Assessing Informal Employment and Skills Needs: Approaches and Insights from Regional and Local Labour Market Monitoring
Summary of the 2019 RLMM Annual Meeting
The 14th Annual Meeting of the European Network on Regional Labour Market Monitoring (EN RLMM) took place in Moscow, October 3-4. For the first time, the annual meeting was organized in Russia. It was hosted by the Institute of Socio-Economic Studies of Population (ISESP), and located in the fascinating building of the Russian Academy of Sciences (RSA), one of many impressive buildings near the Moscow River. ISESP is part of the RSA and well experienced on the topic of informal employment, thus particularly well suited for organizing this year’s annual meeting, under the headline “Assessing Informal Employment and Skills Needs”. Hence, not surprisingly, the conference was successfully carried out, with more than 100 registered participants, from many different countries, and with media interest manifested in a press conference. The annual meeting gathered participants from mainly academia, research institutes and public agencies; certainly many from Russia, but also from countries such as Egypt, France, Germany, Italy, Luxemburg, Morocco, Poland, Spain, Sweden, and the UK. As usually, the annual meeting was preceded by a call for papers procedure on the topic, resulting in this year’s anthology, named after the conference. While several papers from the anthology were presented during the conference, the programme also included presentations of the research and studies of other experts on the informal sector and/or labour market monitoring.
Informal employment is a multidisciplinary issue
At the outset, the conference’s welcoming address immediately stressed the importance of the informal economy. According to ILO figures, two billion people around the world are informally employed, corresponding to more than 60 percent of the global work force. Notwithstanding these striking figures, according to estimates the informal economy continues to expand. During the second half of the 20th century, it was “discovered” as a socio-economic phenomenon of development. Today, it is clear that it is a permanent “outgrow of capitalistic society”, which is overrepresented in less developed countries yet a considerable part of any economy.
During the course of two intense days, the conference made it obvious to all participants that informal employment is an intrinsically multidisciplinary issue. Aspects such as income, poverty, tax policy and tax base where addressed together with, and as self-evident as, migration, gender, corruption, education and geography. The conference programme, accordingly, offered the perspectives from numerous academic disciplines, e.g. economics, geography, laws, political science, and sociology. The conference host, ISESP, is an inter- and multidisciplinary institution, with research fellows in e.g. economics, sociology, demography, philosophy, and mathematics.
Several, if not most speakers, focused on, or somehow addressed, the issue of defining the informal economy. The conference gave interesting insight into this fundamental and intrinsically complicated methodological problem, inevitably showing off some of the numerous notions that are used to capture the elusive nature of informality (like “atypical”, “irregular”, “grey”, “non-standard”, “untaxed”, “illegal”, “self-employed”, and “criminal”). During the first conference day, it became clear to the audience that there is no overarching common definition of informal employment. While the ILO historically has played a key role in addressing informal employment, e.g. the OECD and the EU have their own definitions. At the national level, e.g. the European Platform tackling undeclared work can help regarding convergence on defining undeclared work. Nevertheless, each member state has its own definition. In practice, the survey studies presented at the conference showed that a common approach is to use a number of questions to define informal employment. Typically, then, the questions allow the quantification of informality, for the specific purpose of the research, may it concern undeclared, precarious or unregistered work. Probably without exception, conference participants would agree that the prospects for finding a truly general, multi-purpose definition of informal employment are not promising. Rather, the general message is that, in addressing “informality”, the socio-economic context and specific purpose of the researcher is key in obtaining high-quality labour market information.
Informality is widespread and multifaceted
While quantitative figures on the informal economy in itself underline its importance, the widespread nature of this phenomenon may have been surprising even for the speakers at the conference. Whereas precarious work is strongly related to the general level of development of a country, migration flows seem to sustain remarkably poor working conditions also in developed economies. In countries as different as Poland, Russia, and Spain, moreover, speakers and participants gave testimony of informality far above the lower ends of the income scale. For this group, informality concerns highly skilled professionals like teachers, dentists, skilled craftsmen, and ICT specialists, which manage to work “underground” completely or to a surprisingly large extent. In general, the scale between “occasional” or “partly” and “permanent” or “fully” seems to be virtually continuous when it comes to informality. In many countries, for example, formal firms actually act as vessel of informal employment, with part of the workforce unregistered. In Germany, by contrast, the Qualification initiative of the federal state of Hesse will attempt to “formalize” the huge amounts of household services used by elderly and disabled. Geographically, finally, the informal economy may differ considerably even within the same national context. Thus, while the informal production of goods and services in Italy is estimated to amount to 530 billion euro per year (one third of national GDP), informality is much more pervasive in the south. Similarly, the urban informal economy of Moscow is completely different from the rural informal economy of small cities, which still account for the lion’s share of Russian cities of today. Yet the urban and rural informal economy continues to be closely knit by otkhodnichestvo, a both formal and informal institution through which seasonally featured labour flows are linked.
Despite the many facets of informal employment, there are a number of key determinants, perhaps most notably when it comes to precarious work. Young people and elderly are disproportionately represented in this adverse segment of the labour market. Yet while the subsistence motive is completely dominant for the elderly, for the young informal employment may well offer an opportunity of human capital formation as well as future transition to the formal economy. Precarious work is also closely related to low-skilled workers and poor household income. More generally, the kind of informal employment carried out tend to differ considerably depending on gender and residential area (rural/urban). Regarding economic sector, urban informal employment is particularly pervasive in construction and the low-skilled service sector. Migration, finally, is another key determinant of informal employment. In Russia, for instance, as much as five million unregistered migrants are expected to be part of the informal work force, predominantly from former Soviet Union states.
What about informal employment in the future?
As the world of work changes, so does the dynamic, unregulated world of work. The last decade’s increase in international trade, digitalization and migration thus inevitably affects informal employment. These are subjects that were repeatedly addressed during the conference, yet, needless to say, remain both exciting and challenging topics of regional labour market monitoring. Big data, for example, may collect and aggregate individual views on informality from social media. And how will the growing Gig economy impact on informal employment?
Victor TANAKA, Arbetsformedlingen, SWEDEN