Informal employment of the population as realization of the right to work

March 29, 2013, автор tim0

Perova M.B.
Doctor of Economics, professor of the Vologda State Technical University, Russia

Informal employment of the population as realization of the right to work

Perova3Labour promotes self-determination of an individual, his identification in the society. It performs important social function. An individual feels proud if his labour is in demand. Realization of the opportunity to work defines the social role and the social status of an individual; it effects the recognition of his place in the society.
The Universal Declaration of Human Rights (The United Nations, 1948), Article 23 proclaims that everyone has the right to work, to free choice of employment, to just and favorable conditions of work and to protection against unemployment.

The right to work assumes presence of the work that people can do. Job shortage in formal sector of economy leads to informal employment. The International Labour Organization (ILO), defines informal employment as a total number of informal jobs carried out in formal sector enterprises, informal sector enterprises or households.
Formal and informal sectors of economy are interconnected. Frequently, formal sector activities do not abide by the official regulations. For instance, employment of the staff under the verbal agreement and concealment of a part of salary (“grey” salary) at the enterprises of formal sector. Nowadays informal relations are present in all sectors of management.

Criterion of reference to informal employment is the absence of official registration of the employment relationship. Informally employed individuals are those who are not registered under established order: entrepreneurs with or without employees, individual workers (self-employed), including home-workers, and wage workers of informal sector enterprises, unpaid family workers and hired workers of formal sector working without the contract.

Informally employed can be workers with full-time and/or part-time employment. As soon as there are unregistered economic activities at the enterprises of formal sector of economy they automatically become hidden from tax authorities, and therefore, do not belong under formal economy any more.

Informal employment in Russia has become rather significant. During the period of transition to the market relations informal employment was a sort of an agreement between the population and the government, with the authorities in most cases disclaiming any responsibility for human survival and winking at non-registered economic activities.
On the whole, all informal workers can be divided into two groups: traditionally employed in informal kinds of activities and the non-traditionally employed, due to objective social and economic reasons.

The individuals can be considered traditionally employed in informal sector, if they are engaged in natural economy as a primary activity in the countryside and produce products for sales. Resource availability, traditional way of thinking contribute to high concentration of informal kinds of activities in rural areas. Such kind of activities is caused by lack of conditions for formation of formal activities.

Nontraditionally employed are the individuals, who live mainly in urban areas and are engaged in non-registered activities (employees or self-employed) and the individuals, who sell products produced on their own farmlands.

Informal employment has bean extending in developing countries and transition countries since it ensures the survival of many poor people who produce cheap products for their own use and for sale.

This paper is devoted to that part of informally employed individuals whose earnings are not-registered officially though such registration is provided by legislation. Unregistered informal activity is concentrated basically in service sector since the main capital in this sphere is human capital. A large share of the involved in unregistered employment is represented by family businesses or individual employment. Due to its secrecy informal business is vulnerable to instability of orders, inability of business insurance, lack of social protection. Informal employment can’t guarantee that all terms of the verbal agreement will be fulfilled. There is a high probability of labour rights violation and lack of social guarantees.

The statistical information on the size of informal employment in Russia has come to prominence not long ago. It was reflected in results of a variety of sociological surveys targeted directly at informal employment, as well as in secondary results of sociological research on labour relations, illegal labour practices, etc. The method of indirect survey assumes obtaining necessary information from sociological surveys not aimed directly at the study of informal employment of individuals. Extraction of the necessary information from survey results allows determining both the share (number) of informally employed individuals, and factors affecting it. This material is based on a secondary analysis of data of the Monitoring of social and economic changes in Russia. The Monitoring has been conducted by VTsIOM (The Russian Public Opinion Research Center) since 1993. During the first years the Monitoring was carried out 6-8 times per year but more seldom in recent years. The average sampling of 2100 people includes urban and rural residents, aged 16 and above of almost every region of the country.

According to the surveys data, reasons for individuals’ participation in informal employment can be defined as following:
- instable political situation in the country. One may assume that increasing confidence in the Government and the President promotes increasing confidence in State Development Program. Hence, the population certain of positive changes of socio-economic situation will tend to get a job in the formal sector of economy, rather than in the informal one;
-wage rates. Decreasing average wages in formal sector of economy cause people to go into the informal sector, in which workers get higher salaries without paying taxes;
- level of social security. Enhancing level of social security in the formal sector makes it more attractive to the population. Hence, enhancing level of social security contributes to a decreasing number of individuals employed in the informal sector of economy;
- the size of individual services. Insufficient coverage of the population by individual services or their high cost contributes to drift of labour to this sphere, in many instances without official registration.

The results of the factor analysis revealed that the population involved in informal employment, has a specific socio-economic portrait. There are several factors affecting individuals’ participation in informal employment [1].

