The global governance of informal economies: the International Labour Organization in East Africa

This article develops a Gramscian approach to the governance of ‘informal’ economies through a historical study of International Labour Organization (ILO) programmes in East Africa. Drawing on Gramsci’s conception of the ‘subaltern’, the article highlights the ways in which the articulation of ‘informality’ in policy documents is coloured by broader struggles over the political organisation of labour. The article develops this argument through two case studies. The first examines the World Employment Programme mission to Kenya in the 1970s that popularised the concept of ‘informal’ labour. The second is a contemporary programme on apprenticeships in the informal economy that originated in Tanzania.     

Labour in Paradise: Gender,Class and Social Mobility in the Informal Tourism Economy of Urban Bali,Indonesia

Bali’s recent socio-economic transformation is mainly a result of rapid growth in mass-tourism, which, as a capitalist labour-intensive industry, represents a new regime of labour that reorganises, dislocates, and multiplies wage labour opportunities. ‘Localising globalisation’ through labour in tourism alters conditions for gaining a living wage; yet, it also produces new contestations of gender, caste and class. This article argues that the labour regime shift has produced a large informal economy that provides new paths for social mobility for low caste Bali-Hindus, whilst at the same time class, gender and caste inequalities interlock in the shaping of different labour trajectories.     

Who Suffers the Penalty?: A Panel Data Analysis of Earnings Gaps in Vietnam

In spite of its predominant economic weight in developing countries, little is known about the informal sector earnings structure compared to that of the formal sector. Taking advantage of the rich VHLSS dataset in Vietnam, in particular its three wave panel data (2002, 2004, 2006), we assess the magnitude of various formal–informal earnings gaps while addressing heterogeneity at three different levels: the worker, the job (wage employment vs. self-employment) and the earnings distribution. We estimate fixed effects and quantile regressions to control for unobserved individual characteristics. Our results suggest that the informal sector earnings gap highly depends on the workers’ job status and on their relative position in the earnings distribution. Penalties may in some cases turn into premiums. By comparing our results with studies in other developing countries, we draw conclusions highlighting Vietnam’s labour market specificity.     

Education,Employment and Earnings of Secondary School and University Leavers in Tanzania: Evidence from a Tracer Study

This study uses a tracer survey of secondary school completers in Tanzania to analyse the impact of educational qualifications on labour market earnings. We show that the rates of return to the highest educational qualifications for wage employees are not negligible and, at the margin, provide an investment incentive. However, we find little evidence of human capital effects in the earnings determination process for the self-employment sector. Introducing controls for father's educational background and a set of school fixed effects designed to proxy for school quality and potential labour market network effects reduces the estimated rates of return to educational qualifications. A comparison of our results with the available evidence from other countries in the region suggest that, despite an extremely small secondary and university education system, the private rates of return to education in the Tanzanian wage employment sector are comparatively low.     

Adjustment,stabilisation and the structure of employment in Brazil

A significant change in the structure of employment in Brazil in the period 1988–95 took place. Industrial employment fell, especially in the most traditional sectors such as clothing, textiles and footwear. There has been a shift of workers from the industrial sector to the services sector and an increase in the share of self‐employed workers and informal wage earners. The quality of jobs being created in the services sector are not of the same ‘quality’ as those in the industrial sector, leading to a deterioration of employment conditions and of the labour market performance. Hence the rate of unemployment is not a very good measure of labour market conditions during adjustment. The creation of jobs in general might therefore not be an explicit target under adjustment. Rather the objective should be trying to change labour market institutions in order to improve the quality of the jobs and the quality of the labour relations.     

Pakistan's informal sector

This study reviews the main features of Pakistan's informal sector. The data on the informal sector, compiled from censuses and sample surveys in one major city (Rawalpindi), suggest that both real wages and employment have grown in the informal sector. The seeming paradox of real wage growth in a labor surplus economy is explained by real wage growth in both agriculture and large‐scale manufacturing, both of which were made possible by Pakistan's growth performance during the 1960s. The differences in wages between the formal and informal sector, after adjusting for age and education, are quite small, a reflection of high labor mobility between the two sectors.     

Where has all the education gone in sub-Saharan Africa? employment and other outcomes among secondary school and university leavers

Anecdotal evidence and generalisations abound concerning the employment outcomes of secondary school and university leavers, but there is very little solid, accurate information on what these groups in African countries do after they have completed their education. Using tracer surveys, this paper presents comprehensive time-series information on the activity profiles of representative samples of secondary school leavers and university graduates in Malawi, Tanzania, Uganda, and Zimbabwe. The paper shows that much of the anecdotal evidence surrounding the labour market outcomes of these groups is spurious. While employment outcomes are generally much better than expected, the tracer surveys highlight the enormous challenges of educating and subsequently utilising secondary school leavers and university graduates in an efficient and effective manner in low-income African countries. In particular, given the paucity of new employment opportunities in the formal sector, much more needs to be done in order to ensure that both these groups are better prepared for productive self-employment, especially in high growth and higher skill activities.     

