There is no universally accepted definition of the informal sector. Normally, this term is used to describe economic units which are operating totally or partially outside the formal, institutionalized economic structure. The following characteristics are frequently found: family ownership; small scale of operation; labour-intensive and adapted technology; and reliance on indigenous resources. Informal work may cover a range of diverse situations including own-account small businesses, family enterprises, retail trading, street vending, home work and certain forms of subcontracting.
There is evidence that profound changes are taking place in the processes which give rise to informal activities, and in the way they operate and fit into national economies. It is no longer true that goods and services in the informal sector are produced only for local consumption in low-income households. Links with formal-sector enterprises and with international markets, through subcontracting arrangements, have clearly increased.
Women are disproportionately and to a growing extent represented in the informal sector. Such work is an essential source of employment and income for many women workers who face occupational segregation, unemployment and underemployment, and for their families. They are mainly engaged in subsistence labour and informal activities linked to the new tradable sectors. Although they usually bear the costs of setting up their informal activity, they do not always control the benefits, which may be appropriated by male relatives.
In general, work in the informal sector is far less secure and more poorly paid than work in the formal sector. Workers in the informal sector are outside the realm of conventional social protection schemes. Limited access to resources, information, products, markets, credit, infrastructure, training facilities, technical expertise and improved technologies poses a serious problem for improving the productivity of and return on informal sector labour. An appropriate strategy for upgrading the informal sector should therefore cover:
→ see also Home work and Occupational segregation
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