• Informal economy/informal sector

  
  
  • Waged jobs with no formal contract or labour rights
  • Self employed people/groups who operate either outside the law (illegal) or in the gaps in the law (extra-legal)
  • Little or no payment of taxes
    

• Informal settlements/ informal housing – commonly slums

  
  
  • Residential areas built with little or no urban planning (by the state)
  • Housing built in contravention of laws and regulations
• Often interlinked
• Also criticised as definitions not quite clear but still commonly used
  
  

Informality: pre-history

• During colonial times, ‘native’ societies were viewed through a lens of dualism:
  
  • Distinction between ‘traditional’ and ‘modern’ economic activities/housing
  • The ‘traditional’ associated with the rural, but also with ‘urban peasants’ (bringing village life to cities); seen as stagnant and unproductive
  • A planned modern sector and an unplanned informal traditional area
    
    

The urban unemployed in the ‘Third World’ often seen by Marxists as:

• A ‘reserve army’ of labour
  
  • Collection of poor people desperate to make money therefore can be used by the state and discarded anytime
• The failure to provide waged jobs to city-dwellers was seen as a failure of capitalism in these societies
  

The International Labour Organisation (ILO) adopted the term in 1972, and defined it in relation to:
– Ease of entry
– Small scale of operation
– Family ownership
– Unregulated markets

Informality as salvation

After Hart and ILO report, informal sector seen as a ‘solution’ to unemployment

• De Soto criticised the bureaucratic obstacles that informal workers had to face
  
  • Over-regulation was preventing informal workers’ potential
  • Informal enterprises reflect entrepreneurial spirit of the urban poor, which needs to be ‘unleashed’ through deregulation
    
    

Celebration of informality went well with the neoliberalism and free-market ideas:

• Emphasis on ‘rolling back the state’ and liberating market forces
  
  • Helped legitimise the stopping of ISI (Import substitution)
    
    

• Informal sector - very dynamic and vibrant
  

Many criticised this positive attitude to informal labour

• Should we really celebrate the informal economy?
  
  • People who have been abandoned by the state and living in poor conditions
• Ignores exploitative link between formal and informal sector
• Part of capitalist mode of exploitation (Moser)
• ‘Informalisation’ a deliberate strategy by formal sector to protect itself (cheap labour) (Meagher)
  

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People also criticised idea of just one informal ‘sector’

• All sectors of the economy contain elements of informality
• Distinction between formal & informal is ‘utterly fuzzy’ (Peattie)
• Gave rise to new alternative terms
  
  • E.g. ‘Second economy’; ‘real economy’; ‘shadow economy’; ‘grey economy’; ‘parallel economy’
    
    

Sri Lanka as an exception

Sri Lanka – One Million Houses programme 1980s

• One of the largest efforts to provide low-income communities in both rural & urban areas with improved infrastructure & shelter
• Gave people basic blocks allowing them to develop it once financially able to
• Based on flexible system of loans and community participation
• State-driven programmes (rare but was successful)
  
  

Causes and persistence of slums

- Sean Fox argues many cities in power interested in keeping slums

• because slum landlords make profit from slums, capital to be made
• too much involvement can lose votes for political party, seen as interfering with people's lives
  
  • Syagga et al found that slums are big business for political elites:
• 41% of Kibera’s (slum in Nairobi) landlords were government officials
  

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• Regression of taxation – lack of public investment for housing
  
  • No tax being paid as poor can’t afford to pay and rich refuse to pay, leaving a lack of public tax funds
• ‘Poaching’ – houses built for poor people, but rich people end up buying to create profit
• Slums may be due to failures of post-colonial states promising stuff to poor and fail on doing so
  

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Exacerbated by withdrawal of the state from public provision of services

• Neoliberalism ideas
• Meant urban poverty rose by 50% in Latin America
• Building housing for the poorest rarely profitable

Statistics

• Women are more likely than men to be working in the informal economy
• 10-20% more likely in many African cities (Herrera et al)
• On average, the ‘informal sector’ comprises 41% of GDP in African countries (International Labour Organisation)

Informal sector jobs

• Street trade
• Waste-pickers
• Home-based work
• Informal manufacturing
• Informal service provision
• Sex work
• Informal transport
• Informal construction
  

Hong Kongs informal rooftop communities

• World of informality buried in modern, rich cities
• Hong Kong informal housing on roofs of buildings (out of public eye)
• Shack-like dwellings
• Unplanned settlements despite being in rich city
• Contrast between rich urban city and informal settlements

Moser and asset portfolios

To improve people's prospects, need to look at what the poor already have and understand households ‘asset portfolios’ and strategies (Moser)

• 5 aspects
  
  • Labour (women & children joining labour force)
  • Human capital (affects ability to mobilise labour, family members who are possibly educated?)
  • Productive assets (may have some bit of lend they can capitalise on and rent out)
  • Household relations (restructuring family members to increase income, someone looks after relative whilst other goes to work)
  • Social capital (neighbours who help each other, dynamic & impermanent; but eroded by violence)
    
    

The intangibility (not physical form) of many assets and vulnerabilities has implications for poverty-reduction programmes in cities