Informal Economy

Formalization of the Informal Economy in Jamaica

ILO Pilot Project in Granville and Garlands/Horseguard Communities in the Parish of St James


To implemented a project on 'Formalization of the Informal Economy” in two pilot communities in the Parish of St. James in Western Jamaica.  The core strategy of the project utilized a Local Economic Development (LED) approach to enhance the capacity of communities to identify their employment and labour market challenges and opportunities and plan and implement the response needed, whether in employment creation or training needs or other capacity development approaches. 

The project also aimed at engaging the micro and small enterprises in the two pilot communities by establishing a foundation to successfully implement locally-based programmes that promote, facilitate and support job creation, and at the same time, enhance quality jobs, which should reduce informality. The project was designed to contribute to the formalization of informal employment relationships and businesses, including MSMEs.


Since the 1970s, Jamaica has been experiencing very slow economic and employment growth. This was exacerbated by the world recession of 2008 which created many challenges in the labour market. Many companies in sectors such as mining (bauxite and alumina), hospitality, agriculture and manufacturing experienced closure or major restructuring, the result of which is that hundreds of workers are displaced from their jobs. Simultaneously, school leaving graduates with a number of skills are unable to find jobs.  The lack of employment opportunities have forced some into self-employment while others have become involved in illicit activities. As a consequence, the country has experienced many socio-economic challenges and the informal economy is now estimated to be between 45 percent and 50 percent.

ILC Recommendation 204 defines informal economy as “all economic activities by workers and economic units that are – in law or in practice – not covered or insufficiently covered by formal arrangements”. 

Given the many challenges facing the country, the government sought assistance to reform the labour and social environment and to introduce relevant reforms. These reforms have had to take into account the stability of the labour market and how to assist displaced workers re-enter the job market through new or improved skills.  The ability to capitalize on these opportunities depended largely on human and social capital and the capacity of local stakeholders – workers, job seekers, Government, micro and small enterprises, training providers and other business support institutions. However, in attempting these reforms in the economy, a big challenge has been the large informal sector which exist.

In searching for solutions, an approach was made to the ILO in 2015 to provide support for an initiative to alleviate unemployment in the rural areas as well as to provide support for the large amount of informality which exist in the country.  The initial project proposals and discussions were funded under a pilot project on formalization. Since the ILO began discussions on the Formalization of the Informal Economy, It was opportune for Jamaica to be used as a pilot project and it was therefore agreed that the necessary support for a project on Formalization would be provided to the government. Consequently, collaboration began in 2014 between the ILO and the Ministry of Labour and Social Security for the development of this pilot project.

Two communities were selected for the pilot; Granville, an urban inner-city community with a population of 5,074 persons and Garlands/Horseguard, a deep rural community consisting of 1,465 persons; both in the parish of St James (where Montego Bay is located).


Ministry of Labour, SMEs (formal and informal), Ministries of business, small business associations, employers’ and workers’ organizations, young men and women; persons with disability.


  • Surveys completed and key documents such as a Situational Review, Qualitative Needs Analysis, Business Listings and a directory of Community Based Organisations were developed from the data analysis.
  • Establishment of a National Steering Committee and a Local Oversight Committee.  This emphasized the integrated approach to formalization and involved a number of local tripartite plus institutions.
  • Appointment of National Coordinator and Local Economic Development (LED) Coordinator
  • Development of a Package of Community Targeted Support Services. The pilot was operated for one year - October, 2014 to November 2015. Six workshops were conducted in which over 100 persons were trained in areas such as:
  1. Entrepreneurship and SME development with special focus on tourism and artisans
  2. Co-operatives
  3.  Starting and Improving your Business
  4. Workers’ Rights, Social Dialogue and Social Protection

Impact to date

Implementation of this project commenced in October 2014 and over 100 persons have benefitted from training and exposure to material which would assist them with formalizing their business or employment relationship.  At the end of the project, a number of the beneficiaries sought to register their businesses and two new cooperatives were registered by project beneficiaries.  Dialogue has commenced with the Ministry of labour and the ILO with a view to reproduce the project on an island wide basis.