Supporting workers in the informal economy: a policy framework

Supporting workers in the informal economy: a policy framework

Regulating the informal economy

This paper argues that the informal economy is here to stay and requires appropriate regulations, laws and policies to correct biases in the existing regulatory, legal, and policy environment that favour formal enterprises and workers to the disadvantage of informal workers and enterprises. It argues that policy makers should redirect their efforts away from an (almost) exclusive focus on micro- level interventions to a wider structural or systemic perspective.

This paper describes:

  • key aspects of the informal economy - its size and composition, its linkages with both poverty and growth,
  • its legal status, risks and opportunities associated with the informal economy
  • a debate over whether governments and other stakeholders should intervene in the support for and regulation of the informal economy.
  • a conceptual and normative framework for policy and discusses how four different functional areas of policy relate to the informal economy: macro economic policies, urban policies & regulations, labour policies and standards and social protection policies.

It offers two case studies on inclusive policy- making processes relating to the informal sector

  • the National Labour Commission in India
  • the Informal Economy Policy Review in Durban, South Africa.

It concludes with some principles and guidelines for facing the challenge of undertaking inclusive policy processes to develop appropriate policies for the informal economy in different contexts.

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