Informality, Poverty & Gender: Summary of WIEGO Findings

Poverty & Informality:
Significant but Not Complete Overlap

  • There is an overlap between working in the informal economy and being poor.
    • Average incomes and wages in the informal economy are lower than average income and wages in the formal economy.
    • A greater proportion of workers in the informal economy, relative to the formal economy, are from poor households.
    • A greater proportion of household income in poor households, than in non-poor households, comes from informal activities.
  • But there is no simple relationship between working in the informal economy and being poor or working in the formal economy and escaping poverty.

Hierarchy of Earnings Within the Informal Economy:
By Employment Status

  • Average earnings of micro-entrepreneurs tend to be higher (sometimes much higher) than the legal minimum wage.
  • Average wages paid to the employees of micro-enterprises tend to be near or below the legal minimum wage.
  • Average earnings from own account activities and family businesses tend to be near or below the legal minimum wage (with some notable exceptions).
  • Average wages paid to casual day labourers tend to be lower than the legal minimum wage.
  • Average piece-rates paid to industrial outworkers tend to be far lower than the legal minimum wage.

Segmentation & Gaps Within The Informal Economy:
By Sex

Gender Segmentation

  • Women are overrepresented in the informal economy in most regions: i.e., greater share of female workforce, than of male workforce, in the informal economy.
  • Majority of women in the informal economy are own account operators, casual wage workers, industrial outworkers, and unpaid contributing family workers; relatively few are employers who hire others.
  • Men and women are often involved in different activities or tasks, even within the same sectors and statuses.

Gender Gap in Earnings

  • Gender gap in average earnings/wages appears higher in the informal economy than in the formal economy – even within self-employment.
  • Relatively large gender gap in earnings/wages found in the informal economy – largely due to two interrelated factors:
    • hierarchy of average earnings by employment status hierarchy within the informal economy
    • women worldwide under-represented in high-earning statuses (notably, as employers) and over-represented in low-earning statuses (notably, as industrial outworkers)

Measuring Poverty & Informality:
Complicating Variables

Understanding and measuring the relationship between informality and poverty is complicated by the following factors:

  • Different units of measurement: employment status and earnings are measured at the individual level; income and poverty are measured at the household level.
  • Differences within the informal economy: understanding relationship between informal work and low earnings requires analysis by sector, status of employment, and sex/ethnicity/geography.
  • Differences between households: understanding relationship between informal work and household poverty requires analysis of other factors: composition, headship, and dependency ratio of household; number and type of household income sources; and education levels of adults in household.
  • Differences between individuals within households: understanding relationship between informal work, household poverty, and individual poverty requires analysis of intra-household dynamics.

Segmentation of the Informal Economy:
By Sex, Average Earnings & Poverty Risk

poverty risk and average earnings diagram