About the Informal Economy

dakar vendor

Photo by Olga Abizaid

The Informal Economy

The informal economy is the diversified set of economic activities, enterprises, jobs, and workers that are not regulated or protected by the state. The concept originally applied to self-employment in small unregistered enterprises. It has been expanded to include wage employment in unprotected jobs.

This summary explains why supporting informal workers is key to reducing poverty.

Ending the "Shadow Economy" Myth

Often, the informal economy is stigmatized as “illegal”, “underground”, “black market” or “grey market”. It is often called the "shadow economy" and characterized as illegal or inethical activity.

The generalization is unfair. The vast majority of informal workers are trying to earn an honest living against great odds. Rather than working in the shadows, a great many work in public spaces and make huge contributions to communities and economies.

Get the facts about the informal economy here: Myths & Facts

For in-depth information on the informal economy, read WIEGO Working Paper No. 1, The Informal Economy: Definitions, Theories and Policies by Martha A. Chen.

A Majority of the World's Workforce

The International Labour Organization released the first-ever estimates of the world's informal labour force: 61% of the world's workers are part of the informal economy.

More About the Informal Economy in this Section

  • Since its “discovery” in the early 1970s, the informal economy and its role in economic development have been hotly debated. History & Debates presents a brief overview and looks at subsequent debates and the dominant schools of thought on the informal economy.
  • Global estimates on the size of informal employment (ILO 2018) show 61 per cent of all workers are informally employed – 2 billion workers worldwide. The Statistics subsection offers data, details and discussion.
  • The informal economy is expanding in many contexts, appearing in new places and new guises. It plays a significant role in the global economy and, if supported, in reducing poverty and inequality. The informal economy does not, however, offer a “cushion” during economic crisis. Poverty & Growth Linkages explores these interrelated topics.
  • Occupational Groups features information on the size, contributions and working conditions of some of the most significant sectors (specific groups of workers) in the informal economy. While we have divided occupational groups, not all may be cleanly characterized by occupation. For example, home-based workers produce a variety of goods and services across many industries.
  • Economic and social policies have direct impacts on the informal economy. Policy Frameworks summarizes policy responses and considers policy frameworks.