Wage determination in Brazil: The growth of union bargaining power and informal employment

This article examines wage determination in Brazilian manufacturing during the 1980s and early 1990s. It presents evidence to show that the reduction in state regulation of collective bargaining has led to the development of a system of wage determination which is increasingly characterised by rent sharing and insider trade union bargaining power. Real wages appear increasingly inflexible with respect to movements in open unemployment, with a large informal sector disciplining formal sector wage bargaining and cushioning the impact of broader labour market conditions. An important consequence of this is that the employment costs of a successful counter‐inflationary strategy may be very severe.     

The labour market in a dual economy: Another look at colonial Rhodesia

A labour market model is developed for the formal sector of a labour surplus economy, allowing for monopsony power by firm owners and an inelastic supply of labour with respect to the wage rate. This inelasticity arises even though the wage rate in the traditional sector may be ‘fixed’ due to surplus land, and the supply of labour to the traditional sector responds quite positively to an exogenous increase in the (implicit) wage rate there. This labour supply function is derived from a simple utility maximisation model incorporating the spatial aspects of temporary migration to the formal sector.     

Enforcing labour rights of irregular migrants in Indonesia

The multi-directional nature of labour migration flows has resulted in an increasing number of countries having become both senders and receivers of regular and irregular migrants. However, some countries continue to see themselves primarily as senders and so ignore their role as a receiving country, which can have negative implications for the rights of migrants in their territory. Using the example of Indonesia, which is State Party to the 1990 UN Convention on the Rights of All Migrant Workers and Their Families, this article demonstrates that irregular migrant workers in this country have the legal right to protection against labour exploitation even when they work despite the government’s prohibition on employment. The article discusses the ‘right to work’ and how international human rights law has translated it into the ‘right to protection from labour exploitation’ for irregular migrants in Indonesia. By way of two case studies about the Indonesian government’s handling of irregular migrants, it shows how it prioritises enforcement of the employment immigration law over labour and employment laws much like countries that have not ratified the ICRMW. It also draws attention to legal protection gaps that emerge for asylum seekers when they are recognised to be genuine refugees.     

Racing to the bottom: international trade without a social clause

Linking trade concessions to compliance with internationally recognised labour standards is referred to as a ‘social clause’. The social clause is usually depicted as causing division between the (rich) global North and the less-industrialised global South. This article shows, however, that there is diversity of opinion among the labour movements of the global South and that contemporary labour-intensive manufacturing pits countries of the South against one another. The article raises the possibility of a race to the bottom in labour standards, where workers cannot enjoy the fruits of growth because their employers and governments hold on to the competitive advantage of cheap labour. Consider competition between China and Mexico for the North American apparel market: despite enormous employment growth apparel workers have not enjoyed wage growth and their conditions are often appalling. The race to the bottom can be prevented by South–South agreement to honour labour standards.     

Who Benefits from Higher Education in Low- and Middle-Income Countries?

In this article, we investigate how higher education contributes to the employment and earnings of individuals in labour markets, and whether social origins play a role in the financial benefits from higher education. We focus on these questions in nine low- and middle-income countries: Armenia, Bolivia, Colombia, Georgia, Ghana, Kenya, Laos, Macedonia, and Vietnam. We use the recent Skills Towards Employability and Productivity (STEP) surveys of urban labour force participants to examine individuals’ educational attainment, labour market participation, and earnings. Using logistic regressions, we find that individuals from disadvantaged origins are less likely to obtain a higher education degree. We find that in most of these countries, individuals who have earned a higher education degree are significantly more likely to be in the labour force and find employment, and enjoy sizable earnings premia. The findings are fairly robust with regard to the samples of individuals examined, and the methods used to measure earnings premia. Finally, we find little evidence that the earnings premia from higher education vary by social origins or the likelihood of an individual completing a degree. These results suggest that the benefits from higher education are comparable for individuals from disadvantaged and advantaged social origins.     

