World Urban Forum

Informal sector enterprises and jobs are not recognized. There is a need to recognize the micro and small enterprises, especially in urban informal settlements and support them through registration facilities, access to credit, banking services and quality and design inputs. Formal sector business support organizations, such as the Small and Medium Enterprise Development Authority (SMEDA), should reach out to these enterprises and entrepreneurs. The support will help the micro enterprises to grow and merge and support employment generation and innovations. The regulatory environment needs to facilitate and create competitiveness and not to suffocate.

We´re now in economic crisis, it´s not easy to give credit to someone who has nothing to prove to a bank. I propose UNITED between us first, we have to connect our ressources together by group of sector although a cooperative. We need to stop thinking about government to change our destiny or cross our arms then wait them to give us JOB. That´s bad, it´s for what we have more poverty every day!

About Employment Data Bank creating jobs in the city, yes it is true that, this can happen from the practical experience in my country- Uganda, Kampala has a big population like any other cities but what is happening it is hard to know where to procure a service, because there is system and once a Data bank was created many people especially the youth would get employed. Another important issue is that, some people are not employed because there are not competent that is why Competence Development Program is relevant and appropriate to unemployment in addition to the recent efforts. I have also developed a model, matching which brings skilled people with relevant employers. Please if you are interested further to learn about this concept, feel free to ask me to send you all the details.
Thank you

L'ong gradi pense que soutenir les paysans et des agriculteurs dans la maîtrise de travail agricole, à la mise en place ou création de très petite et moyenne entreprises agricoles, constitue un creno porteur d'emplois. Cette démarche doit être accompagnée sur le plan technique et financier à fin de rendre ces exploitations viables tournées vers l'approvisionnement des marchés de consommation.

Steve Miller asks,
"Do regulations kill jobs or create them? Are they the cause of or solution to informality?"

I think our public policy -- particularly immigration policy -- is so ambivalent on this question.It is so easy for investment to flow across national borders, and we extol open competition and free enterprise, but the free flow of labor (which is the only thing most people have to exchange) is often harshly regulated or criminalized. A recent book by Guy Standing (formerly of the International Labor Organization) identifies "denizenship" as a degraded form of citizenship: migrants work in receiving countries but they enjoy scant legal protection against exploitation by their employers (i.e. their civil rights are minimal), and they have few political rights either (an incisive review of Standing's book, The Precariat, is attached). -

I heard on the radio this morning that France's new President, Francois Hollande, will be advocating growth measures for the E.U. that include reforms to labor migration rules -- making migration easier and more open. Informal immigration has already changed the nature of cities profoundly throughout the world; perhaps legally recognizing these informal arrangements and taking steps to protect the civil rights of those who participate in them will stifle urban growth, but perhaps it will make such growth more equitable.

Of course the 'informal economy' a huge subject in the sense that it is the majority 'employment' in many cities in the south - in South Asia and Africa, the vast majority. For large numbers of citizens it is the result of desperation in the sense of needing an income but there being no jobs. But it is also in a sense the result of incommensurability between 'modernity' with all its bureacratic and regulatory structures and assumptions and the culture of those who enter urban life with their own aspirations and outlook that tends towards alternative lifestyles. In vast numbers of cases, informal employment is more congenial than formal, given more flexible hours and working conditions and not always less lucrative than formal employment (wastepickers, for example, often earn rather well by standards of those labouring in the formal economy for a pittance).

And gradually people in the informal economy are becoming organised. Maybe we should say that, with the economic decline in the future, 'informal' ways of working will become the norm and, in thier own way organised as part of the revival of 'local community' encouraged and eventually necessitated by the decline of the modern economy linked to the decline in energy resources over the coming years.

In the interim, there are attempts to suggest, under the generic title of Local Economic Development (LED), ways in which work and incomes might be generated amongst those residing in informal settlements (not a one-to-one relationship with the informal economy, but nevertheless with close links). See attachment which are guidelines for generating economic activity, jobs and income aimed at development workers involved in 'slum upgrading' projects.

