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The Future of Work Podcast

Episode 16
Informal economy

How to make the informal formal?

18 February 2022

More than 60 percent of the world’s adult labour force, or about 2 billion workers work in the informal economy. They are not recognized, registered, regulated or protected under labour legislation and social protection. The consequences can be severe, for individuals, families as well as economies.

Despite major efforts over the years, there are few signs of the informal economy shrinking in size. In fact, the COVID-19 pandemic has pushed more workers into informal work to survive while highlighting the vital role access to social protection plays to support workers, especially when they are unable to work.

Just what is life like for workers in the informal economy, what are the global solutions to intransigent informality and will the growth of the ‘gig’ economy help informal economy workers gain the security and social protection they so badly need?


Hello, and welcome to this edition of the ILO's Future of Work Podcast.

I'm Steve Needham at the ILO Regional Office

for Asia and the Pacific in Bangkok.

Here in Thailand, if you see someone selling food

by the road, working in the fields, building a house,

chances are they're working in the informal economy.

They're certainly not alone.

Recent ILO figures point to more than 60% of the world's adult labour force

at some 2 billion workers operating in the informal economy.

The informal economy is often characterized by unsafe

and unhealthy working conditions,

low or irregular incomes, and long working hours.

Workers in the informal economy are not recognized, registered, regulated,

or protected under labour legislation and social protection.

The consequences are severe,

both at the individual, family, and national level.

Despite major efforts over the years,

there are few signs of the informal economy shrinking in size.

In fact, COVID-19 pandemic has pushed

more workers into informal work to survive.

To talk about this, I'm joined today by Susanita "Babes" Tesiorna,

National President of the Alliance of Workers in the Informal Economy

who joins us from the Philippines.

Good afternoon.

Good afternoons, Babes.

Joining us from Geneva is Shahra Razavi,

the Director of ILO's Social Protection Department.

Good afternoon.

Very good to be with you.

Thank you both for joining us today to discuss this important topic.

Babes, let me turn to you first.

No need to pay taxes, no regulations, no bureaucracy.

For some, the informal sector almost sounds like a paradise,

but what is the reality of life for informal workers and their families,

and how has the COVID-19 pandemic affected them?

Mostly of the workers, generally the informal sector workers,

like vendors, are largely unprotected socially.

They're now largely unregistered in the national government agencies

and even in the local government agencies that makes the absence

or lack of social protection from the government.

They earn low, especially during the pandemic,

no vendors were allowed to sell their products in the public markets.

Even in normal conditions, they cannot sell anywhere

because they're already regulated now, and because there are plenty

of workers competing with the prices, largely, they lose income

or they do not profit at the end of the day,

and they borrow money from loan sharks, and that makes them more vulnerable.

Because there's no regulation,

they're always caught by policemen or in the Metro Manila,

it is the Metro Manila Development Authority personnel,

and it's really hard.

They survive very hardly by loans,

by borrowing, and they cannot even pay those markets or those stocks coming

from provinces because they can hardly sell also during the pandemic.

It's quite obvious that the lot

of the informal economy worker is a very vulnerable one.

Shahra, let me turn to you now.

As we've all seen and we've heard from Babes just what the situation is like

for informal economy workers and the COVID pandemic has also had

a huge impact on their lives and livelihoods.

In response, the UN and the ILO have recently established

a global accelerator to help create 400 million jobs worldwide.

The key objective of this new initiative

is to accelerate this transition from informal to formal work.

How will this be done?


Thank you for that question.

I think as was already very clearly pointed out

by Babes this picture that you initially painted

of no regulation, no taxes, isn't this paradise?

It's actually not paradise, no regulation, no taxes means no cushion to fall back on.

It means when you're sick,

when you have a family member who's unwell and needs medical attention,

when you have no source of income,

because you cannot find a source of income or as we saw during the crisis

because of the lockdowns and the restrictions,

there's absolutely no support, no cushion to fall back on.

