AFTER THE MARKET, NOW UNIONS TO RESCUE INFORMAL SECTOR
Geneva, 19 Oct 99 -- Trade unionists from 31 countries began a
five-day meeting here Monday at the International Labour
Organization (ILO) on how to better the working conditions of
millions of unorganized workers around the globe in the so-called
A new ILO background paper, "Trade unions and the informal
sector: Towards a comprehensive strategy," for the meeting says
reliance on the market since decades to deliver prosperity was
The report actually makes the case for active government
intervention to improve the lot of the traditionally neglected
sector of workers.
The unionists are to discuss more concrete policies for
governments in such areas as labour standards 'to put into
practice the promises they made about upgrading the quality of
jobs in the informal sector.'
This broadening of the role of the organized trade unions, with
the support of the ILO, to reach out to the numerically more
powerful labour force and give them a 'voice' is, in effect, a
Moreover, it appears to be a case of weak assisting the weak.
Organized labour unions and their movements are already under
great strain and there are rampant violations of the freedom of
association as well as many other international labour standards
around the globe.
The 'informal sector', which essentially covers the unorganized
spectrum of economic activities in commerce, agriculture,
construction, manufacturing, transportation and services, now
absorbs as much as 60% of the labour force in urban areas of
It is also recognized as the only part of the economy creating
any new jobs at all.
Past neglect of informal sector workers is explained by a number
of assumptions (i.e. that the work was transitory by nature, that
scarce resources were best deployed in trying to mobilize and
maintain members in the 'modern economy' and that self-employed
workers were viewed as 'entrepreneurs' and thus not potential
trade union members) that are no longer so clear cut.
The ILO itself has been researching and proposing policies on the
informal sector for almost 30 years.
The general policy approach traditionally advocated by the ILO
has been a compromise that attempts to preserve the income-
generating potential of the sector while removing exploitation
and gradually raising employment standards.
The search for consensus between the interests of employers,
trade unions and governments in debates about the sector have
resulted in endorsement of that compromise, which aims at the
gradual integration of the informal sector into the modern
According to the ILO report, the strategy of gradual
formalization of the informal sector is 'simply not working.' The
'trickle down' theory of economic and social development has
proved to be unrealistic.
During the 1980s and most of the 1990s, says the ILO report, an
excessively optimistic perspective on the informal sector was
popularized by the proponents of neoclassical economic theory.
'Consequently, the development of public policy concerning the
informal sector in the last few decades must be seen in the
context of the pervasive influence that the standard structural
adjustment policies, imposed by the international financial
institutions, have exerted on economic development.'
As part of the neo-classical paradigm, a new and controversial
view of the informal sector emerged, the report maintains.
According to this line of thought, rather than trying to restrict
or regularize the informal sector, governments should concentrate
on creating an enabling environment for it.
"The whole emphasis switched to deregulation and withdrawal of
the government to ensure that the private sector was not 'crowded
out' by public investment or overburdened with government red
tape. These policies were pursued first, and most vigorously, in
a number of Latin American countries, but they spread to other
regions and assumed centre stage globally."
This policy towards the informal sector was part of the broader
laissez-faire approach to economic policy and the dominance of
sheer self-interest in the 1980s and most of the 1990s, the ILO
In this period, the focus of economic policy narrowed from the
pursuit of broad-based development, full employment and high
levels of income for all to concentration on fighting inflation,
encouraging private investment and promoting market forces at all
The policy package advocated by neoclassical economists for
developing countries also included devaluation of the currency;
removal of subsidies for basic commodities; reduction of
government expenditure on education, health and social
protection; employment reductions in the public sector; labour
market reforms to increase flexibility and mobility in the formal
sector; and reduced trade protection.
The rational for this policy package was a belief that all
government intervention was bad: that government cannot make a
positive contribution to jobs and growth and that the economy
should be left entirely to market forces.
According to the ILO report, the outcome of these policies was
detrimental in most countries, with the promised economic rebound
through export-led growth failing to materialize, and
unemployment and underemployment increasing, while access to
health, education and other social services diminished.
"In part, these inequalities derived from promoting a global
economy and powerful multinational companies while simultaneously
strangling social protection at national level, eroding worker
solidarity and replacing collective responsibility with
individualized working relationships."
The informal sector activities cover a vast range of small-scale,
income generating activities which take place outside the
official regulatory framework and typically utilize a low level
of capital, technology and skills, offering commensurately low
levels of pay, little if any job security and often appalling
"The informal sector reflects the survival strategy of the poor,
those without steady jobs or incomes and without any form of
social insurance," says Manuel Simon, Director of the ILO's Bureau for
Workers' Activities. "It is often the only recourse for workers
left to fend for themselves."
The low productivity and income combined with the absence of
social protection, training or social services is a particularly
harsh burden on many of the most vulnerable groups in society,
including women, children and migrants, who are
disproportionately concentrated in the informal sector, says the
In most countries, except in Latin America, the proportion of
women working in the informal sector is higher than that of the
men. In Africa, more than a third of women engaged in non-
agricultural activities work in that sector.
Because of job segregation in the formal sector, women have been
more affected than men by retrenchments resulting from structural
adjustment programmes. The alternative for many of them has been
to seek employment in the informal sector, where they are
generally found in low-paid precarious employment.
The ILO report is also quite specific about the 'substantial
scale' involvement of children in the informal sector. It
estimates that in developing countries alone, at least 120
million children between the age of 5 and 14 are working full
time. The number rises to about 250 million if those for whom
work is a secondary activity are included.
Of these, 61% are in Asia, 32% in Africa, and 7% in Latin
America. While Asia has the largest absolute number of child
workers Africa has the highest incidence at around 40% of
children between 5 and 14 years of age. The participation rates
of children are higher in the rural areas than in urban centres.
However, regardless of how debates within the ILO on the informal
sector evolve and how governments respond to trade union policy
proposals, it would be unrealistic to assume that this sector
will be rapidly integrated into the modern economy, the ILO
It also adds that 'unfortunately, trade unions must assume that
this sector will be a prominent feature of most developing and
many industrialized economies for the foreseeable future.'
While the efforts of the trade unions as well as ILO's support
to the cause of at least half, if nor more, of the working
population of this world are certainly commendable, the five-day
meeting appears to be missing an important strand in its
Labour will present its recommendations to governments in an
apparent bid to remind them of their responsibility.
But where is the industry/business in all this? The five-day ILO-
sponsored meeting appears to have no one from one of its most
crucial, and powerful tripartite segments - employers. Without
their active involvement, the best of intentions of labour groups
and governments can easily be frustrated.
Later this week, the International Confederation of Free Trade
Unions (ICFTU) plans to announce at the ILO its thinking on the
process of incorporating the issue of labour standards and trade
into WTO mechanisms, a controversial issue between the developed
and developing countries as they prepare for the upcoming
Ministerial meeting of the World Trade Organization next month
in Seattle. (SUNS4533)
The above article first appeared in the South-North
Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief
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