Transcript Document

Formalization of the Informal Economy
The Need for an Integrated Policy Framework
Frédéric Lapeyre
Informal Economy Unit, Head
DEVINVEST/Employment Policy Department
International Labour Organization
Share of non-agricultural informal employment in
total non agricultural employment, by region (%) 2009
Some definitions
• Employment in the informal sector – All jobs in informal sector
enterprises - “ENTERPRISE-BASED DEFINITION”– 15th ICLS 1993
• Informal economy - All economic activities by workers and
economic units that are – in law or in practice – not covered or
insufficiently covered by formal arrangements - 90th ILC 2002
• Informal employment – “All informal jobs, whether carried out
in formal sector enterprises, informal sector enterprises, or
households - “JOB-BASED DEFINITION”– 17th ICLS 2003
8
Latin America: Informal wage employment as % of
total wage employment by type of employment
120
100
80
60
40
20
0
Agricultural
Employees
Non-agricultural
employees
Domestic
Workers
Dynamics of informal employment in the formal and informal sectors of the economy
in Argentina
Why the formalization of the
economy is a desirable goal ?
Informal
Economy
Formal
economy
Formalization a mean and not an end
for policy makers
•
The transition from the informal to the formal economy
aims at promoting:
- decent work for all,
- inclusive development.
•
As most people enter the informal economy not by choice
but as a consequence of a lack of opportunities in the
formal economy:
formalization should go hand in hand with ensuring
opportunities for income security, livelihoods and
entrepreneurship.
•
•
For individuals (workers and/or
•
employers)
– Improved access to rights at work,
social security and decent working
conditions;
– Better access to representation and
national policy dialogue;
For enterprises
– Better access to credit and other
productive factors, including through
public programmes;
– Expended access to markets:
participation in public procurements,
access to imports and exports
through formal channels;
– Reduction of the influence of
corruption, greater respect for
commercial contracts, etc.
For society at large
– Broadening the tax base (increasing
the scope of public action, reducing
tax rates, etc.);
– Increased equity with regard to the
contribution to public budget and to
benefits of redistributive policies;
– Increased efficiency and sustainability
of preventive & compensative
measures to address risks;
– Fairer competition in national and
international markets
– Greater social cohesion
Why do we need
an integrated
policy
framework?
Economic growth:
A necessary but not sufficient condition
1.
The growth of formal employment is insufficient to
absorb the new entrants and those currently trapped in
informal employment
2.
The rate of informal employment in the formal sector is
growing in many places
3.
Informalization is a persistent phenomena even in
countries with good growth performance
GDP growth and informal employment in Argentina
during the economic crisis
Informal employment: multiple dimensions
Dimensions
Indicators
Legal framework: Labour legislation
coverage
Recognition of employee status &
associated employment rights
Employment rights in practice
Legal framework: Social security
coverage
Recognition of social security
entitlements
Registration with SS system/scheme
Payment of SS contribution
Declaration with public authorities
Income tax declaration
Formal employment practices
Written contract, terms of
employment
Pay slip, record of payments
• Formalization of economic units
– Registration of economic units
– Increased compliance
– Extension in application of labour and social security regulation
• Formalization of jobs
– Extension of application of labour regulation
– Extension of coverage of social security
Typology
of
– Registration of employment relationship
– Registration of own-account endeavours formalization
• Productive job creation in the formal economy
– Most new entrants have access to employment in the formal
economy
– Increased formal employment intensity of growth.
A Taxonomy of Formalization
21
Key components of an integrated policy framework:
• Macroeconomic, trade, industrial, tax, sectoral and infrastructure
policies that promote employment, enhance productivity and
facilitate structural transformations;
• Policies that affect transversal drivers of formalization such as the lack
of a social protection floor, weak labour market institutions, low
productivity and problem of access to finance, skills and
infrastructure;
• Policies that target specifics categories of economic units (e.g. MSEs),
groups of workers (e.g. domestic work, self-employed), type of
informality (e.g. undeclared work in formal enterprises).
Economic policy
Employment and
social policy
Institutionnal
policy
Formalization
for
inclusive development
What did we
learn from the
Latin American
experience?
Building knowledge on successful formalization paths
Lessons learnt about formalization
1. Some of the policies that explicitly sought to increase labour
formalization were already present in these countries before –
although in an isolated manner – with no positive effects on labour
formalization.
2. Ad-hoc formalization policies delinked from a national
development strategy and lacking political commitments are
unlikely to make a sustained impact on informality.
3. Where integrated approaches have been adopted, the results for
formalization have been more robust
TOWARDS AN INTEGRATED APPROACH IN LAC
Productivity
Macro
(environment)
Norms
Information
Training
Meso
(sectors, chains)
Streamlining of
procedures
Micro
(business level)
Social dialogue
(improvement,
change)
Incentives
Link to business
Formalisation
(registry, taxes)
Enforcement
Culture of
compliance
Link to social security
(focus on hard- toreach groups and
non-conventional
methods)
Institutional
strengthening
(advocacy
management,
automation)
Specific approaches
(Formalisation
standards, specific
agreements, etc.)