Thanks to Laura for the references and data on US regarding the impact of immigrant workers on the labour market, and to Adrian for sharing the Local Economic Development Guidelines and his thoughts on informal workers. While I understand you are not making a blanket statement, do others agree with your view that "In vast numbers of cases, informal employment is more congenial than formal, given more flexible hours and working conditions and not always less lucrative than formal employment (wastepickers, for example, often earn rather well by standards of those labouring in the formal economy for a pittance)."!?

It seems we are dealing with two very different visions of the informal economy. One would correspond with the view raised in the World Bank publication "Informality: Exit and Exclusion" where a good number of workers chose to opt out of the formal economy because they find the regulations too restrictive and can actually do better in the informal economy. A very different view, embraced by Saskia Sassen, Marty Chen and others, would see the informal economy as an integral feature of modern economic development. Here one could argue that if the informal economy didn't exist, the formal economy would invent it!

Of course, Steve, there is a vast pool of the neglected and desperately poor that make up the majority of those in the informal economy. That is the result of the neoliberal world in which we currently live. But Kerul is right that there is a very large section that shades over from desperation to preference. The fact is that working in the formal economy is almost always a stressful business. Amongst those of us who win, it has its rewards of fat incomes and consumerist wealth but amongst those - the real workers who produce the beguiling stuff, the acquisition of which is the central goal of our (post?)-modern world, who work long hours in factory conditions and earn derisory incomes: why do it, if there is an alternative? - the fact that incomes in the informal econoimy are also derisory matters less than the relative freedom of choosing your own hours and conditions of work and being free of the arcane rules and regulations of a bureaucratised world.

We can go futher, not just as you rightly say is it that without the informal economy the formal would't work, but that it is the informal economy rather than the formal that should be assisted and encouraged insofar as it is the formal economy, with its drive to produce more and (the rewards being the capacity - and the related inclination) to consume more that is driving the world into the deserts of unsustainability. Compete, compete, compete or the devil take you! Most people are really not interested in competing if they are to be cast out as losers and if they can get by doing something relatively congenial, then why continue the harrowing attempts to find uncongenial and exploitative work or to go through the hasstles and indignities of formalising your enterprise for little or no gain?

At the World Urban Fora (WUFs) far too little attention has been paid to the issue of the urban economy and partricularly the informal economy but a (very) few networking events have focused on this and I remembers in Nanjing participating in one where the results was, it seemed: this is the real economy, not the formal one. So much more attention needs to be given to assisting people working informally directly rather than discriminating against them and trying to formalise them into the competitive modern economy, as is the general tendency of the authorities.

Indeed, as the formal, globalised economy falls apart in the coming years for lack of fuel, community self-organised infomal economies will necessarily lead the way into the deglobalised, relocalised world that we can expect to emerge, so lets start already now to look at the local economies in this light, rather than seeing informality as a problem. Start by helping to organise local food production (urban agriculture) and then revive the local artisanal economy over against the flood globally-traded stuff. That's it!

There is also competition in the informal sector, and a fierce one - one difference is that such competition is mainly local, as opposed to a continously globalizing formal sector.

What is the definition of the informal sector? Different definitions have been offered, but by and large the focus has been on the fact that the informal sector is not regulated, therefore functioning outside government regulation boundaries. In this way, the informal sector epitomizes the neo-liberal approach. Following from this, and following from Adrian's point: is the world then heading towards a - locallly-based - neo-liberalism?

Regarding the informal sector, we appear to be getting different messages. Some would say, for example Adrian's above inputs, that its strength lies in its freedom from regulation. But others (and this is what you seem to be saying Edmundo) is that the informal economy needs to be regulated, otherwise, as you say, "the world then heading towards a - locallly-based - neo-liberalism." What do others think? What should city governments do to support the informal economy? Are there any practical examples which can be shared to help better focus this discussion.

Thanks, Steve. I want to highlight the fact that, in order to function, governments - as we know them now - depend on taxes from the formal private sector and/or on income generated by public enterprises (which are also formal). If cities / the world head towards a full informal economy, and a zero formal economy, this will have major consequences to the capacity of governments to govern, really. In order to advocate for a full informal economy, the consequences of a possible stateless society will need to be well considered.

