The term ‘informal economy’ is a relatively recent concept. Keith Hart was the first to refer to ‘informality’, within the context of his anthropological work in Ghana,4 in which he explored the economic situation of ‘urban sub-proletariat in Accra’. In some discussions, ‘informal economy’ and ‘informal sector’ are used interchangeably; however, ‘informal economy’ remains a preferred term, since the term ‘sector’ does not reflect the fact that informal work can be found in a diversity of economic sectors, including informal employment within the formal economy.
Similar to the definitional problems surrounding the concepts of THB, forced labour, coercion, and exploitation, the definitions of informality are characterised by “the vagueness and plurality of views”.5 Formal definitions of informal economy are based on the traditional dichotomy of ‘legal’, or regulated, and ‘illegal’, or unregulated and purposefully removed from the sphere of formal regulation, units of economic activity. In June 2015, the 104th General Conference of the ILO adopted6 the Transition from the Informal to the Formal Economy Recommendation.7 The document identifies ‘informal economy’ as encapsulating “all economic activities by workers and economic units that are – in law or in practice – not covered or insufficiently covered by formal arrangements”.8 It affirms that informal work may occur in all sectors of the economy, including public and private sectors. At the same time, the ILO definition explicitly excludes:
illicit activities, in particular the provision of services or the production, sale, possession or use of goods forbidden by law, including the illicit production and trafficking of drugs, the illicit manufacturing of and trafficking in firearms, trafficking in persons, and money laundering, as defined in the relevant international treaties.9
In a similar fashion, the European Commission, in its overview of the shadow economy and undeclared work, defines shadow economy as “economic activities and the income derived thereof that circumvent or avoid government regulation or taxation”.10 It further distinguishes between “undeclared work which refers to the wages that workers and business do not declare to avoid taxes or labour market regulation” and “business underreporting income to avoid taxation”.11
Another approach to defining informal economic activities focuses on the level of employment relations. From this perspective, according to the 2009 study by the International Labour Office and the World Trade Organization, informal workers are “those who do not benefit from any social or labour security, i.e. regulation on hiring and firing, minimum wage, protection against arbitrary dismissal and health and social insurance.”12 However, since not all labour within the context of the shadow or informal economy is unfree or exploitative, informal employment does not automatically equate to poverty, low productivity, and exclusion from services and social security.13 A broad category of informal workers may include owners of informal firms employing other informal workers, self-employed workers, informal employees of both formal and informal firms, domestic workers, casual day workers, and unpaid contributing family members. The 2015 ILO Recommendation encapsulates a hybrid approach and, in setting out its applicability, provides a list of informal employment relationships, including all workers holding informal jobs in or for formal enterprises, or in or for economic units in the informal economy (including those in subcontracting and supply chains), or paid domestic workers, as well as workers in unrecognised or unregulated employment relationships.
Less agreement, however, exists on factors behind the growth of the informal sector and the increasing number of informal workers globally. The ILO Recommendation falls short of providing a definitive list of factors, and merely acknowledges that there are multiple causes, including “governance and structural issues” and “a lack of opportunities in the formal economy”.14
The available scholarly literature15 identifies three diverging schools of thought on the nature of informality, highlighting the difficulty of identifying a uniform approach because of the global scale and heterogeneity of the phenomenon, and also, in a methodological sense, because of the variety of epistemological and ontological assumptions in relation to what ‘informal economy’ is, what its origins and causes are, and how it can be understood, identified, and measured. The Dualist school of thought views the informal sector as an inferior part of the dual labour market, with little or no direct links to the formal economy. The Structuralist school focuses on the role of small companies and enterprises subordinated by corporate capital, which looks for increasing flexibility and, therefore, becomes increasingly more reliant on the informal sector, which is able to provide such flexibility at low cost. The Legalist school interprets the informal sector as comprising small-scale entrepreneurs, operating informally to avoid registration and tax burdens.16 None of these approaches, taken in isolation, can encapsulate the complexity and dynamics of the informal sector. An integrated approach is therefore suggested, which combines the elements of the three schools to explain the diversity of ‘segments’ within the context of informal employment.
