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Formalization of the Informal Economy: Perspectives of Capital and Labour

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  • Jeemol Unni

    (Ahmedabad University)

Abstract

Informality takes various forms in countries and new forms over time. Hence, there can be no “one size fits all policy” to regulate or improve the conditions of informal workers. Governments tend to regulate to its advantage, for example to gain revenue through taxes. We call this the capital view of formalization. Workers need to benefit from moving from informal to formal arrangements. The labour view of formalization is that the fundamental right of workers and entrepreneurs must be recognized. In this paper, I discuss the journey of the concept of informality in the labour market in developing and developed countries. The debate on formalizing the informal economy can be seen from the lens of capital or the lens of labour. We argue that the capital view is only normalizing the enterprises, while the labour view is actually formalizing, with inclusion of workers in formal systems. The Indian debate on formalization to overcome the formal/informal divide has mainly taken the capital view.

Suggested Citation

  • Jeemol Unni, 2018. "Formalization of the Informal Economy: Perspectives of Capital and Labour," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 61(1), pages 87-103, March.
    • Handle: RePEc:spr:ijlaec:v:61:y:2018:i:1:d:10.1007_s41027-018-0121-8
    DOI: 10.1007/s41027-018-0121-8
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    References listed on IDEAS

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    1. Berg, Janine., 2016. "Income security in the on-demand economy : findings and policy lessons from a survey of crowdworkers," ILO Working Papers 994906483402676, International Labour Organization.
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    Cited by:

    1. Abel Polese & Gian Marco Moisé & Talshyn Tokyzhanova & Tommaso Aguzzi & Tanel Kerikmäe & Ainoura Sagynbaeva & Arnis Sauka & Oleksandra Seliverstova, 2023. "Informality versus shadow economy: reflecting on the first results of a manager’s survey in Kyrgyzstan," Central Asian Survey, Taylor & Francis Journals, vol. 42(1), pages 149-170, January.
    2. Katharina Lenner & Lewis Turner, 2024. "The Jordan Compact, Refugee Labour and the Limits of Indicator‐oriented Formalization," Development and Change, International Institute of Social Studies, vol. 55(2), pages 302-330, March.
    3. Estevão, João & Lopes, José Dias & Penela, Daniela, 2022. "The importance of the business environment for the informal economy: Evidence from the Doing Business ranking," Technological Forecasting and Social Change, Elsevier, vol. 174(C).

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