Informal economy in China and Mongolia

Woman selling fruits at small market stall. China.

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In many developing countries in the Asia and the Pacific region, the informal economy employs a substantial portion of the labour force, providing jobs for 60 per cent of the workforce. However, such economic activities are – in law or in practice – generally not covered (or insufficiently covered) by formal employment arrangements. Although it is hard to generalize about the quality and nature of informal employment, very common characteristics include a lack of protection from 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. Above all, informal workers are among the most vulnerable. The informal economy is also characterized by the low productivity of enterprises due to the low skills of workers, outdated production systems and limited management capacity.

CO-Beijing’s programmes address informal employment through support for training of informal workers and extension of social protection.

China

China’s experience in the expansion of informal economy is unique. It has been through the process of opening a highly centralized economy. Those who were laid off from public enterprises and large numbers of internal migrant workers have been absorbed in small production units and service industries in the private sector. Many such small businesses have official registrations as “individual industry and commercial households” or “laid-off worker’s enterprises”. However, most of the workers in these businesses are hired on temporary contracts, part- time work, self-employment and domestic work. This is known as “flexible employment”.

While the informal economy has become the source of alternative employment and income opportunities for many workers who lost jobs in the transition, it remains a problem as being unrecognized with lack of skills and low productivity. Most informal workers are vulnerable groups, whose labour rights are easily infringed.

To mitigate the issues of informality, the ILO provided technical advice and support in the formulation of the Labour Contract Law by conducting research to review coverage of workers in the informal economy. The law was enacted in 2008.

Mongolia

The informal economy in Mongolia has been steadily growing and currently provides employment to approximately eleven per cent of the total labor force. Although the informal economy has created jobs, workers were not fully covered by legislation and their jobs are marked by low incomes, long hours, unsafe and poor conditions of work. ILO’s assistance has supported the development of a national policy on informal employment, which addresses the most pronounced decent work deficits. ILO has supported capacity building of the tripartite constituents to better understand the issues of the informal economy. This includes developing and implementing activities on local planning and investment decisions through ILO’s Integrated Rural Accessibility Program (IRAP), on entrepreneurship and business management through Start and Improve Your Business (SIYB) (SIYB) and Get Ahead, as well as on occupational safety and health in small and home-based enterprises.