This story was written by the ILO Newsroom For official ILO statements and speeches, please visit our “Statements and Speeches” section.

In Asia, informal work shifts but remains massive

Despite a GDP growth rate twice the world average, more than 1 billion Asians still work in the informal economy. Most lack basic social protection and hold unproductive jobs with low earnings. An ILO report prepared for the Asian Employment Forum held on 13-15 August says the rapid shift from rural and agricultural employment to urban-based manufacturing and service-oriented work in developing Asia will continue and in some countries accelerate. ILO Online reports.

Article | 09 August 2007

BANGKOK (ILO Online) – In a recent survey of Bangkok street vendors (Note 2), 84 per cent said they were satisfied with their income and 83 per cent said they would encourage friends to enter the business. However, only 20 per cent said they would encourage their children to follow their footsteps.

Despite stunning economic growth, more than 50 per cent of the Asian work force, or 900 million workers, still survive on less than US$2 per person, per day. Unemployment rates are slightly higher than ten years ago at 4.7 per cent in 2006, compared with 4.2 per cent in 1996, while the incomes of many workers have deteriorated.

Given the limited employment opportunities in the formal sector, some 1 billion women and men, must find ways to eke out a living for themselves and their families in the informal sector. There they face poor working conditions, lack of job security, benefits and career opportunities. They have less access to information and enjoy fewer market opportunities, voice and representation to articulate their interests.

Most workers in the informal economy face greater risks and enjoy fewer opportunities than their counterparts in the formal economy”, says Ms. Sachiko Yamamoto, ILO Regional Director for Asia and the Pacific. “They face greater exposure to risks such as illness, property loss, disability, old age, and death as there are fewer mechanisms for coping with risks – that is, less access to formal sources of finance, labour and social protection.”

Women, youth and older people are disproportionately represented in the informal economy. Informality has also become the last resort for many indigenous and tribal peoples, workers with disabilities, and those affected by HIV and AIDS, who lack adequate opportunities for employment in the formal sector and face discrimination in accessing formal labour markets.

By 2015, the persistence of the informal economy in Asia, 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. Social and economic challenges are likely to follow, notably in countries where development lags behind urban population growth.

Making growth profitable for all while improving the lot of the 60 per cent of the workforce in Asia’s informal sector remains a daunting a challenge.

Informality and other issues related to the gap between economic growth and the creation of quality, decent jobs will be at the top of the agenda of the ILO’s Asia Employment Forum. The Forum is to discuss job creation and poverty reduction, productivity and competitiveness, labour market governance and the informal sector.

The roots of informality

“There are multiple factors underlying informality”, explains Ms. Yamamoto. “First and foremost is the problem of poverty and the livelihood opportunities and jobs for the working poor. A second factor is the inability of the industrial sector to absorb labour in more productive jobs. Low quality jobs are more widespread in the service sector which is expanding.”

According to the ILO Regional Director, the increasing flexibility of work in the formal economy, with work arrangements lacking security and proper social protection is also a factor. Similarly, the easing of trade and financial barriers, coupled with the fall in the cost of transportation and communication, has made it easier for businesses to break up production processes and subcontract them in countries where labour costs are lower.

“Informality is also a problem of governance. The starting point for national strategies to reduce informality is the recognition that operating in the informal economy involves high costs to businesses, workers and their communities”, explains Gyorgy Sziraczki, senior ILO economist. “Bringing informal workers into the framework of social protection as well as into the underlying tax base is essential for sustainability”.

According to the report, rolling back informality through a deliberate, coherent and comprehensive set of policies is key to realizing decent work in Asia.

Policy initiatives should promote decent work through growth strategies and quality employment generation; strengthening the regulatory environment, including the respect for international labour standards; promoting entrepreneurship, skills, finance, management, and access to markets; extending social protection schemes; organizing informal economy workers and promoting social dialogue; and locally based rural and urban development strategies.

“Root causes of informality are manifold and interlinked. Effective regional and tripartite dialogue and cooperation are essential to develop specific policies adapted to local contexts and to the characteristics of the informal economy. The development of regional and international knowledge networks can help to disseminate and multiply innovative policies and institutions promoting decent work strategies for the informal economy in the Asia-Pacific region”, concludes Ms. Yamamoto.

Note 1 Visions for Asia’s Decent Work Decade: Growth and Jobs to 2015, and background paper Rolling back informality, International Labour Organization, Asian Regional Forum on Growth, Employment and Decent Work, Beijing, 13-15 August 2007.

Note 2 Narumol Nirathron, Fighting Poverty from the Street: A Survey of Street Food Vendors in Bangkok, International Labour Office, Bangkok, 2006.