Economía Informal

In the mid-1950s, W. Arthur Lewis developed a theoretical model of economic development based on the assumptions that there was an unlimited supply of labour in most developing countries and that this vast pool of surplus labour would be absorbed as the modern industrial sector in these countries grew. It was therefore assumed that the traditional sector comprised of petty traders, small producers and a range of casual jobs would eventually be absorbed into the formal economy and disappear.

The first ILO employment mission in 1972 to Africa, Kenya, recognized that the traditional sector, named the “informal sector”, had not just persisted but expanded. The mission also observed that the informal sector, described as activities that are unrecognised, unrecorded, unprotected or unregulated by public authorities, was not confined to marginal activities but also included profitable enterprises. Furthermore, the activities of the informal sector were mostly ignored, rarely supported and sometimes actively discouraged by policy makers and governments.

Economic development had thus failed to create enough modern jobs to absorb the increasing numbers of unemployed people. However, critics argued that economic growth in countries such as Kenya had not been sufficient enough to induce industrial growth for absorbing the surplus labour. Moreover, many believed that the informal sector was marginal and peripheral and thus not linked to the formal economy at all.

Nevertheless, contrary to the predictions of many economists influenced by the thinking of W. Arthur Lewis, the informal sector in developing countries has been steadily growing during the last three decades. A huge pool of surplus labour has thus created its own source of livelihood to survive.

The informal sector is increasingly being referred to as the informal economy to get away from the idea that informality is confined to a specific sector of economic activity but rather cuts across many sectors. “Informal economy” also emphasises the existence of a continuum from the informal to the formal ends of the economy and thus the interdependence between the two sides.