ilo discussions on the informal economy - international labour organization · 2014-06-09 ·...

Decent Work for All ASIAN DECENT WORK DECADE 2006-2015

Way Out of Informality, National Knowledge Sharing Workshop, 6 December 2012

Royal Plaza Hotel, New Delhi, India

ILO discussions on the informal economy

Sandra O. Yu Local Strategies for Decent Work Specialist

Decent Work Team for East, Southeast Asia and the Pacific

…issues and paths towards formalisation

… self-employed? What is informal employment?

… or dependent work? What is informal employment?

4

Mandate of ILO

Expressed as decent work for all, in both formal

and informal context

ILO policy is set by its constituents; i.e.

government, employers, workers organizations

(185 countries)

ILO’s constituents provided the direction of ILO’s

work on the informal economy

The goal is to promote decent work along the

entire continuum from the informal to the formal

end of the economy

… social justice as basis for peace

ILO on the informal economy

1972: ILO first used the term, “informal sector”

Referring to working poor who are unrecognized, unrecorded,

unprotected

1991: 78th Session of the ILC, Dilemma of the Informal

Sector: To promote or to regulate? (idea of a trade-off)

Eliminate progressively the worst aspects thru a

comprehensive strategy

2002: 90th Session of the ILC , Decent Work and the IE

Provides a new approach: not only enterprises but also workers

2006: 95th Session of the ILC, Employment Relationship

Produced a resolution defining ambiguous work arrangements

and showing some monitoring mechanisms

… some milestones

6

Decent work & informal economy

From informal sector to informal economy

Includes both enterprise and work relationships

Includes informal work in the formal sector

Legal frameworks relevant to the issue of formalization

Commercial or business regulations

Labour legislation

Laws pertaining to property rights

Emphasis on organization, representation and voice

Provide enabling legal framework to support representational rights

(continued)

… a new approach from the 90th ILC resolution

Decent work & informal economy

(continued)

Endorsement of decent work approach to the informal

economy

Rights, decent employment, social protection and social dialogue

Macro, meso and micro level interventions

Depicts a continuum of production and work relations

DW deficits are worst at the bottom; also found in formal jobs

Policy implications is to enhance positive linkages in the continuum

… a new approach from the 90th ILC resolution

Regional meetings and priorities set by ILO Constituents since ILC 2002

Asia-Pacific (2006)

Recognition, universal social protection for workers, MSME promotion.

Africa (2006)

11 point agenda: integrated policies focus on transition into mainstream. Focus on employment generation and universal social protection.

South America (2007)

mainstreaming SMEs and workers into formal economy through enabling environment, removal of regulatory obstacles, and progressive social protection.

Objectives of ILO

Immediate term

reduce / eliminate the the negative manifestations of informality

while ensuring that the opportunities for income and livelihood are

not destroyed

Short and medium term

gradual integration of the informal economy into formal systems of

protection and support

Longer term

prevention of informalization of workers currently found in the

formal sector

creation of enough employment opportunities that are formal,

protected and decent for all

… an integrated DW approach along the continuum

Causes of informality … guidance towards formalization approaches

Lack of economic growth,

employment creation

Local development strategies

Growth strategies and quality

employment generation

Legal and regulatory environment

(including ILS + core rights)

Equality (gender, ethnicity,

race, caste, disability)

Organization,

representation and voice

Entrepreneurship, skills, finance,

management, market access

Extension of social protection

Legal and institutional

obstacles

Direct and indirect

discrimination

Lack of representation and

voice

Flexible specialization and

global chains

Demographic trends, incl. rural-

urban migration

Governance

Reduce direct and

transaction costs

Establish contracts

and promote

understanding of

contracts

Review direct

exclusions

Enactment of special

laws

Labour administration

Define employer

employee relationship

in ambiguous contracts

Establish contracts

Legal literacy

Review for

exclusion and

inclusions

Reduce cost of

package

Collection/Admin

Tax based funding

Review law for

organizational

forms: TU, coop,

MBO, corporation

Business /

Commercial

Regulations Labour

Legislation

Social Security Representation

al rights

leg

al an

d r

eg

ula

tory

en

vir

on

men

t

Local development strategies for effective policy design and delivery

Discrimination

Growth strategies

and quality of

employment

Entrepreneurship, skills,

finance, management,

market access

Organising and

organisational

development training

support (to

strengthen principles

and practice of

governance)

Address causes of informality

Growth strategies and quality employment generation

Making employment the central concern of socio-economic policies

Macroeconomic, trade, investment policies must focus on employment

Infrastructure that link communities with more dynamic center

Sectoral strategies for those with large informal economy

Legal and regulatory environment

Legal frameworks are key to recognition and protection by law

Relevant legal and institutional frameworks: business, labour, property

Areas of work towards inclusion in labour protection laws:

Review of explicit exclusions

Enactment of special laws

Defining employment relationships

Legal literacy

… areas of work to reduce deficits and seek formalisation

Organization, representation and voice

Enabling law to support representational rights

Consider various forms of organization (cooperatives, trade

unions, member-based association, corporations)

Areas of work:

Review of laws to assess entry barriers and advocacy

Organising and organisational development training (to

strengthen principles and practice of governance)

Entrepreneurship, skills, finance, management,

market access

National framework for skills qualification as tool for

recognizing skiils levels and wage protection

Experiences in construction; ongoing for handicraft

producers

Objective is to formalise work standards otherwise

determined informally and subject to discretion

Extension of social protection

Social security, occupational safety and health, HIV-

AIDS prevention

Social security

Challenges and responses

Legal exclusions or lack of enabling laws

Administration for those with no employers

Direct/transaction cost

Inability to contribute and accountabilities

• Removal of

employer

contribution

• Satellite offices

and

accreditation of

banks

• Reducing

package of

benefits to

minimum to

lower cost

• Tax-based

systems; taxing

the industry;

use of

subsidies for

the very poor

Summary

To reduce manifestations of informality (immediate)

improve labour rights

enhance social protection

invest in knowledge and skills + access to business support services and

financial services

To address root causes (medium to long term)

Growth strategy and quality employment generation Macro policies

Entrepreneurship, skills, finance, mgt, access to markets

Formalization through legal regulatory framework Regulatory environment, standards and rights

Improve social protection

Organization for representation and social dialogue

Emphasis on Equity

Use of Local development strategies

… areas of intervention, short- to long-term approaches

Enterprise Formalisation Worker Formalisation

Formali-sation

Compliance with local and national regulations(business registration and licensing, taxations, labour regulations)

Worker Protection (with/without any defined employment relationship)

Goal Unlock growth potential, enterprise sustainability AND respect human dignity, environmental sustainability, and DW

Universal access to international labour standards, esp core rights

Focus • Integration into Mainstream: • Reduce the costs of formality • Reduce regulatory/administrative

barriers to formalization • Incentives for Productivity increase (OSH,

technology, training), linkages

• Legal inclusion and institutional provisions • Knowledge of rights and benefits of workers • Formalising work arrangement through contracts

Approach - Business registration reform, simplified tax administration.

- Incentives towards formalisation. Provide business services to formal enterprises to increase the advantages of formality

- Formalisation AND Upgradation

- Review law for exclusions - Introduct laws that extend labour protection - Institutional partnerships for labour protection

(OSH, organizing, mediation) esp to hard to reach areas

- Identify employment relationships where ambiguous for legal inclusion

- Organize and review enabling laws representation rights