The informal economy accounts for 50-80 percent of urban employment in cities across the global south
WASHINGTON (May 29, 2018) — Informal workers represent 50 to 80 percent of urban employment in the global south – from street vendors and waste pickers, to workers manufacturing goods at home – and generate up to half of GDP outside of agriculture. Though cities need informal workers to be productive, most are either ambivalent or hostile towards them. The latest working paper in the World Resources Report, “Towards a More Equal City,” called “Including the Excluded,” reveals how cities in the global south can create policies, legislation and practices that support informal workers while promoting economic productivity and environmental sustainability.
The prospect of employment will continue to attract rural migrants to cities; however, there are not enough formal jobs in many cities to meet demand. Already the size of the informal economy is staggering: the percentage of informal workers in the urban workforce in Africa is 76 percent, 47 percent in Asia/Pacific, and 36 percent in the Americas. Cities have historically stigmatized informal workers as avoiding taxes and regulations, representing unfair competition to formal firms, appropriating public space, and creating congestion, unsanitary conditions, and public health risks. As a result, they are largely invisible. City officials rarely recognize the economic activity of informal workers as a livelihood strategy or as a contribution to the formal economy. But this can change.
“As urban population growth continues, and often exceeds employment growth, struggling and emerging cities need to recognize and value the informal economy as an integral contributing component of the urban economy,” said Victoria A. Beard, co-author of the study and Fellow at WRI Ross Center for Sustainable Cities. “The informal economy creates more jobs than the formal economy, particularly for low- and middle-income groups, and significantly contributes to economic growth.”
A collaboration between Women in Informal Employment: Globalizing and Organizing (WIEGO) and WRI Ross Center for Sustainable Cities, the paper finds that more inclusive approaches are crucial – and beneficial – as cities cannot become more equal or more economically productive if they exclude the vast majority of their workforce, especially the working poor.
What do these informal workers need to become more productive? Street vendors need public space in good locations to vend. Waste pickers need the right to bid for public procurement contracts to collect, sort and recycle waste. Home-based workers need equitable access to core public services. With these needs met, they can be even more productive and have greater security as they contribute to the city’s economy. In “Including the Excluded,” the authors examine innovative ways some cities have found to work with home-based workers, street vendors and waste pickers that can be replicated around the globe.
For example, the Self-Employed Women’s Association, a trade union of 1.5 million women informal workers across several Indian cities, is collaborating with city governments to provide core public infrastructure services by organizing workers and linking them to specific city departments responsible for housing, electricity, sanitation and water. Another example is: across several Latin American cities, waste picker organizations have received official recognition and support, including buildings to sort and store waste, vehicles to transport waste, and municipal contracts.
Still, “the politics of change should not be underestimated,” said Martha A. Chen, co-author of the study, WIEGO Senior Advisor, and Lecturer in Public Policy at the Harvard Kennedy School. “The best way forward is to include organizations of informal workers in the formal processes of urban governance and management to negotiate policies and plans that balance competing interests, and promote social and economic justice.”
Four key recommendations emerge from these examples of positive integration:
Increase informal workers’ access to public services, public spaces and public procurement. To better harness and encourage economic growth, city governments and local officials should acknowledge the economic contribution informal workers make to the urban economy and reduce harassment and penalization. Cities should provide core public services to informal workers to make their workplaces more productive; grant regulated access to public space; and allow organizations of informal workers to compete for public procurement.
Reform laws and regulations so they support informal workers. City governments and local officials should make it easier for the informal self-employed to register their businesses, as well as make taxation progressive and transparent, and assess what taxes and operating fees informal workers already pay. And they should extend benefits to workers in exchange for paying taxes.
Include informal worker leaders in participatory policymaking and rule-setting processes. Cities should integrate informal economy activities into local economic development plans and urban land allocation plans. Informal settlements are often thriving industrial hubs and house many home-based businesses. Cities should also recognize and protect natural markets for vendors, and recognize that waste pickers contribute to cleaning streets, reclaiming recyclables and reducing carbon emissions.
Support coalitions for change. All of the inclusive approaches highlighted in the paper were brought about by coalitions for change comprised of organizations of informal workers, supported by activist allies. Coalitions for change help monitor and highlight the situation on the ground, create awareness with the media, organize policy dialogues and provide technical assistance to advocacy campaigns.
“By 2050, two-thirds of the world’s population will be living in cities – nearly 2.5 billion more people than today,” said Ani Dasgupta, Global Director of WRI Ross Center for Sustainable Cities. “This report shows that to thrive and be sustainable, cities have to find more ways to enhance the productivity of informal workers, which make up the majority of urban employment, by recognizing their worth and encouraging greater public benefit from their labor.”
For more information on the “Towards a More Equal City” series, visit citiesforall.org.