It is living in a situation of high precarity.

We know that for more than 50% of the world's population

they have absolutely no form of social protection to fall back on,

whether it's a pension or a family benefit, nothing there.

The global accelerator really responds to this situation that was already there

before the crisis,

but it just became much clearer to everyone that there were huge numbers

of people who had no access to social protection.

I think governments have rightly mobilized

during the pandemic to put in place some measures,

but many of these measures were temporary and they're already running out

because they were there for a few months and now they're no longer there.

At the same time,

the economy has not picked up and the jobs are not there.

People are still highly precarious,

are highly vulnerable and the ambition of the accelerator is really to create,

as you said, the jobs that are needed, decent jobs with social protection,

and to extend the scope of social protection

so that there is coverage for everyone.

It's an ambitious agenda,

but the moment we're in is so dire

that you only need big ideas and big plans in order to be able

to address the huge disruptions that this crisis has exacerbated.

Can you give me any examples that you've come across

in your role as the global head of social protection for the ILO?

Have you seen good examples

from around the world to help people move from informality into the formal sector?


I think what is important from a social protection perspective

to really emphasize is that ensuring

that people who work in the informal economy, in particular,

whether they're working

in small enterprises, as Babes was just mentioning,

which are very important in many parts of the world,

and the registration of those enterprises

and the formalization of those enterprises is absolutely key,

or whether they are self-employed own-account workers,

genuine self-employed own-account workers.

I think there have been many efforts

to bring them under the coverage of social protection systems.

It's challenging but it's not rocket science.

We have many examples of governments

that have extended social protection to workers

who are in the informal economy through, for example, contributory systems.

I'm thinking of social insurance systems,

extending social insurance to those workers,

as well as through non-contributory mechanisms,

tax finance mechanisms.

For example, thinking of--

We know that for many workers in the informal economy when they get ill,

if they have to pay out of pocket,

this is something that's going to ruin the household, the family,

and it's a major driver of poverty and of not families and households

being able to move even above the poverty line.

You have in countries like Rwanda,

in Thailand, in Vietnam,

the social health protection has been extended to workers

in the informal economy,

or you have also examples of ways

of simplifying the payment of taxes and social security contributions

for small enterprises, for micro-enterprises

as well as for own-account workers so that the registration, paying taxes,

paying social security contributions doesn't become such a challenge.

It can be done in one way, in one form.

Here you have the Monotax that was put in place in Uruguay and Argentina

that has made it much easier for these micro-enterprises to register

and to have social security coverage for them or, for example,

extending unemployment protection to domestic workers.

Here, again, we know that countries like Chile and South Africa have done it,

they have extended their existing social insurance systems

to include domestic workers.

This is working, and there are very good examples

on the ground from the countries that have done this,

which now really need to be looked at and, in a way, accelerated.

I was in Starbucks in Bangkok a few weeks ago,

and they must have been

maybe 15 delivery drivers

from these platform delivery drivers there,

waiting to pick up their orders and take them

to their customers wherever they would be.

There's an incredible number

and it's obviously been spurred by the COVID-19 pandemic,

but this huge growth in the platform economy

or the gig economy has taken place

worldwide, is this a good thing for the move towards formalization?

Is it like a magic bullet which will solve a lot of problems

or does it come with its own challenges?

I think it's very much the latter.

Obviously, in many parts of the world, and Asia is definitely part of that,

there are many jobs being created through this platform economy,

large numbers of women and men who are working in the platform economy,

and the challenges are also there.

I think it's good that this is a dynamic source of job creation,

but very often, the workers who are working on platforms don't have

access to all the different kinds of social protection that are needed,

or if they do have access,

many of them have access to it through another job that they have,

but not through the platform,

so the platforms are not paying their fair share of contributions

to ensure the well-being of their workers from whom they benefit.

