In some Latin American countries, informal labor represents 60% of the market

In Latin America, at least 140 million people survive through informality. According to the Development Bank of Latin America, in some countries of the region the informal sector is larger than the formal economy, comprising more than 60% of the labor market.

Leer en español: Informalidad en América Latina: ¿Necesidad o alternativa?

This scourge has been a clear indicator of the level of poverty of a nation. However, there are those who consider informal working as an opportunity to generate better income than basic salaries.

Of the 140 million informal workers in the region, an amount that even exceeds that of sub-Saharan Africa, 27 million are young people. According to figures from the World Economic Forum, six out of 10 young people do not have a job in Latin America.

This factor classifies the region in the ranges of higher unemployment in the aforementioned population globally and excludes young people from the basic guarantees such as social security, pension, and health.

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Labor informality represents the segment of the work force that performs unstable and low productivity jobs. For many experts, this scourge responds to the insufficient economic dynamics of a State and is a refuge for society immersed in poverty. However, those who live this reality, see informal activity as a favorable alternative to generate income greater than those offered by performing other formal jobs.

According to political scientist and columnist Roberto Rave, the construction of these parallel systems obeys a "complex regulatory system" and high taxes, often difficult to pay.

A "cause of the high rates of informality that we suffer in Latin America are taxes. Not only because they are high, but in general, they are very difficult to pay. In Colombia, for example, between the national, departmental, and municipal, there is a huge tax burden for companies. This encourages evasion", says Rave in one of his articles published on CNN.

Men or women, who are the most affected?

According to statistics published by the World Economic Forum in a report for 2017, Costa Rica (30.7%), Uruguay (33.1%), Brazil (36.5%), Panama (40.4%) and Argentina (46.8%) are the five Latin American nations with the lowest rates of informal work.

On the contrary, El Salvador, Honduras, and Guatemala are positioned at the end of the list with the highest incidence of labor informality with 65.6%, 72.8% and 73.6% respectively.

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On the other hand, and according to information from the United Nations, of the 2 billion people worldwide who are forced to carry out unregulated economic activities without guarantees, 740 million are women.

In regions of Africa, Asia, and the Arab States affected by the scourge in question, men are mostly in informal employment. However, in Latin America, the relationship is reversed and the rate of women working informally exceeds that of men.

Likewise, in the Latin American region, the young population is another group with a greater presence in the informal activities, representing 46.2% compared to 40% of adults, confirm ILO statistics.

A real alternative?

Although international organizations and economics specialists coincide in recognizing informality as a phenomenon responsible for the inequality, social exclusion, and poverty of a country, the people involved in these activities – informal commerce, work in hotels, restaurants, warehouses, domestic work, street vendors, among others-, consider the informal working as an alternative that allows them to generate more income than some salaried work.

So far, no official figures are known that can support this postulate. Nonetheless, ECLAC studies have observed that according to the degree of development of a given economy, activities considered "informal", included in their forms of trade, service and small production units, may generate higher income than a wage employment.

Such gains are no guarantee of stability neither for the families that depend on this form of work, nor for the economies that seek alternatives to reduce poverty.

LatinAmerican Post | Krishna Jaramillo
Translated from “Informalidad en América Latina: ¿Necesidad o alternativa?”