As world leaders met in Davos, Switzerland, in January for the 56th annual meeting of the World Economic Forum, geopolitical uncertainties, new technologies and rapidly changing trade relationships have emerged as consequential challenges impacting the world of work. A major concern for the international development community is how to ensure decent lives and livelihoods amid rising geo-economic tensions and the collapse of the rules-based order.

With their eye on the so-called new economy, government officials and business leaders suggest that skills transformation and macroeconomic and regulatory reforms are crucial for realizing its economic and social benefits. However, with these leaders’ primary focus on artificial intelligence and the digital revolution, a critical question arises: What about the challenge of jobs today?

According to the International Labour Organization’s Employment and Social Trends 2026 report, approximately 186 million people globally are unemployed. At the same time, many lack access to decent and stable jobs. As a result, the informal economy is the main form of employment and an important source of livelihoods for most of the world’s workers.

Despite this, workers in informal employment remain excluded in discussions about the future of work.

Workers in the informal economy already pay tax, and additional hikes would harm

Workers in informal employment should be seen as drivers of development and economic growth. In cities like Accra, Bogotá and Dhaka, communities rely on street vendors and market traders for affordable food and goods, and worldwide – with inadequate access to care and social services – women and girls perform an estimated 12.5 billion hours of unpaid care work daily.

But instead, where the informal economy is mentioned, workers in informal employment are often seen as obstacles. As a result, there has been increased interest in regulating informal work by formalizing informal enterprises and incorporating them into the tax base. The rationale is the belief that formalization can unlock substantial untapped government revenues and stimulate economic growth. However, a study by WIEGO in collaboration with the International Centre for Tax and Development highlights that this perspective neglects the diversity of fees and payments that workers in informal employment already contribute to municipal and national revenues. Further, this approach tends to overestimate workers’ capacity to contribute more to taxes than they already do on their low and insecure earnings. Therefore, increasing taxes on workers in informal employment is likely to harm rather than improve livelihoods, particularly in developing countries where many already struggle to survive.

In reality, corporate taxes are cut while lowest-income earners pay more

A recurring theme in Davos was the persistent optimism about the private sector’s ability to generate wealth and create jobs. This is despite numerous studies indicating that in many regions, job creation has failed to keep up with the growth of the working-age population. Key sectors such as artificial intelligence, energy and infrastructure are seen as vital for achieving inclusive and sustainable development. Hence, governments are encouraged to incentivize corporations to increase investments through macroeconomic reforms that support the ease of doing business, enhance competitiveness and build resilience across sectors. In reality, this typically involves reforming trade and fiscal policies by reducing corporate taxes and simplifying regulatory compliance at the national level.

At the same time, government policies are typically less supportive of activities in the informal economy compared to those in the formal private sector. A 2022 WIEGO study involving 2,700 home-based workers, market traders, and street vendors in Accra, Ghana, showed that taxation in the informal sector was highly regressive, with the lowest-income earners paying 17% of their income in taxes, fees, and other payments. Also, these workers largely lacked access to state-based social protections, and frequently faced hostility from the state, including evictions, which hindered their ability to earn a living.

 Addressing corporate tax abuse could free revenue to finance social protection

Since workers in informal employment are usually not registered for income tax, many experts believe that including them in the tax base could reduce the gap in social protection coverage. The prevailing narrative is that informality limits fiscal space. However, WIEGO’s research suggests that taxing vulnerable workers in informal employment is unlikely to generate the substantial revenue gains that policymakers envision. Further, studies show that, despite contributing to government revenues at various levels, workers in informal employment are frequently excluded from accessing essential services.

While many governments seek to boost revenues by taxing workers in informal employment, research shows that lower-income countries lose taxes equivalent to more than one-third of their health budgets to corporate tax abuses. Further, a study of 18 OECD countries found no evidence that corporate tax reductions led to increased employment or economic growth over a 50-year period. Instead, the rich got richer without any significant social or economic benefits. In contrast, employment in the informal economy has been associated with reductions in extreme poverty and, in many regions, serves as a vital source of income for vulnerable women and girls. However, these workers’ contributions continue to be undervalued and misrepresented in key macroeconomic policy discussions and debates.

How WIEGO is teaming up with workers’ organizations to advocate for decent jobs through fair tax policies

Since 2018, WIEGO has been advocating for tax justice in the informal economy to support decent livelihoods in some of the world’s poorest regions. Our research examining the effects of regressive tax policies on the informal economy has challenged misconceptions about workers’ contributions to government revenues, broadening understanding about the purpose and allocation of taxes in municipal and national budgets. With funding from the Wellspring Philanthropic Fund and in collaboration with our partners at StreetNet International, WIEGO is advancing this work through regional training workshops aimed at empowering workers and worker leaders in membership-based organizations and networks to negotiate for fairer taxes.

The workshops seek to:

  • Develop a platform for workers to learn and share knowledge about the key tax challenges impacting informal sectors.
  • Expand participants’ understanding of a fair and just tax system.
  • Facilitate the development of advocacy strategies for addressing tax-related issues.
  • Improve the capacity of workers and worker leaders to address tax-related issues at local, national and regional levels.

“This knowledge will empower us to demand the necessary changes to achieve this goal.” – Accra workshop participant

The first of these worker education and training workshops took place in 2025, focusing on street vendors and market traders in Accra. The second will be held in Quito, Ecuador, in 2026 and will include workers from both Ecuador and Colombia.

As policymakers seek to increase revenues through taxation, WIEGO’s aim is to ensure the tax burden does not disproportionately fall on workers in informal employment. Our research seeks to broaden discussions on formalization to include worker perspectives. Additionally, we are exploring innovative financing mechanisms that provide coverage for workers in informal employment without compromising national and international development goals. Finally, as the world sets its sights on the new economy, we remind our leaders that there can be no jobs of the future without the workers of today, many of whom are in the informal economy.