There are many examples - some of them already provided in this e-debate - of possible actions of local governments re. support of the informal sector. The question is: support the informal sector to remain informal, or try to bring it to the 'mainstream of the urban economy' ? The impacts will be very different!

Thanks to everyone for such an interesting discussion. I'd just like to offer one point that addresses the question of the definition and size of the informal economy, and the relationship between informal economy and regulation.

More and more national statistical agencies are generating data on the informal economy that follow the ICLS definition (see http://wiego.org/informal-economy/concepts-definitions-methods). The ILO will soon launch a joint publication with WIEGO that provides comparable statistics on the informal economy worldwide, based on that definition. One of the main findings of this publication is that informal employment comprises more than half of non-agricultural employment in most developing regions and is as high as 82 per cent of non-agricultural employment in South Asia and over 80 per cent in some countries in Sub-Saharan Africa. So without question, there is tremendous diversity within that very large informal economy – including diversity in terms of 'winners and losers,' in terms of working conditions, in terms of income, etc. – as many contributors have pointed out.

One way to break down the informal economy and better understand how regulation and informal employment interact is to look particularly at employment status (as in this model http://wiego.org/informal-economy/wiego-network-holistic-framework), and another way to break it down would be to look at place of work. Different types of informal workers interact with a different range of regulations, based on where they fall on these two points (employment status and place of work). To give a very simple example on employment status, informal employees of formal enterprises would fall outside the realm of labour regulation, while own-account workers may fall outside the realm of business regulations. Regarding place of work, informal workers in public space (such as street vendors) interact with public space regulation first and foremost, while home-based workers may be dealing more with residential zoning regulations. So one thing that city governments could do is to recognize that regulations may be more appropriate and effective if they take these two points into account – and to worry less about whether more or less regulation is better, and more about what kinds of regulations are appropriate to which kinds of work.

For anyone who is interested, the citation to the forthcoming publication is: Vanek, Joann, Martha Chen, Ralf Hussmanns, James Heintz, and Francois Carre. 2012. Women and Men in the Informal Economy 2012: A Statistical Picture. Geneva, Switzerland: ILO and WIEGO.

Many thanks Sally for these helpful comments. Indeed the debate is not so much about whether we need more regulations (to protect informal workers) - or less regulations (to make it easier to "do business"), but rather what kinds of regulations. Often there is a largely ideological focus on "deregulation" which is supposed to liberate the private sector, which then, it is assumed will create jobs. However, there needs to be more concrete evaluation of regulations (or the lack of them) in terms of their actual impact on decent jobs.

Municipalities and local governments tend to be more pragmatic and less ideological - and have a great interest in seeing jobs created, hence decreasing the social costs they have to bear, increasing their tax base. Therefore city governments have a lot of regulatory levers which can be used to create jobs.

Thanks for pointing out to us some of those levers or areas of comparative advantage.

Thanks also Sally for the cite to the forthcoming ILO publication...
It does seem useful to draw a distinction between regulations that protect workers from exploitation and ones that put barriers in the way of their contribution to the economy. As a general matter it would seem that home-based workers are more in need of the former type of regulation while the rights and economic well-being of informal workers in public spaces may threatened by the latter type.

At the municipal level, there is often a fine line between a public space regulatory regime that sets basic guidelines for safety and fairness and one that criminalizes informal activity. The most prominent examples relate to street retailing. There is a controversy in New York City right now about a set of bills streamlining regulation for street vendors-- two of these aim to reduce highly punitive fines on vendors
http://www.urbanjustice.org/ujc/projects/street.html

Portland, Oregon offers an example of how a municipality can embrace the potential contribution of street retail (specifically, food carts). I am attaching a consulting report that Portland's Bureau of Planning commissioned, which found that on the whole food carts have a positive impact on street vitality and quality of life in both high-density and low-density neighborhoods. The report discusses urban design interventions that can mitigate some of the carts' negative effects (such as trash and congestion); the report notes that many food cart owners would actually like to "formalize" their operations by opening in storefronts, but don't have access to capital, so one recommendation is to connect these entrepreneurs with lenders and technical assistance providers.

I look forward to the ILO publication and will be curious to see whether it makes any recommendations concerning regulation to aid/protect either home-based or public space-based informal workers.