In a similar fashion, an OECD study identifies four broad drivers of informality, including specific economic and social development that fail to generate decent jobs for all within the formal sector; an increase in subcontracting driven by globalisation and economic liberalisation; unsuitability of formal regulations designed for large companies for the needs and conditions of micro-enterprises; and deliberate informalisation of formal jobs by employers in a bid to lower labour costs.17
In her analysis of informal economy, Chen18 identifies two contradictory trends underpinning recent expansion of informal economies globally, including rapid flexibilisation of employment relationships, making it easier for employers to recruit and lay off their workforce when and if needed; and a relatively slow liberalisation of labour mobility, making it difficult for workers to move across, and sometimes within, borders. Chen describes the informal sector as segmented, significant and permanent, and incorporating a continuum of employment relations within it.19 The continuum of employment relations within the informal sector is demarcated by the two opposing poles: workers who enter the informal sector voluntarily, and those who are coerced into the informal sector because of their vulnerability. A multitude of locations between these poles intersect with a number of other continuums – of migration, individual agency, exploitation – to produce individual circumstances of vulnerability to exploitation and inequality. The ILO Recommendation identifies a number of groups who are “especially vulnerable to the most serious decent work deficits in the informal economy”, including “women, young people, migrants, older people, indigenous and tribal peoples, persons living with HIV or affected by HIV or AIDS, persons with disabilities, domestic workers and subsistence farmers”.20
There is a growing acknowledgment among scholars and policy-makers of the complex relationship between informal and formal economies within the context of globalisation and internationalisation of trade. Chen21 comments that “many informal enterprises have production or distribution relations with formal enterprises, supplying inputs, finished goods or services either through direct transactions or sub-contracting arrangements”. Although quantifying the impact of increasing trade openness on the informal employment sector remains problematic, the assumption that individual countries’ trade integration would result in reduced labour market vulnerabilities has not proved true. In some instances, the international trade integration of labour-abundant countries such as India or Brazil led to the increased skill-premium making low-skilled workers within national informal sectors worse off.22 The ILO/WTO study identified a number of ways in which the informal labour market affects trade and macroeconomic performance.23 A number of influences, assessed as negative, include a negative impact on export diversification and productivity growth, preventing re-allocation of jobs within the formal economy, hampering economies of scale, and acting as a barrier to economic restructuring. The study also identified a positive influence by suggesting that informal economies
“may provide cheap intermediate goods and services that boost the competitiveness of formal firms in international markets”24 –deemed (within the context of neoliberal doctrine of growth, at any rate) as ‘essential’ in enabling formal firms in vertical supply chains to “compete successfully on international markets”.
Trafficking in human beings and the informal sector
The claim that both THB and the informal sector do not exist as objective phenomena, but are social and political constructs reflecting gendered and racialised configurations of economic and political power, may dismay some supporters of the legalistic view clinging to the legitimacy of convention-based definitions. Both remain legal and policy categories defined by legislation and operationalised by State authorities within specific economic, political, social, and cultural contexts. However, as the ‘What the Problem is Represented to Be’ approach to policy analysis developed by Bacchi25 suggests, examining policy interpretations of complex problems reveals a complexity of power relationships underlying such representations. From this perspective, an explicit exclusion of human trafficking from the sphere of informal economy within the context of the ILO Recommendation reinforces the dominant ‘crime – illegal immigration – charitable victims’ rescue’ view of human trafficking in anti-trafficking law, policy, and practice, severing it from complex political and economic contexts which foster vulnerability and informality of labour globally. In echoing Anne Gallagher’s comments on the USA’s Trafficking in Persons report,26 much more dangerous is the implicit and mistaken assumption that the specific ways in which complex phenomena such as human trafficking or informality are defined in law (and operationalised in policy) could tell the whole story of exploitation, disadvantage, and marginalisation.
The separation of THB from the informal sector within the context of the 2015 ILO Recommendation reinforces, on a political level, the assumption that these two phenomena have nothing in common, even though both human trafficking and informal economies, apart from situations in which labour market participants enter the informal sector purposefully to avoid taxation and excessive regulation, thrive on economic and social vulnerability. Gozdziak,27 citing Mahdavi, suggests that gendered, raced, classed, and sexualised discourses of human trafficking are rooted in the current disconnect “between the broad legal definition that embraces any worker who experienced force, fraud, or coercion, and the narrow latitude of activist and policy discussions that focuses on sex work”.28 High-level policy discussions of human trafficking have failed, so far, to assert and respond to an explicit connection between the re-emergence of human trafficking and the advent of the ‘labour market flexibility’, which, according to Standing,29 “crystallised in the 1980s”, and included “systematically making employees more insecure” and forcing them into the ‘precariat’.
The separation of THB and the informal economy raises a key question of what conditions, or discourses, of “social belonging and abandonment, caring and disregard”30 enable national governments and international organisations to create a very specific anti-trafficking narrative. This narrative removes systematic labour exploitation from the circle of moral and legal obligations by bracketing the presence of exploitative labour through the concepts of THB, forced labour, and ‘modern slavery’.
The last three decades of global, neoliberal capitalist developments have seen labour being “the major loser experiencing stagnant real wages, greater job insecurity, and widening inequality”.31 Job creation linked to globalisation and the growth of trade has been accompanied by an increase in insecure, non-standard employment contracts in both developed and developing economies, including zero-hour arrangements, agency work, casual and temporary employment, and growing rates of informal employment. Lower wage costs, flexible labour, and limited (or non-existent) social welfare arrangements provide, as Peters32 argues, a common baseline for profitability and growth within the context of neoliberal economies where profit depends, in larger part, on getting more out of a workforce than that workforce is paid. Within such contexts, cost re-emerges as a central value in calculating who can, or should, be protected and cared for. Shelley, for example, observes: “the greater the productivity of workers – the higher the ratio of their output to their wages, the greater is the degree of exploitation”.33 The ‘trickle-down’ promise of globalised economic growth and modernisation has so far failed to materialise; instead, the role of globalisation in re-allocating poverty and stigma, and in reinforcing existing patterns of neoliberal domination, have come to the fore. The informalisation of labour became, according to Yusuff:34
an alternate form of labour utilization (and often exploitation) by capital … informal labour relations (like informal workers) are not ‘just there’ by some accident or flaw in capitalist development. Instead, these relations (and workers) are actively ‘informalised’ by capital under the logic of peripheral capitalist accumulation.