Specific
approaches
WAGE WORKERS
OWN-ACCOUNT WORKERS
DOMESTIC WORKERS
Source: Roxana Maurizio, 2014, Labour formalization and declining inequality in Argentina and Brazil in
2000s:A dynamic approach; ILO Research Paper No.9
Argentina
INFORMATION
STREAMLINING
National Labour
Regularization
Program - PNRT. Systematic
media campaign
National Labour Regularization
Program – PNRT. MiSimplification Programme
SIMPLES and SUPER SIMPLES, Law on
Individual Micro-entrepreneur, eSocial, REDESIM
Brazil
Chile
Social Security Education
Fund
Chile Emprende
“Your business in a day”, Law on reducing redtape for new firms, PREVIRED, Family-Owned
microenterprise Law
Laws and regulations
•Dissemination of information on how to register enterprises/workers,
benefits, costs, sanctions, obligations, etc.
•Streamlining of administrative procedures for registering/formalizing an
enterprise, tax and social security obligations
•Social dialogue to promote formalisation.
SCHEME
Argentina
Brazil
Uruguay
CHARACTERISTICS
• Simplified regime for MSEs and own-account workers which merges
tax payment and social security contributions in a one fixed monthly
(Single Tax
payment.
Regime)
• Unification of contributions with other household members
Monotributo &
• Access to pension benefits and medical care
Monotributo Social • Subsidy (50% health insurance, total for security contribution) and
tax exemption for activities performed by those in situations of social
vulnerability.
SIMPLES &
Individual Microentrepreneur
• Simplified regime for MSEs and own-account workers.
• Merging of federal taxes and social security contributions in a single
annual payment.
• Reduced cost of social security payments
Monotributo &
Monotributo social
• Special regime for own-account workers, domestic workers or
entrepreneurs below poverty line.
• Small contribution for access to social security and tax exemptions.
• Access to health care for an additional fee.
Incentives
• Tax incentives and special tax regimes for smaller firms
• Social security incentives
Enforcement
• Encouraging compliance through information and training
• Strengthening of inspection capacity
• Alternative specific approaches
Argentina
INFORMATION
STRENGHTENING INSPECTION
National Labour
Regularization
Program - PNRT
• National Labour Regularization
Program – PNRT. “Digital Inspector”
• Law to promote registered
employment and prevent
employment fraud
Colombia
Ecuador
Electronic Payroll (PILA)
Dignified Domestic
Work
Strengthening of labour inspection
Mexico
Strengthening of labour inspection
Uruguay
Share of information among entities
OTHER APPROACHES
Formalisation agreements
SIMPLES
Single simplified annual tax and social security declaration
Number of micro and small enterprises registered with
Simples Nacional, 2007-2012 (thousands)
5000
4409
4500
3975
4000
3569
3172
3500
3000
2496
2627
2007
2008
2500
2000
1500
1000
500
0
2009
2010
2011
2012
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Towards a new ILO
instrument :
The Recommendation
on the transition from
the informal to the
formal economy
• At its 317th Session in March 2013, the ILO Governing Body
decided to place a standard-setting item on the agenda of
the 2014 ILC on facilitating transitions from the informal to
the formal with a view to the elaboration of a
Recommendation (Double General Discussion 2014 and
2015).
• The Office prepared a preliminary report setting out the law
and practice in the different countries, together with a
questionnaire which was transmitted to member States in
August 2013.
• Governments were invited to give their views by 31
December 2013 after consultation with the most
representative organizations of employers and workers.
• White report, 23 Jul 2013 (accompanied
by a questionnaire and tripartite meeting
of experts held from 16-20 Sept 2013 as
part of the preparatory work)
• Yellow report, 28 Apr 2014 (basis for the
1st discussion at the ILC 2014)
• 1st discussion at the ILC, June 2014
Report of the Committee on
Transitioning from the Informal Economy
• Brown report, 26 Aug 2014 (3rd report
prepared by the Office)
The objective of the new instrument is
to provide policy guidelines to:
(a) facilitate the transition of workers and economic units
from the informal to the formal economy;
(b) promote the creation, preservation and sustainability
of decent jobs in the formal economy through
coordinated effective public policies; and
(c) prevent the informalization of formal economy jobs.
Consultation
Lorsqu’ils élaborent, mettent en œuvre et évaluent des
politiques et des programmes concernant l’économie
informelle, et notamment sa formalisation, les Membres
devraient consulter les organisations d’employeurs et de
travailleurs les plus représentatives et promouvoir la
participation active de ces organisations qui devraient compter
dans leurs rangs, conformément à la pratique nationale, les
représentants d’organisations représentatives dont les
membres sont des travailleurs et des unités économiques de
l’économie informelle.
THANK YOU