There is little information on working conditions in general and wage fixing in particular in the informal economy. It is often assumed that informal wages are fixed according to the law of the demand and supply of labour. It is also stated that income from participation in the informal economy is a major source of income for poor people. However, how wages are actually fixed at the concrete level of the informal employer remains a kind of black hole.

Based on data analysis and surveys of firms in Brazil, India, Indonesia and South Africa, this paper shows that wage fixing in the informal economy is a much more complex and elaborated process than often thought. In particular, the provision of a number of diversified allowances and benefits, as well as ― at least in some countries ― the reference to the minimum wage, are common.

The paper also provides information on working hours in informal firms, which are found to be very long in India and Indonesia, and much less in the other two countries. In a number of cases, no rest day is allowed.

Finally, the paper concludes that labour laws can, to a certain extent, reach the informal economy, providing that they are formulated in a simple and realistic way and adapted to the social and economic realities of countries.

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