Within this context, exploitation of labour (even though it takes different forms on the continuums of coercion, and may or may not involve crossing international borders) cannot be regarded as isolated instances of bad governance and/or unabated criminality – as opportunistic or unexpected – but central to the neoliberal re-structuring of the global economy. In a similar vein, Povinelli35 argues that neoliberalism:
is not a thing but a pragmatic concept – a tool – in a field of multiple manoeuvres among those who support and benefit from it, those who support it and suffer from it, and those who oppose it and benefit from it nevertheless.
Despite the 2012 assessment by the ILO36 that almost “three out of every 1,000 persons worldwide are in forced labour at any given point in time”, and despite a series of catastrophic industrial events taking the lives of low-paid workers, including the Tazreen Factory37 and Rana Plaza38 disasters, such findings and incidents do not cut time into two in a fashion similar to other spectacles of violence interpreted as having immediate implications for ‘our’ security and good life, such as terrorist attacks or collapses of major financial institutions. The regular reports of workers’ enslavement, suicide, and deaths, collated and disseminated by activist groups, do not result in public outrage or demand for exceptional measures to be taken. The day-to-day uneventfulness of suffering, misery, exploitation, exhaustion, and dying, described by Povinelli39 in her analysis of neoliberal abandonment, lacks intensity and devastating images of threat. In not being spectacular, and in being ‘inward’, suffering, misery, and exploitation on the global scale do not create an ontological necessity to respond or intensify public anxieties about economic, social, and political threats, or about not being able to continue ‘living well for less’.40 The deployment of the limited statistics on the extent of exploitation and inequality, globally, results in a paradox: in an attempt to transform the dispersed, uneventful, and invisible suffering into the visible, eventful, and compact call for an ethical response, such assessments obliterate the very nature of such suffering by presenting Western consumer-citizens with a figure, an ethical dilemma, and no script for meaningful action. Within this context, consumer-citizens’ awareness and knowledge of human trafficking co-exist with the daily acts of denial and ignorance.41 As Cohen42 notes in his States of Denial: “Televised images of distant misery don’t seem to belong to the same world as our familiar daily round”.
Another example of separating legal frameworks and policy discussions surrounding the issue of forced labour, THB, labour exploitation, and informal economies is the role of businesses and, in particular, multi-national corporations. A 2015 report by the McKinsey Global Institute43 suggests that “[f]or the past three decades, corporations have enjoyed record profit growth, new market opportunities and declining costs”, resulting in surging earnings and incomes. Such growth has been possible due to rising consumption and industrial investment, the availability of low-cost labour, and globalised supply chains. The rise of Apple, for example, appears to have been enabled, partly, by reliance on a low-paid workforce in China. A
ccording to China Labour Watch:
Apple would need to invest up to 10 percent of its profits to ensure that workers making its products enjoy fundamentally improved working conditions. Yet the low pay, long hours, unpaid work, poor workplace safety, and despicable living conditions persist.44
Despite the size and the economic dominance of transnational corporations, the disconnect between international corporate structures, on the one hand, and international and national law, on the other hand, remains a key issue in making corporations accountable for the damage inflicted globally to both human and non-human life. Even though legal debates around the corporate ‘personhood’ continue, most corporations remain multinational entities, while legal systems remain largely national.45 The complexity of entanglements between corporations and the State has been highlighted by a number of commentators, including Povinelli46 in her discussion of States acting as “a source of corporate wealth and welfare through tax breaks and finance”; and by Brass47 commenting on the key role of the State in implementing and regulating conditions of unfreedom, which remain a key feature of exploitative relations of labour within the context of neoliberalism. In discussing the relationship between corporations, labour exploitation, and human trafficking, Gallagher comments that “corporate complicity in trafficking – and the government corruption that makes this possible – isn’t even on the table”.48
The voluntary UN Guiding Principles on Business and Human Rights,49 endorsed by the United Nations Human Rights Council in June 2011, merely invite, rather than oblige, businesses to refrain from profiteering from exploited labour – a weak concession to the economic and political power of multinational corporations. Human Rights Watch described the adoption of these Principles as a squandered opportunity “to take meaningful action to curtail business-related human rights abuses”.50 Within this context, the “confluence of doing good business and doing good” has not replaced the market logic of profit maximisation but “endowed it with a moral legitimacy”.51
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