Introduction to Informal Employment and its Global Impact
Informal employment is set to be a central theme at the 113th International Labour Conference (ILC) of the International Labour Organization (ILO), with 187 countries participating in Geneva, Switzerland, from June 2 to 13. The conference aims to explore innovative approaches to promote formalization.
The ILO’s Governing Body, during its 347th meeting in March 2023, decided to include a general discussion point on innovative approaches to combat informality and encourage transitions towards formal employment, fostering decent work.
According to the ILO, six out of ten workers and eight out of ten businesses worldwide are part of the informal economy, which contributes between 15% and 35% to the total Gross Domestic Product (GDP) depending on the region. In 2024, informal employment accounted for nearly 58% of total employment, compared to 62% in 2004.
Regional Breakdown of Informal Employment
In Latin America and the Caribbean, microenterprises with fewer than five workers, including self-employed individuals, account for less than 40% of informal employment. The services sector contributes 60% to informal employment, followed by industry (more than one in five informal workers).
Over 70% of workers have secondary education or higher, yet nearly one in ten informal workers live below the poverty line of $3.65 per day, measured in purchasing power parity.
Informal Employment in Latin America and Mexico
Latin America exhibits high levels of informality, affecting nearly half of the region’s employed individuals. Mexico is not exempt from low-quality jobs, as more than half of its labor force is in the informal sector.
According to data from Mexico’s National Institute of Statistics and Geography (Inegi), by March, the population employed in informal labor reached 32.5 million people.
ILO’s Focus on Informal Employment and Transition to Formality
The ILO has increasingly highlighted informal employment and the transition to formality in international labor standards, general discussions, and conference declarations. Following the 2019 Covid-19 crisis, calls to accelerate the transition to formality have become an urgent necessity.
Key Questions and Answers
- What is informal employment? Informal employment refers to work situations where workers are not legally recognized or protected, and their working conditions are not regulated by labor laws.
- Why is informal employment a significant issue? Informal employment affects a substantial portion of the global workforce, contributing to economic output while often leaving workers without social protection or decent working conditions.
- What is the ILO’s role in addressing informal employment? The ILO aims to promote formalization through innovative approaches and international cooperation, ensuring decent work opportunities for all.
- What are the regional differences in informal employment? Informal employment varies across regions, with Latin America and the Caribbean having a significant portion of microenterprises in informal work. In Mexico, more than half of the labor force is engaged in informal jobs.
- How does informality impact workers’ well-being? Despite having higher education levels, informal workers often live below the poverty line due to insufficient income and lack of social protection.
