The relationship between informality, poverty, and growth are complex. This section of the website explores what is known about these relationships.
Links with Poverty
There is significant overlap between working in the informal economy and being poor. This sub-section explores what is known about the relationship between informality and poverty by summarizing findings of recent studies that used different measurement approaches. Statistical evidence suggests a hierarchy of earnings and poverty risk across the various segments of the labour force, and a gender gap: average earnings are lower and the risk of poverty is higher among women workers.
Links with Economic Crises
The informal economy is thought to provide a “cushion” during crises to those who lose jobs. Little attention has been paid to how firm this cushion is for new entrants to the informal economy, and what happens to those already working in the informal economy. This section summarizes findings from two rounds of a study – in 2009 and 2010 – on the impact of the global recession in 10 countries on three occupational groups: home-based producers, street vendors, and waste pickers.
Links with Growth
If we want to improve individual earnings, household incomes, and overall growth, there is a need to explore what “productivity” and “productive growth” mean in the informal economy, and to rethink the definitions and measures of productivity. This sub-section explores the two-way linkages between informality and growth: the impact of the informal economy on economic growth, and the impact of economic growth on the informal economy.