Informal economy

In many developing countries in the Asia Pacific region the informal economy constitutes a substantial and important portion of the labour force. Overall the informal sector accounts for 60 per cent of the workforce. The “informal economy” refers to all economic activities by workers that are – in law or in practice – not covered (or insufficiently covered) by formal employment arrangements. Although it is hard to generalize about the quality and nature of informal employment, the characteristics include a lack of protection for non-payment of wages, retrenchment without notice or compensation, unsatisfactory occupational health and safety conditions and an absence of social benefits such as pensions, sick pay and health insurance.

In countries with a rapidly growing population or movement to the cities, the informal economy tends to absorb most of the expanding labour force in the urban areas. By 2015 the explosive growth of many Asian countries’ urban populations and the increase in service-sector employment will combine to significantly expand the urban informal economy in Asia. Social and economic challenges are likely to follow, notably in countries where development is not keeping pace with urban population growth.

The ILO has recently undertaken a range of projects related to informal employment, such as local economic development, support for informal workers, training and extension of social protection.