I think the challenge is really to make sure that workers who are there,

or also the employers, are also contributing their fair share

to finance the kind of protections that workers need in order to be dynamic

and to make the contributions that they're already doing.

I think there are many challenges ahead in terms of how you set up

the necessary regulatory regimes,

and you make sure that the platforms are also contributing as employers,

that they make their side of the contribution as well

to the sustainability and well-being of their workers from whose work,

obviously, they're benefiting.

Babes, turning to you on the same issue, platform economy in the Philippines.

Are you seeing this growing

in the communities that you're working with or the groups

you're working with and do you think it offers good opportunities?

They can be both if the government is very responsive in--

because there are already laws,

even you have in the social security system,

for example, there are already laws in

which these platform workers can be covered because I can say that there is

an established employer-employee relationship between the restaurants,

for example, for those in the delivery of food,

they are formal businesses.

Therefore, if there could be stricter

implementation monitoring by the Department of Labor

and other authorities, then it could be good

also to substitute the absence of work that we have in the regular work.

If the government is not working on it, it's not good for the workers.

If I can just also add a small point here if I may on this digital platforms.

I think it's useful to just refer

to a survey that ILO did of 20,000 platform workers in 100 countries.

This was really across different regions.

It found that 40% of the respondents were covered by health insurance

and only 20% had access to employment injury protection,

unemployment protection, old-age pension.

Very tiny proportion, 20%.

Then, also I think what's really important

is that the survey results highlight another major challenge,

which is that most of the platform workers who did have access to social protection,

the 40% who had health insurance,

and the 20% who had other forms of coverage for unemployment

or employment injury,

they were not covered through their economic activity on the platform,

but because they had contributed

to social insurance through another job that they have,

or through another family member in the case of health insurance,

for example, because they have a partner who has health insurance

and they can benefit as a so-called dependent.

Basically, what this is saying

is that the cost of their coverage is being borne by others,

including other employers and taxpayers

while the digital platforms themselves are largely avoiding contributing

to the social protection of the workers who are active on their platforms.

This is a really big challenge.

I think the other point that we need to highlight here,

if I may just add it,

it's that the informal economy is a very diverse, a very segmented economy.

Really, we have to think about

very context-specific solutions for specific groups of informal workers.

Platform workers need very different solutions compared to,

let's say, contributing family workers

who are working on family firms, most of them women.

That needs a different kind of solution.

Then, domestic workers who have multiple employers

and work in a number of different homes,

again, they need very context-specific responses.

I think we really have to keep

that specificity of response

into account when we talk about workers

who are working informally because it is a very diverse group.

That I think is really important to keep on emphasizing if I may.

I agree with Shahra.

It's very true that it should be country-specific,

and sector-specific because, for example, in our particular case, the vendors,

for example, was no employers, of course.

They are already contributing as voluntary, or individual paying members

to fill health and voluntarily member also of social security system.

I think the best strategy

there is really a massive education to the people to them,

what would the benefits be after they have enrolled,

and this pandemic has shown

them the picture, the difference between being socially protected,

and not socially protected

because of the benefits that these SSS members get from this.

It really showed a picture

and I took this opportunity of reviving, telling them in all our meetings,

always on social protection,

social protection, so that when they retire,

or when they get sick, or when there is because we are oftentimes visited

by typhoon that will help them raise their resilience.

That's such an important point, I think, that Babes is saying.

This crisis showed everyone could see

very clearly, very concretely why they need social protection.

Even if you're young, and you're dynamic

and you think you don't need anything, and you can manage, it just goes to show

we're all vulnerable, so that's one really important point.

We have a window when people have really seen

how it matters, but also, I think many employers as well,

and owners of enterprises saw that

if they have social protection for their workers,

it's also very important for business continuity.

I think this increased awareness of the importance of social protection.

