Informal - Sector Employment is growing faster Than Employment in the Formal Sector.

·         Out of a total world labour force of 2. 7 billion, a significant proportion of labourers are thought to be employed in the informal sector. For example, in the developing world, it provides between two-fifths and two-thirds of urban employment, depending on the country. In Latin America, informal sector employment as a proportion of total employment rose by over 50 percent during the 1980s.

• Examples of informal-sector employment prevalent in many developing countries include street vending, food processing and trading, sewing, domestic service, money lending, motorcycle and radio repairs, transportation, and small scale carpentry and construction. These types of services and businesses are labour intensive, encounter few legal barriers to entry, and cater to clientele with limited means.
• The informal sector is the fastest growing portion of many developing country economies. According to the International Labour Organization (ILO), employment in the organized sector grew at an annual rate of 2 percent during the 1980s, whereas urban informal-sector employment grew at 4. In terms of economic activity, it already contributes between 25 and 60 percent to the gross domestic product (GDP) of developing-country economies (see Figure 2). There is a growing informal sector in many developed countries as well.
• Growth in the informal sector has been driven by a number of factors: lack of employment opportunities in the wage-earning sector, relative decline in the value of wages, the need to supplement incomes from formal-sector work, and government red tape (which restricts legal registration of small businesses). Particularly pronounced has been the rise in work at home, where women sew or do piecework for larger companies. "Own account" or self-employment among women is on the rise due to migration of spouses, divorce, andor the need to support children.

The Contribution of Informal Sector Production to GDP is Large and Growing in Many Developing Countries.

• Once viewed as an impediment to economic development, assessments of the role and contribution of the informal sector in developing-country economies are now more mixed.

• Informal-sector workers generally lack the health plans, pensions, and secure wages that come with formal-sector employment. Informal employment can be little more than a last resort for the poorest members of society who eke out an existence at the economic margin. Furthermore, the unregulated nature of informal enterprises means that governments are often unable to collect tax revenue to support services.

• From an environmental perspective, informal-sector activities such as appliance repair, plastics recycling, and rickshaw driving are quite sound. However, other activities, such as the conversion of forests to charcoal for urban energy needs, can be quite destructive. And there are health risks for service providers, such as the trash picker, rickshaw driver, and for customers, such as the consumer of food produced in unsanitary conditions.

• Some countries are trying to "formalize" informal enterprises by reducing legal barriers to the creation of micro-enterprises, providing credit to small entrepreneurs, and granting legal titles to land.