Unregistered wages get 7,8% of the population, with more women engaged in informal employment than men. Among the informally employed individuals men make on average 46,2%, whereas women make 53,8%. Informally employed individuals can work on a constant basis or get extra wages.

The young population is more inclined to such kind of activity, rather than the older one. Among 16-30 age group approximately 4.3 % are informally employed, whereas among population aged 65 and above the share of the informally employed is 0.7 %. It is explained by higher level of activity of working-age population in search for both, main and secondary jobs outside the formal sector of economy with the purpose of earning higher income.

About 30% of the informally employed are individuals with no vocational education (primary or secondary education only). The shares of the informally employed individuals with higher or vocational education are rather significant. These groups are approximately equal in share and constitute 21% and 22% respectively.

Marital status of individuals exerts profound influence on informal employment. Married women, particularly those with small children, seek to get a part-time job that is difficult to find in the formal sector of economy. Moreover, such individuals can earn higher wages working informally.

The structure of the informally employed population by primary employment is presented in Table 1. The table data shows, that the overall ratio of the informally employed (29%) are jobless individuals. Majority of them receive unregistered income, as these individuals can not find a job or, getting unemployment benefits, don’t want to have one in formal sector. It should be noted, however, that 4.3% of the unemployed population don’t look for employment neither in formal nor in informal sectors. It might be related to presence of other possibilities of income acquisition that provide comfortable living (rooming, return on equities, bonds, etc.) or lack of desire to find gainful employment. About a quarter of the engaged in unregistered informal activities are students, who seek part-time work or earn income in informal sector of economy due to their full-time studies, and thereby inability to work full-time.

Structure of informally employed population
by primary employment

Groups of informally employed population Individuals with unregistered income, %
among informally
employed
among employed
in the group
Full-time students 23,9 12,7
Old age pensioners 15,5 2,1
Disablement pensioners 6,0 5,2
Housewives 13,0 14,1
On maternity leave 7,5 8,2
Unemployed 29,0 22,0
Unemployed and not seeking employment 4,3 20,7
Other 0,7 9,7
Total 100,0 -

 

 

There is a significant tendency of increasing proportion of informal employment from low to upper strata of society based on population self-rating. Population groups, estimating their economic conditions as middle-income are most likely to be inclined to work informally. Informal employment is more characteristic for individuals considering themselves the upper middle-class, 12.5 % of which earn income without official employment. It might be explained by individuals’ desire to receive higher income in informal sector of economy, in which wages are generally higher than in formal sector, and by secondary employment in formal and informal sectors of economy. On the other hand, there is a group of population who view their economic conditions as extremely poor but who, nevertheless, are not seeking extra income to raise their standard of living. This part of population receives insignificant informal income.

The degree of involvement of individuals in informal employment depends on the form of the enterprise they are working at. If labour legislation is somehow implemented in government–financed organizations, the requirements of the Russian Labour Code in commercial sector are by no means always observed. Civil-legal relations are widespread in small and medium-sized enterprises, as this kind of relations is convenient for the employer (there is no need in complying with all guarantees established by labour legislation).

Migrant workers from other countries make up a significant share of the informally employed, particularly in the building sector. They are forced to leave due to absence of jobs or extremely low wages in their native countries. There are organizations that deliver legally or illegally cheap workforce. More than often passports of such workers are withdrawn and they are, therefore, turned into low-paid “slaves” deprived of their rights. It is noticeable, that the larger share of the population involved in unregistered informal employment is, the more it involves migrant workers for the very fact of possibility of informal employment indicates the existence of such potential. In the country or region with low level of informal employment among its nationals, there are no conditions for migrant workers informal employment as well.

In the dynamics before crisis, the highest level of informal employment was observed in the year 2001. Stabilization and subsequent growth of economic indicators contributed to reduction in the number of the informally employed. Financial crises in Russia and in the world adjust general dynamics of the phenomenon. In particular, the amount of official workplaces provided by the country’s economy, income received in official sector of economy, etc. are decreasing during the crisis.

The modelling of socio-economic profile of an informal job holder allows determining probability value of involvement in informal employment of an individual with certain characteristics. Knowing this probability and the number of such individuals we can determine the number of population inclined to involvement in informal employment.
Socio-economic profile of an informal job holder allows determining informal employment trend. The level of informal employment might alter depending on transformation of the socio-economic profile. Such transformation in the dynamics is feasible due to changes in demographic and economic situation in the country, as well as due to governing impact on characteristics of socio-economic profile of an informal job holder.