We only have a short window before people forget,

and this is now really the time to use that increased awareness,

to make sure that everyone is registered,

to make sure that people are contributing and at the same time,

I think it's also really important

that institutions that are in charge of Social Security,

that they also are very transparent, and people trust the system and they know

that when they make a contribution, then they can benefit

when they have an accident or when they're old.

That issue of transparency and trust in the system is also absolutely key

so that people put their money there and feel that they're contributing,

but it's putting it in a safe space

and they know they will have access to it when they need it.

It's a little bit sad that people only realize it

when it's necessary when disaster strikes or crisis strikes.

I think it's also important to emphasize

that COVID was a large scale shock, a big crisis, a systemic one,

but people have crises all the time.

You're working and you have injury at work.

You work and you have a health crisis in the family.

Even forgetting about, we all age,

of course, and we need a pension at the end of our careers,

but people have shocks and crises all the time.

I think it's important to keep that also in mind

that we need social protection,

not because we will have another COVID or we have a climate-related disaster,

but also we have day-to-day crises.

People always have day-to-day crises,

and it's these day-to-day crises that push them down and push them behind.

When you have social protection,

you have that peace of mind

and you have that security to be able to carry on in the world despite

all the lifecycle risks that I think we all face as human beings.

A new buzzword, which seems to be circulating now

is this e-formality, which is coming up a lot seen as an innovative way

of using technology to include informal workers into the labour market.

What exactly is e-formality and is technology really the answer?

Technology is always--

you have to know exactly what you're doing with the technology.

We know that during this crisis,

obviously, the fact that, for example, people could be registered online,

the fact that payments could be done online into people's bank accounts,

or that they could have messages sent to them about being able

to register online and have access to certain forms of benefits

that were being made available.

All that I think is great.


I think because with that digitalization,

we are able to educate our leaders and they're able to access loans.

Some of them were able to access loans.

I think there is a lot of improvement

of informal sector borrowing funds through digitalization.

Right now, in marketing,

some of our leaders have developed their own products, have access already,

shopping different apps to market their own products.

What is very important is only training on the ground,

especially in the rural areas

because we haven't reached as far as the rural areas

because they do not have really the gadget.

They need hubs.

We need to orient or to have member under agreements

with the local governments to provide them that hub.

Now that everywhere you can market even with your own cell phones,

I think there is a good chance to have

this digitalization a way of formalizing them.

I think we also need to bear in mind

that these information technologies are not available to everyone.

I think that's really important to keep in mind,

particularly as we were talking about gender, the digital divide is quite big

and when it comes to gender,

we know that it's also quite significant.

Technology shouldn't become yet another barrier.

That some groups then have to overcome yet

another additional barrier that can exclude them.

It's as important as it is and as useful as it is to use

new technologies for making social protection systems more accessible

and benefits more accessible

and making it possible for people to access those.

We also have to bear in mind

that there always should be a non-digital channel as well

for people who don't have access to internet,

people who may not have bank accounts,

people who may not even be able to receive messages on an SMS.

Some of this is quite--

I don't know if you've tried to register online for some of these benefits.

You really sometimes have to be quite savvy to know what to do.

I'm not sure I could do all of the things that are required.

I think as useful as technology is,

we should also be very conscious of the fact that it could also exclude

many people who are digitally disconnected.

Technology does give some of the answers but not every answer.

Final question, Babes.

Looking forward,

what kind of future would you like to see for informal workers in the Philippines?

What's your dream?

My dream really is for them to live--

at least they will be brought up to the middle income, simple living,

but a decent living at least wherein you're socially protected,

they have their own simple house.

They are able to send their children to school.

That's all.

Susanita Babes Tesiorna and Shahra Razavi,

thank you very much for your time and talking about this complex subject.

Thank you.

Thank you.

Thank you for having us.

I hope our listeners have found this of interest.

If you'd like to find out more about their work

or about this subject more generally,

you can find links on the web page of this podcast,

which is now on the ILO website.

That's all for now.

Thank you for listening, and goodbye.