ILO adopts fresh standard on informal economy

THE International Labour Organization (ILO) has adopted a new international labour standard that is expected to help hundreds of millions of workers and economic units move out of informality and into the formal economy.

The adoption took place at the 104th edition of the International Labour Conference (ILC), which came to a close in Geneva, Switzerland at the weekend.

The Director General of the ILO, Guy Ryder said the adoption of the Recommendation is not what matters the most, but putting it into practice is the most important.

More than half of the world’s workforce is estimated to be trapped in the informal economy, which is marked by the denial of rights at work, the absence of sufficient opportunities for quality employment, inadequate social protection, a lack of social dialogue and low productivity, all of which constitutes a significant obstacle to the development of sustainable enterprises.

The new Recommendation acknowledges that most people enter the informal economy not by choice but due to a lack of opportunities in the formal economy and an absence of any other means of livelihood.

The Recommendation, the first ever international labour standard, specifically aimed at tackling the informal economy – was passed by 484 votes in favour and garnered outstanding support from the ILO’s tripartite constituents.

The new labour standard provides strategies and practical guidance on policies and measures that can facilitate the transition from the informal to the formal economy.

The vote by the International Labour Conference is seen as a crucial step in assisting countries to set up the necessary measures to promote decent job creation and sustainable enterprises in the formal economy.

Ryder said: “Over the years, we’ve seen a growing consensus between governments, workers and employers that the right thing to do is to move people from an informal to a formal employment situation.

We know it is not easy, we know that these are processes are complicated and take time, but the great value of this Recommendation is that we now have an international framework of guidance to help member States bring this about.”

ILO stated that the Recommendation is of great significance for all those who are concerned with inclusive development, poverty eradication, reducing inequalities and who are looking forward to a strong focus on the goal of decent work for all in the context of the new post-2015 development agenda.

The new objectives of the new international standard provides guidance for member States to: facilitate the transition of workers and economic units from the informal to the formal economy, while respecting workers’ fundamental rights and ensuring opportunities for income security, livelihoods and entrepreneurship; promotes the creation, preservation and sustainability of enterprises and decent jobs in the formal economy and the coherence of macroeconomic, employment, social protection and other social policies, and prevents the informalization of formal economy jobs.

The Recommendation also gives guidance for action in the form of 12 guiding principles. Countries’ successful experiences formed the best practices that shaped the Recommendation, which accommodates diverse national situations and provides multiple approaches but remains universally relevant.

It added that the adoption of the Recommendation constitutes a historic landmark event for the world of work, as it points to the desired direction of many countries in making the transition to formality.

It provides concrete guidance about the multiple pathways to achieve decent work and to respect, promote and realize the fundamental principles and rights at work for those in the informal economy.

Chair of Committee on the Transition from the Informal to the Formal Economy and Chief Director for Advocacy and Statutory Services at the Department of Labour in South Africa, Virgil Seafield, said: “The new Recommendation is a major step forward in bringing the grey economy out of the shadows.

It will help transform the informal economy, which has been particularly pervasive in developing economies. Importantly, it will facilitate the transition of the many million workers in the informal economy; promote job creation in the formal economy and prevent further informalization.”

Depending on the developing region, between 45 and 90 per cent of workers are in the informal economy. As concerns small and medium enterprises with 10 to 250 employees, as many as 90 per cent are informal.

The share of women in informal employment is higher than men in most countries, and other vulnerable populations, such as youth, ethnic minorities, migrants, older people and the disabled are also disproportionally present in informality. The adoption of the Recommendation came as the ILC is gearing to close its 104th session, where once again government, employer and worker representatives have worked together to discuss and move forward on key world of work issues.