ABSTRACT
There are roughly 839 million working poor in developing countries who survive on less than $2/day and about 80 per cent are employed in the informal economy. The conventional poverty approach therefore tends to frame the informal economy as a problem to be solved rather than as an important source of household income or a critical base of the modern economy. This chapter aims to reframe the link between informal employment and income poverty by examining the role of informal employment in reducing poverty. To explore the potential for measuring the link between informal employment and poverty reduction, the chapter presents the results of a poverty decomposition analysis using household survey data from South Africa. The findings suggest that a focus on low earnings in the informal economy belies the important contribution of this income to keeping workers and their households above the poverty line. The chapter concludes by considering whether or how policies might look different when they recognise and support the role of earnings from informal employment in the households of the working poor.
