Introduction

The world is not new to inequalities. Everywhere you look, there seems to be people that are having it better than others. When it comes to the growth of an economy, a lot of issues could contribute to either slow progress or a fast one. Identifying these issues and working hard to address them often leads to better growth in every economy.

One challenge that has hindered a faster growth rate within many economies is the gap between people employed in the formal sector and those in the informal sector. Each country or region faces unique challenges in this matter. But, how large the gap is between formal and informal workers could be one indicator of how fast that economy grows. Its best to reduce, if not eliminate the gap. In this discussion, we want to see in what specific ways employment in the formal sector has opened a wide gap with those of the informal sector.

Pillars of decent work is weak in the informal sector

In order to clearly see the disparities between formal and informal workers, it would be nice to look in the direction of what constitutes decent work. The International Labor Organization has identified some important components of decent work and these could be used to compare the work environment in both the formal and informal sectors. Consider just two constituents of the pillar:

• Social protection: This is one pillar of decent work that seems to have fled the informal sector - I doubt if it has ever been there in the first place. First of all looking at the formal sector, there is always a sure presence of this social protection often in more ways than one. Take for example pension. Workers in the formal sector often enjoy receiving some payments long after they have retired. These funds are super helpful as they make it possible to continue enjoying decent life when this person is no longer working.

Another element of social protection that is present in formal sector is insurance. Those in the organized sector often enjoy some forms of insurance such as health insurance, car insurance, etc. These packages ensure that when the worker is sick or feels unwell, there are funds under the health scheme that would be used to cover the medical treatment and bills. So basically the formal sector has most of these economic benefits of being employed. Pension and insurance are just two examples. But could we say the same about the informal sector?

There is little and often no social benefits in the informal sector. The inequality here is glaring. Informal workers do not have any proper cover for health challenges. When they fall sick, they have to take care of any bills that come from medical care. They do not enjoy any sick leave. Most times, a sick worker continues to manage their health and report to work everyday for fear of having their wages reduced or even withheld.

For other social security items like pension, it simply does not exist in the informal sector. Workers contracts are often terminated once they stop working. It does not matter how long they have been in that role. There are no monies paid if and when no work is done.

As a result of lack of social protection in the informal sector, the input of workers are affected which in turn also affects the rate of growth of the economy.

• Job security:Starting in the formal sector, there are designs that prevent employers from just terminating employment as they wish. Each job offer is a contract whose terms all parties must abide by. In some developed economies, workers rights are clearly spelt out in the constitution and if a worker feels their rights are violated, they could take legal action and seek compensation for damages.

So basically, there are labor laws that protect worker rights in the formal sector. There are also contract terms that prevent the worker from being fired indiscriminately. The rules of engagement are clearly stated and as long as the worker adheres to these rules, they have the right to remain employed. These are some structures that guarantee some level of job security in the formal sector. Could we say the same about the informal sector? Its hard to do so.

The informal sector is where there is virtual no job security. The employee is always the boss and could fire anyone whenever they wish. They could fire them even for a negligible reason. Employers in the informal sector face a high level of uncertainty about their job. This is because most governments have failed to recognize the informal sector and create laws to protect worker rights.

Most informal jobs lack a detailed role objective and requirements. As a result, employers could be asked to take on additional roles without any further compensation. They could be asked to do something completely different from what they were initially hired to do. When they have no choice than to comply or loose their position. This is another big inequality that exists between workers in formal and informal sectors.

How to make a headway

So what are some recommendations to close the gap between informal workers and formal workers? A popular suggestion which some advanced governments are trying out is to formalize the informal sector. This should be done by the governments of the day.

To formalize the informal sector requires recognizing the informal sector as an important part of the economy and creating clear policies to regulate it. There should be government laws to protect workers in this sector. The laws should touch on important matters including how informal workers are hired and fired. The regulations should also require informal businesses to be properly registered and known. There should be a channel for workers to report any maltreatment by the employer to the authorities.

Maybe this formalization of the informal sector would also include creating or recognizing labor unions. These unions just like in the formal sector should be designed to support and fight for the rights of its members. They should be able to stand as a united body and press for what is due its members.

In formalization, there is huge hope for the informal sector to close its widening gap with the formal sector.

What else could be done to reduce the inequality between the informal and formal sector? Share your thoughts in the comment section

Reference

• Links with Inequality

Note: thumbnail edited from Pixabay

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