Thanks for the information on street vendors from the Urban Justice Project. In fact, this is a big issue in my (New York) neighborhood Jackson Heights which is a major center for street vendors and food carts in New York.

WIEGO has an excellent site on street vendors as well as other occupational categories of informal workers at: http://wiego.org/informal-economy/occupational-groups. which includes a recent report on Street Vendors in Durban South Africa.

It seems many municipalities, in order to get street vendors off the streets (Durban, Ouagadougou, etc.) provide them dedicated marketing space. Does this work and is it a good idea?

Dear All, thanks again for such an interesting discussion and for sharing so many useful resources. On Steve's last question, my sense is that the evidence on whether it works to provide street vendors dedicated market space is quite mixed. The most commonly cited stumbling blocks are (1) that too many vendors cannot afford to buy or rent the stalls available in the dedicated market spaces, (2) the dedicated market spaces are often located in areas that do not attract enough customers, rather than being located at natural markets where customer flows are predictable, and (3) dedicated market spaces often have design flaws that discourage vendors from using them (too dark / unsafe, too crowded, too difficult to access, inappropriate or nonexistent infrastructure (toilets, water, child care facilities, etc.)). The article in The Guardian from May 17 on covered markets in Zambia is a very typical example (http://wiego.org/news/zambia%E2%80%99s-move-covered-markets-proves-hard-sell-street-vendors). It seems that in many cases the dedicated market spaces are designed and planned without the participation of street vendors themselves, so vendors don't end up using them because of one or another flaw in planning. The most prominent positive examples are Durban, South Africa which Steve already mentioned (at Warwick Junction; see e.g. http://www.aet.org.za/2011/06/tv-series-production-of-the-warwick-junction-story/) and Bhubaneswar, India, both of which developed processes of defining vending zones that included street traders in their planning and design.

Laura thanks for sharing the report on Portland food carts – I wonder if anyone has looked at whether lessons from the more successful North American cases could be appropriately adapted in cases in the global South, and vice versa.

Continuing along the line of thinking about the informal economy from my earlier ruminations and after reading what has been submitted subsequently to the dialogue... It is indeed true, as Edmundo wrote a little while back in this dialogue, that there is strong competition in the informal economy and I agree that it is brought on by the neo-liberal present. Being difficult to find a means of livelihood, when one person hits on an idea that makes money, others pile in. I remember this particularly in Haiphong, when I was working there some 15 years ago and with Doi Moi (launching of the ‘market economy’) everyone was scrabbling about looking for some way to earn a living where there were too few jobs on offer... And I remember in Tanzania, immediately informal workers invented a zany new object to sell, people with capital came along and stole the idea, producing it en masse and marketing it cheaper, doing the original inventors out of a job. So the only option was street vending, adding just a little onto the price of the things others were producing and making the real profits – viz products produced in China - undermining one gainful economic activity after another, beggaring the people who couldn’t compete successfully.
This is the perennial problem. One of the ILO ideas is to increase productivity amongst those in the informal economy so that they will earn a better living. But if a few increased productivity, they actually put the majority out of a job. Better leave space for the large numbers who are close to destitution but just manage to survive. In the good old days, there was cooperation amongst those producing in different sectors. You can still see the remnants of this in the Medinas of the Middle East (they still craft beautiful inlaid furniture and tableware) and the ‘craft villages’ around Hanoi and the 39 streets in the old city itself. I remember this way of organising the local economy was still alive when I wandered through Asian cities back in 1970 – I have slides from Isphahan and Lahore from that time. In Europe, before the advent of modern capitalism, we in Europe also had our guilds where craft knowledge and quality was maintained amongst each productive sector.

I was very impressed when researching for the ILO on the informal economy on reading the material that came out of the project which the agency set up following the 1992 International Labour Conference debate on the informal economy. Specifically the work in Manila (there were other projects in Dar es Salaam and Bogota) where it became evident that, given stimulus and assistance, some entrepreneurs took training courses, learned to do accounts, form and register an enterprise, buy the necessary plant and equipment and employ people; where others didn’t seem to have the umph to take these steps, either lacking the confidence or, perhaps, being (too easily?) satisfied (‘satificed’) with a level of activity in the informal economy and continued to operate as unregistered family enterprises, getting by, spending what small income they had on upgrading the interiors of their self-constructed houses, etc.

