance and
enforcement of laws and the regulatory framework in the informal
economy is the challenge.
 The strategy based on reducing the cost of the transition to formality
and increasing the benefits of being formal should go hand in hand
with increasing the cost of being informal
 the cost of informality should be increased in case of non compliance
with fundamental principles and rights at work
• These requires both:
1. Innovations in workplace inspection and advice, dispute settlement
and promotion of collective organization and action.
2. Training programs that target Informal enterprises which need to be
sensitized to the need of improving employment and working
conditions.
The need for an integrated policy framework
to facilitate transition to formality
Adapted to local conditions, integrated policies that address:
Growth strategies and quality employment generation
Regulatory environment, including ILS and core rights
Organization, representation
and social dialogue
Gender equality and the informal economy
Entrepreneurship, skills, finance, management,
access to markets
Extending social protection, including social security
Local (rural and urban) development strategies
Thank you