ABSTRACT
During the past two decades, the notion of an informal economy has increasingly become part of everyday language. Despite this, or perhaps just
because of it, uncertainty over what the informal economy comprises still persists. Williams and Windebank (1998) discovered at least 22 adjectives used as synonyms for the ‘informal’ economy. On the one hand, it has been and still is often viewed as fraudulent activity, equating with the illegal economy. However, a distinction can be made between the illegal and informal aspects. Thus, Castells and Portes (1989, see also Portes 1994) define illegal economic activities as being involved in the illegal production and distribution of goods and services that are by law defined as illicit. Informal economic enterprises deal with licit (i.e. legal) goods and services, while the way of operating the business in which such goods and services are provided is to a varying extent illicit. The definition that has been most broadly adopted is that proposed by Castells and Portes (1989: 12), whereby the informal economy is defined as ‘all income-earning activities that are not regulated by the state in social environments where similar activities are regulated’. Originally the concept of an informal sector was developed within the International Labour Organisation (ILO) Research Program on Urban Unemployment at the beginning of the 1970s (Bangasser 2000). It was associated exclusively with the analyses of economic and social processes in Third World countries. Hart (2005), the economic anthropologist who coined the concept, was impressed by the creativity in which ordinary people generated incomes ‘out of the adverse circumstances of their impoverished everyday life’. Hart described this contingent entrepreneurial dynamism as the informal economy. Its character was not only an expression of self-help, it represented ‘people taking back in their own hands some of [the] economic power that centralized agents sought to deny them’ (Hart 1973; Portes 1994: 427). But even before Hart’s important work (1973), the ILO had already embraced the notion of an ‘informal sector’, seen as largely synonymous with underdevelopment. The informal sector in developing countries was thus viewed as a result of political inability to modernise society, to provide prerequisites for ordered urbanisation, to provide universal education for citizens and to provide employment opportunities within the formal economy (Sassen 1998). The informal economy has not been confined to less developed economies however. There has also been a persistent increase in the share of population engaged in informal activities in both transitional post-communist economies and indeed in developed economies. More recently, the ILO (2002) has redefined the informal economy to include both self-employment in informal enterprises and paid employment in informal jobs. It suggests a broad approach that understands the informal economy in its connections to the formal economy rather than a dualist or strict separation between formal and informal (Castells and Portes 1989). This view sees informal employment in terms of a lack of employment security, access to social benefits and social protection. It shifts the focus away from circumventing formality in terms of the employment contract and tax and social insurance obligations towards a deeper understanding of
the nature of employment relations and the emergence of features of informality even within the formal economy. Routh (2011) accordingly suggests that the concept of informal employment can bridge the divide between dualist and structuralist cum legalist explanations of informal economic activities, reaching beyond a strictly formal/informal dichotomy. This conception also enables the development of country-specific policy tools for improving working conditions in the informal economy, assuming of course that states are not simply bent on a path of open deregulation and free market policies which undermine labour standards. The relationship between the so-called formal and informal economy is further discussed by Slavnic (2010). Informalisation of Western economies, it is argued, is closely related to the wider processes of ongoing ‘post-Fordist’ economic restructuring, the decline of large-scale manufacturing accompanied by increasingly service-based economies, and the shift in welfare provision that makes access to benefits such as unemployment support conditional on individuals’ availability for work (‘workfare’), rather than ‘universal benefits as of right’ (Standing 1999). Slavnic asserts that under such circumstances all economic actors are increasingly ready to adopt informal economic strategies to secure their ends. Corporate strategies of downsizing, outsourcing and subcontracting erode secure employment and create new spaces for the informalisation of employment relations (a dilution of fixed rules), while paradoxically welfare states redefine their role in terms of protecting the vulnerable in an increasingly disciplinarian manner (an intensification of rules), in which the poor are increasingly seen as undeserving, rather than simply structurally disadvantaged. Informalisation is also identified as a national strategy of developing and new industrial countries, conspicuously China and India, in order to compete for foreign direct investments (FDI) and foreign markets. Corporations pursue innovative organisational strategies such as off-shoring, outsourcing and sub-contracting chains, connecting the formal and informal economy with global production value chains (Gereffi and Kaplinsky 2001), while governments in emerging economies create export processing zones with favourable tax incentives for foreign companies, but with weak labour rights for workers (Likic-Brboric 2007). Thus the state and large businesses can be identified as part of a process of informalisation from above. Complementary to this is a process of informalisation from below constituted by the agency of a range of marginalised actors. Included here are lowincome earners, and small businesses insofar as they are bound in the value chain and active in work-intensive and highly competitive markets like their workforces, which increasingly comprise poorly protected migrant labour. Their engagement in the informal economy is, on the one hand, a reaction to informalisation from above, that is, marginalisation, exploitation and stigmatisation, and on the other the expression of agency within adverse structural constraints (Slavnic 2010).