This is what I mean when I say that large numbers in the south (in the north we don’t get much chance with the law constantly pushing lazy youth to look for work) choose to drop out. Another study I was impressed by, when working at the ILO, was one of informal enterprises in a low-income settlement in Santiago del Chile where the survey on which the publication was base indicated clearly that the majority did what they did by preference in spite of insecurity and low incomes.

And here we come to the crunch: it is not some off-the-wall radicalism to say that capitalism is a system of ‘grow or die’ and that competition is seen as a good thing. The horrid part is that the majority lose and it really isn’t a nice feeling to lose, so better opt out. The literature on the collapse of societies in the past notes that in many if not most cases, the ethos of these societies was on one of competition that blinded them to the disaster that befell them (see: Ponting, C. (1992). A green history of the world: the environment and the collapse of great civilizations. St Martin’s Press, New York.; Tainter, J. (1988) The Collapse of Complex Societies. Cambridge University Press, Cambridge; Diamond, J. (2005) Collapse: How Societies Choose to Fail or Succeed. New York: Viking.). Our – by now globalised - society is afflicted with exactly this problem which, however, many people resist, working in the informal economy. These are the heroes of the future. Elenor Ostrom, who just won the Nobel Prize in Economics has done copious research, with her co-workers, to show how vast numbers of people actually organise themselves around cooperative ways of organising economic activity and, of course, the cooperative movement has been doing this for well over as century.

The world after fossil fuel – in just a few decades from now - will mean a return to local economies simply because the fuel won’t be there to continue running the global economy. We should see the problems of the informal economy in this light - and whilst WEIGO and others are doing great things to help those in the informal economy to organise, they should move beyond helping those who serve the interests of global capital (street vendors and women home workers) and start to think of ways of ‘recolonising’ the local productive economy, pushing away the beguiling stuff of the global economy and its unsustainable production system and returning to something that provides people locally with things they need for a comfortable life, produced with local labour. Assistance to Local Economic Development (LED) is the present mechanism that some (the ILO at the forefront) are working on in this respect. But once again there should be clarity that this should NOT be about helping communities to compete but rather helping them to cooperate to produce goods and (social) services that help the poor out of their poverty in situ, providing both work and the accoutrements of live comfortable lives that are affordable.

Sorry Ed, I didn’t really answer your concern. It is clear that there is a spectrum with regard to local government attitudes to the informal economy. The Course Manual I did for the ILO on the informal economy attempted to bring local governments around to having a positive attitude to the local informal economy. We have seen, as Sally Roever noted earlier in this debate, the famous case of Durban as a local authority that was pro-active in recognising the legitimacy and rights of citizens working in the informal economy, Shanghai also issues licenses for people to work in the informal economy and in Brazil this has been widely accepted. And where the informal economy is embraced by local governments, much can be done in assisting people working on the streets to improve their conditions and maybe also their incomes.

Notwithstanding sympathetic local governments, however, the problem is, rather, with the neo-liberal ideology and the presumption that comes with it that somehow ‘the market’ is the only reality for economic organisation. Local governments, in the end, are part of this world whether they want to be or not and most subscribe subconsciiously to it such as to have a negative attitude to the informal economy - and indeed the poor and excluded as such. The only local government I know that systematically operated on non-liberal principles is Mondragon in Spain which, furthermore has been immensely successful with respect to assisting in local economic development on consistent cooperative lines! Cooperativism, consistently implemented really does work!!! Only in the Mondragon case, its very success has led to some degeneration in principles... another debate.

I work with local governments and consider, being an ardent decentralist believing that post fossil-fuel they are the real future, that if they only allow themselves an ideological revolution, they will embrace the informal economy, help it to develop around the principles of common property resource management (viz Elenor Ostrom , whom I mentioned in my last missive), they, too, will be the heroes of the future. And the Transition Cities movement is where you will find those local governments that are in process of making this transition (www.transition network (www.transitionnetwork.org) ...