Informality in Latin America:

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Informality in Latin America Interpretations,
facts and opportunities

Victor E. Tokman South Africa, June 2008
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Informality from sector to economy
The ILO original contribution working poor
Inadequate government intervention and regulations
Globalization and disguised wage labor
The ILO 2002 contribution informal economy
The World Bank 2007 exit and exclusion
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The Informal Economy in Latin America
Large and expanding size of the informal economy
Main component informal sector, but precarious
labor expanding faster
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Structure of the informal economy, 1990-2005
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The Informal Economy in Latin America
Large and expanding size of the informal economy
Main component informal sector, but precarious
labor expanding faster
Structure of the informal economy
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The Informal Economy in Latin America
Large and expanding size of the informal economy
Main component informal sector, but precarious
labor expanding faster
Structure of the informal economy
Income gaps within informal sector. Evidence of
exclusion
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The Informal Economy in Latin America
Large and expanding size of the informal economy
Main component informal sector, but precarious
labor expanding faster
Structure of the informal economy
Income gaps within informal sector. Evidence of
exclusion
Informality and labor contracts matter
differences in social protection
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Towards a strategy for inclusion and
opportunities
Five pillars
1. Regulation of informal activities
Excessive and inadequate regulations for micro
enterprise development
Reduction of formality entry costs for all
Simplify rules and procedures
Redesign mechanism of access to formality
2. Labor regulations of informal enterprises
Insufficient capacity to absorb labor costs
Recognition of labor relation
Progressive minimum labor rights floor
(declaration plus)
Redefined labor inspection
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Towards a strategy for inclusion and
opportunities
3. Informal workers in formal enterprises
In search of labor flexibility a misguided
reform based on a-typical contracts
Spain 1981, Argentina 1991-1995, Peru 1993
The return of the permanent labor contract
adapted to present requirement
Spain from 1981 to 1997-2006 Argentina from
1981-1985 t0 1998-2000) Negotiated flexibility
Spain, Argentina and Brazil
4. Diffused labor relations multi-enterprises
relations
Identification of labor relations
Labor obligations and responsibilities under
subcontracting
Home-work a grey zone
5. Social protection for informal workers
Health and pension coverage different modalities
Non-contributory universal guarantees Mixed
systems solidarity and contributory
Coverage of independent workers
Supplementary contributions From voluntary to
compulsory Mono-taxes and special incentives
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From informality to economic citizenship
Formality as a way to foster development of
informality
Tax-registrationaccountingbusiness improvement

Capital recognition-collateral-access to credit
Labor contract recognitionprotection--improved
labor relations management
A different approach to formality
From the interest of the insiders to the benefits
of the outsiders
From obligations to entitlements reversing the
sequence
Cultural change required
Productive cooperation instead of invidualism
Different relations with markets and institutions
Collective action rather than isolation
Organization, voice and representation