As unregistered employment involves jobless individuals, the government can reduce the level of informal employment by providing government support to the population in the sphere of employment (continuing education, organization of public works, etc.). RF Economic Development Industry forecast shortage of manpower by the year 2010. That would have reduced the number of unregistered working individuals on the score of reduction in the number of the unemployed. However, the forecasts were slightly corrected by economic crisis that caused increase of unemployment due to employment losses in spheres of construction, trade, and in services and financial sectors as well. Raise of unemployment contributed to increase of informal employment. During the crisis it is appropriate to provide state financial assistance to establishment of self-own business, to development of cost-recovery mechanism for organising temporary employment at enterprises.

As informal employment is more often considered an extra- job or a job generating extra income, increasing level of informal employment indicates deterioration of socio-economic processes in the country and vice versa. Therefore, the level of informal employment is a sort of an indicator of socio-economic situation in the country, that in its turn demonstrates internal problems of employment structure :
- greater involvement of women in informal employment illustrates existing gender problem of employment;
- increased number of youth in informal sector is the result of lack of flexible policies in employment sphere including policies enabling students to work part-time or half-time. This condition is fully provided in informal sector;
- involvement of individuals with higher or incomplete higher education in informal employment reflects structural discrepancies between demands of the economy and personnel training. Qualified specialists, even experienced ones are frequently unable to find employment in formal sector of economy. That causes them to seek alternative forms of employment and income acquisition;
- greater involvement of parents of large families in informal employment indicates insufficiency of national assistance to this population category and insufficiency of income, received in formal sector of economy.

Government policies on improvement of social sphere contribute to increase of pensions and scholarships. That lowers motivation of pensioners and students for extra earnings. Measures to improve social sphere with government policies in compliance with the requirements of labour legislation contribute to increase of formal wages. Wage increase will enable an individual to abandon an extra-job, and thereby move out of sector of the informally employed. Better arrangement of migratory movements will enable to diminish discrimination pressure on migrant workers.

Thus, informal employment gives the population an opportunity to find jobs, i.e. to realize the right to work of the individuals who are unable to find jobs in formal sector of economy, or whose income is very low. Informally employed individuals find themselves vulnerable and unprotected. They are also deprived of many labour rights and benefits. Nevertheless, such type of employment is more preferable for the society and working individuals rather than unemployment. Informal activity becomes an alternative source of income for individuals not provided with sufficient means for comfortable living. The aim is to create conditions for transferring jobs workplaces from the informal sector to the formal one with all the ensuing advantages for workers.

1. Лытасова Л.И., Перова М.Б. Анализ занятости в неформальном секторе экономики. Вузовская наука–региону: Материалы третьей всероссийской научно-технической конференции. В 3 томах. – Вологда, ВоГТУ, 2005.– Т3. – 289 с. (С. 36–38).
Неформальная занятость населения как реализация права на труд

Реализация возможности трудиться определяет социальную роль и социальный статус личности, влияет на осознание его места в обществе. Каждый человек имеет право на труд, на свободный выбор работы, на справедливые и благоприятные условия труда и на защиту от безработицы. Право на труд предполагает наличие самой работы, которую люди могут выполнять. Недостаток рабочих мест в формальном секторе экономики приводит к неформальной занятости, где реализуют свое право на труд те работники, которые не могут найти работу в формальном секторе экономики или чей доход очень низок. В России неформальная занятость стала заметным явлением. Она нашла отражение в результатах различных социологических опросов населения. По данным опросов выявлены мотивы и факторы, оказывающие влияние на вовлеченность населения в неформальную занятость. Моделирование социально-экономического портрета неформально занятого населения позволяет определить вероятность вовлечения индивида, имеющего определенные характеристики, в неформальную занятость, а также численность таких индивидов. Задача состоит в том, чтобы создать условия для перевода рабочих мест из неформального сектора в формальный сектор с вытекающими из этого преимуществами для работников.

Informal employment of the population as realisation of the right to work

Realisation of the opportunity to work defines the social role and the social status of an individual, it effects the recognition of his place in the society. Everyone has the right to work, to free choice of employment, to just and favorable conditions of work and to protection against unemployment. The right to work assumes presence of the work that people can do. Job shortage in formal sector of economy leads to informal employment that allows for the right to work of the individuals who are unable to find jobs in formal sector of economy, or whose income is very low. Informal employment in Russia has become rather significant. It was reflected in results of a variety of sociological surveys of population. Surveys data allowed to reveal reasons and factors affecting individuals’ participation in informal employment. The modelling of socio-economic profile of an informal job holder enables to determine probability value of involvement in informal employment of an individual with certain characteristics, as well as the number of such individuals. The aim is to create conditions for transferring jobs workplaces from the informal sector to the formal one with all the ensuing advantages for workers.

  • Perova3
Sociology

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