by Elna Schmidt
What do a white, middle-class, teenage private math tutor in the Netherlands and an Indonesian street food vendor in the heart of Manila have in common? While there may or may not be more to their commonalities than meets the eye, one thing can be said with certainty: they both contribute to what is commonly referred to as the “informal economic sector”. This sector features workers and their labour, which is not formally recognized by a nation’s institutions, but which yet results in the gain of financial resources for those working in it. Women especially are at the forefront of the informal sector. Labour such as caring for children and the elderly in a private home, selling self-made wares, or doing laundry in exchange for wares or money are among the many ways in which women have found ways to support their families. This creative kind of entrepreneurship allows women to remain flexible and fulfill their other diverse, often gendered, responsibilities. However, it comes at a cost.
The informal economic sector
Globalization has brought forth an increased need for the informal economic sector, which offers employment to those who are unable to find formal work and provides a kind of final insurance for those struggling financially, especially in times of labour shortages and/or economic crisis. Formal work can commonly be understood as employment which is officially recognized and registered with the government, for example due to a missing employment contract. Formal workers visibly contribute to the state economy, for example by paying taxes. In turn, these workers receive benefits in the shape of protection and financial support, such as labour laws or subsidies. While the math tutor may be unable to find formal employment due to labour laws prohibiting their introduction to the formal sector, the street food vendor might find themselves in a position where they cannot afford to buy a formal permit or receive no financial aid for their business while still needing to contribute to their family’s income.
Contributions stemming from the informal sector to the local and national economy become increasingly hard to measure, making it nearly impossible to appropriately assess the roles these workers play in local economies and a country’s gross domestic product (GDP). Some may consider informal work to be invisibilized. However, it is anything but invisible: Governments partially embrace informal work by not enforcing formal legislation in the informal sector. A tolerance policy of informality manifests itself, which can and can not be beneficial to those working in it. The lack of policies and regulation often renders the informal sector a dangerous place for its workers, who are often predominantly women (of colour). Some have challenged the assumed separation of in/formality. One could argue that no economy is ever entirely formalized. Informal and formal practices may be interwoven, for example, through the informal sector’s tendency to feed the formal economy. An informal street vendor’s produce is perhaps cheaper and is then used by a formal restaurant. The street vendor therefore indirectly contributes to the formal economy, despite their work seemingly disappearing within informality. Especially women are found working in the informal sector. Therefore, it is often women’s labour that is invisible to those who do not know where to look for the great impact women within the informal sector have on the local and state economy. After all, money earned through informal work may yet be spent in formal businesses.
Women in the informal sector: costs and benefits
Marginalized identities, like women, may experience informality differently. The effects of working in the informal economy may manifest themselves both in how women are treated by others, and in their own ideas about their rights and identities. Women commonly prefer employment in the informal sector due to their need for flexibility resulting from conflicting roles, such as being the main keeper of the household. This urge for flexibility leads to a loss of negotiation power. Low wages and no worker’s rights, safety, or security are the consequence. State support for these women is rare, if not non-existent. Although the gender wage gap is slowly closing globally, it remains stable in the informal sector, as there is no way to monitor salary developments in a part of the economy that is not accurately measurable and where a lot of labour is invisibilized. The informal sector thus seems to benefit from women, while women have little to gain but flexibility. This shows how a country may benefit from not regulating the informal sector, as it is less costly. Furthermore, strictly regulating it would lead to an increase of inflexibility for women, making it harder for them to contribute to both their private household and the country’s economy. It is hence evident that women may want to leave their informal jobs but are given little incentive or support to do so, as the state continues to benefit from their purposefully not regulated labour.
To simply state that women enter the informal sector out of a need for flexibility would be a dramatic understatement. Gender-based discrimination also influences why women choose to enter and stay in the informal sector. Interviews in East Java show that female entrepreneurship in Indonesia’s informal sector is mostly made up of low-income labour, self-employment, and gendered occupations. The most cited reason for entering the informal sector was a difficulty of attaining the loans necessary to start one’s own business due to gender discrimination. Women found it impossible to attain the necessary (financial) resources to start their own formal businesses, as they were taken less seriously due to biases associated with their gender. Consequently, informal firms are founded instead, to avoid taxation and debt. The overrepresentation of women in the informal sector is frequently caused by gender-based discrimination in the formal sector. Cultural and thus informal norms result in the shaping of proceedings in the formal sector, further showing the interwovenness of informal and formal economy and highlighting how entering and also remaining in the informal sector is not always a choice.
Although the informal sector provides employment, new skills, and a safety net for its workers, the negative effects of the informal sector, like decreases in tax revenue for the country and social security funding, cancel out its contribution to lowering income inequality. This was found when investigating the ways in which the feminization of labour which describes the increased participation of women in (at times traditionally male) workforces affects the relationship of the informal economy and income inequality in 125 different countries, paying close attention to the effects of women in the informal sector. Therefore, although some might argue that the informal sector offers benefits and perhaps a kind of empowerment or emancipation to its female workers, it becomes clear that this is just a temporary solution for a problem that is still impacting women’s financial security and choices of life.
What can be done?
How can the conditions of women in the informal sector be improved and opportunities for formal entrepreneurship enhanced, so that a permanent increase in gender equality may be achieved? The diversity of the members of the informal sector renders changes through organizing difficult, as no obvious group identity can be assumed with ease. Women in informal economies rarely identify as workers because gendered social identity markers (e.g., “mother”) are viewed as more integral. To provide suggestions for helping women attain workers’ rights, an all-encompassing identity, and a sense of belonging to society, a bottom-up approach has been viewed as most effective. On a local level, the construction of a valued identity as a worker through which a cohesive group willing to fight for change may be formed, is essential. Access to practical benefits stemming from organizing may help women grasp the relevance of organizations formalizing their work through policies. This is another example of the dialogue of informality and formality, as it shows how occupations previously considered informal may transfer to the formal sector. The formal identity of “worker” may already include certain rights and privileges. However, this identity is frequently inaccessible to women in the informal sector, as informal performances of gender roles hinder the identification with this label. For example, a woman might first identify as a mother, and only see her work as a way of providing for her child, rather than understanding being a worker as a separate identity which she could also identify with, and of which benefits may be reaped by organizing with other female members of the informal workforce and making their voices heard.
The Global North has begun heralding the implementation of informal practices as an economic innovation, while the Global South’s tendency for larger informal sectors is seen by Western knowledge production and politics as a symptom of corruption and perceived state infancy. Not only is research on the informal sector thus biased: the known demographics of the informal sector are also largely due to bias and cultural norms. The negative influence of the informal sector is almost exclusive to poorer nations. An unwillingness or lack of funding to research informality within the Global North due to biases thus results in a lack of evidence to establish comparability between informality in the Global North and South. Consequently, finding out how informality may be modified in the Global South to work in favour of those predominantly making up the informal economic sector is challenging.
The women of the informal economic sector are not victims. They are mothers, entrepreneurs, wives, widows, workers. While they may not enter the informal sector entirely out of their own volition, they use it to empower themselves and provide for their families. Unfortunately, the nature of the sector may cause them direct or indirect physical or emotional harm. By meeting these women on an eye level and helping them identify how they may empower themselves and their fellow informal (female) workers, change may be facilitated from the ground upwards, working conditions improved and worker’s rights granted. Women’s informal labour should be recognized as the contribution and enhancement it signifies in a formal economy. Informal labour may be invisibilized, but its impact remains crucial and not to be underestimated.
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