Labor informality in Latin America: poverty and vulnerability

MAURIZIO, ROXANA

Kathmandu

Congreso; Special IARIW-SAIM Conference on “Measuring the Informal Economy in Developing Countries"; 2009

IARIW

Analysis of the informal sector is very relevant in Latin America. More than half of workers in the region are employed in informal activities, mainly as own-account workers or wage earners in small enterprises. The number of informal workers grew steadily during the nineties –associated with insufficient generation of formal jobs in a context of low social protection- and stopped increasing in recent years as a consequence of a greater expansion of employment. However, beyond this regional global panorama, the relevance and structure of informality is very heterogeneous within the region. In some countries, the informal sector represents a relatively low proportion of employment and is more structured. In other countries, the sector is more precarious and workers are at the bottom end of income distribution. Additionally, a close relationship between informality, precariousness and poverty can be found in the countries of the region. This paper aims at analyzing two important aspects related to informality from a comparative point of view. The first is the association between informality and labor precariousness and income segmentation. The second is the relationship between informality and poverty. In order to conduct the study, we selected four countries whose informal sectors are significantly different from each other in their sizes and characteristics. On the one hand, Argentina and Chile whose informal sectors are relatively small in the Latin American context, and, on the other hand, Brazil and Peru, where the opposite is true. Data used in this paper comes from household surveys. This study will contribute to the debate on both the design of public policies for the informal sector and of those policies aimed at giving higher social protection, especially for the most vulnerable groups.