Structural and Behavioural Characteristics of Informal Service Employment: Evidence from a Survey in New Delhi

This article argues that at least two distinct categories within the informal sector - informal services and informal manufacturing - exhibit different structural and behavioural characteristics. While some segments of informal manufacturing may indeed be 'dynamic' as noted by some recent studies, the hypothesis is tested for the informal service employment on the basis of a survey by the author in New Delhi, India. It examines investment, earnings, returns to human capital, socio economic characteristics and scope for upward mobility of informal service employment. It finds formal education does not explain differences in earnings in the sample but background characteristics do; earnings in the informal service sector are neither the lowest in the economy nor are they comparable to wages in the urban formal unskilled sector, when differences between migrants and non-migrants are taken into account. On the basis of these results, the paper reflects on the nature of growth and structural change in the Indian economy and draws some analytical and policy implications.     

Wage Subsidy and Labour Market Flexibility in South Africa

Abstract

We use a general equilibrium model to analyse the employment effects and fiscal cost of a wage subsidy in South Africa. We capture the structural characteristics of the labour market with several labour categories and substitution possibilities, linking the economy-wide results to a micro-simulation model with occupational choice probabilities to investigate the poverty and distributional consequences. The employment impact depends greatly on the elasticities of substitution of factors of production, being very minimal if unskilled and skilled labour are complements in production. The impact is improved by supporting policies, but the gains remain modest if the labour market is rigid.     

Consent behind the counter: aspiring citizens and labour control under precarious (im)migration schemes

‘Managed migration’ schemes promote mobility of labour across international borders, diversifying worksites and introducing new systems of enacting labour consent. This article examines how Canadian franchisees are recruiting Filipino migrants to staff their restaurants, facilitating employers’ access to new, flexible subjects. These workers covet their employment as pathways to Canadian citizenship. Some are unaware, however, that they are recruited under a precarious immigration scheme, one that neither directly denies nor facilitates access to legal incorporation. Instead, migrants are (transnationally) encouraged to compete in the worksite for employer-nominated citizenship, a highly productive system for engendering consent. This draws attention to new challenges ‘managed migration’ schemes pose for resisting downward pressures on work and employment conditions.     

Market control in developing economies

This article analyses the role of government effectiveness in the determination of informal employment. A theoretical model is developed, in which local governance and worker skill level are assumed to influence the decision of the worker whether to seek employment in the formal or informal sectors. The model is assessed empirically using data from Brazil, where almost half of the urban labour force is employed informally. The empirical analysis supports the predictions of the model and suggests that the probability of a worker being employed informally is lower in regions with better governance and higher average education.     

Self-employment in Estonia: Forced move or voluntary engagement?

This article examines the importance of ‘pull’ and ‘push’ factors in self-employment drawing upon the experience of post-socialist Estonia, where self-employment has risen sharply from a negligible level since 1989. Drawing on quantitative data, and also qualitative data, the article identifies a range of different types of self-employment in Estonia and explores the reasons for their different levels of success.     

Economic Transformation Outside the Law: Corruption,Trust in Public Institutions and the Informal Economy in Transition Countries of Central and Eastern Europe

This article considers the role of the informal economy in Central and Eastern European post-communist countries. The informal economy is defined as the ‘black’ economy, which is monetised but outside the law (often illegal) on the one hand and the ‘household’ and ‘social’ economies which are non-monetised and non-legal in the sense that they are outside of legislation. The article shows that in some countries the black economy is very important for supporting household incomes (Serbia and Croatia) and in other countries the household or social economies are predominant (especially Romania and Ukraine). In a third group of countries the formal economy predominates over other economies (especially the Czech Republic and Hungary). The article goes on to look at what kinds of people participate in these different economies and concludes that whilst the household and social economies are a social safety net for the poor, the elderly and those in rural areas, the black economy is more likely to be an option for those who are already better off to improve their incomes. The article considers the implications of this for attitudes to the legitimacy of the public realm and finds that greater participation in the informal economy is associated with both loss of trust in public institutions and increased perception of corruption. Therefore it is hypothesised that economic activities that take place ‘outside the law’ could lead to a decline in confidence in the state, although there are important variations between countries.     

The Russian virtual economy turning real: Institutional change in the Arkhangel'sk forest sector

The article reports on an attempt to assess recent developments of the Russian ‘virtual economy’, a system that, some have argued, represents an alternative form of economic interaction to the modern market economy. In the virtual economy enterprises are engaged in informal non-market transactions with other enterprises and the public sector in accordance with rules that are alien to a market economy. Structural and behavioural changes that have taken place in the Russian economy after 1998 are studied with the help of official data and two surveys (from 1998 and 2005) of 15 forest sector enterprises in Arkhangel'sk Oblast’, a region in Russia's north-west with a largely forest-based economy. The outcome of the assessment indicates that the virtual economy is contracting in the Arkhangel'sk forest sector as well as in Russia at large, and that it will eventually disappear altogether, even if it is likely to exert a profound influence on the behaviour of Russian enterprises for some time yet.