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Characteristics of informal economy workers and their households : concepts and measurement using household surveys.

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This study describes the characteristics of informal economy workers and their households. The central reasons for initiating the study were twofold. Firstly, the informal economy has grown in size and it is increasingly recognised as an important component of the economy. Secondly, it is widely agreed that accurate measurement of the informal economy has not been achieved. Thus, the study aimed to describe the informal economy using the most up-to-date national labour force survey as well as assess how accurately the informal economy has been measured with that instrument. The informal economy has developed as a result of globalisation and the technological revolution (amongst other factors) according to researchers. Recognition that workers within the informal economy (and those subject to informalisation within the formal economy) are not achieving fair labour standards has led to efforts to re-conceptualise work. The informal economy is extremely difficult to define and four conceptual models are described in this study. Each of the models agrees that the informal economy operates outside the ambit of formal activities, thus a form of dualism is defined, and that the economy is heterogeneous in character. The models differ in how the informal economy interrelates with the formal economy; the dualist model proposes there is no interaction while the legalist model states that a superior-subordinate relationship exists between the two. Competing models view the informal economy as either survivalist or as a vibrant, productive entity. A notable characteristic of the informal economy is flexibility in working conditions. This study will contribute to debate on the nature and measurement of the informal economy in South Africa. The method used in this study was secondary analysis of the Labour Force Survey. Integrating elements of theory and measurement, it is suggested that the design of the survey instrument reinforces the dualist model. Analysis revealed that different economies - formal and informal - occur and that, although the two are not mutually exclusive, these exhibit markedly different characteristics. The formal worker and his or her household showed significantly better statistics for a range of demographic, social and economic indicators. Formal employees enjoyed better quality employment relationships than informal workers, as demonstrated by higher proportions in permanent employment and longer duration of employment. Measurement of an interrelationship between the formal and informal economies was hampered by the design of the survey instrument, however, there is evidence that a relationship does exist and this was defined as superior-subordinate in nature. The heterogeneous nature of the informal economy was confirmed by example of a wide range of occupations, involving varied levels of skill. Generally, the South African informal economy appears to be survivalist in nature, as demonstrated by high frequencies of workers in occupations of low skill as well as by the general poverty and low standard of living exhibited by the informal workers' household. It was recognised that there are categories of worker who are worse off than the informal worker and this finding, along with the observation that disparities exist between different types of worker within the informal economy itself, raises the question of how useful it is to use the dualist framework for analysis. Informal workers did report higher levels of flexibility, however, it is argued that this would not compensate for poor statistics recorded for nearly all other indicators measured. Based on the analysis above, it is suggested that the informal worker 'formalise' if this path is made possible because it is clear that formal workers achieve a significantly better standard of living. In the long term this goal could be achieved by improving education levels and by facilitating access to the formal economy. In the short to medium term the outlook for the informal worker could be improved by adopting policies that foster improved work conditions, including improved access to medical aid, paid leave, and some form of pension or retirement plan. The study concludes that measurement of the informal economy is more accurate than past attempts, but that further improvement is possible. Given the disparities within the informal work force and the idea that a dualist approach is not the most effective conceptualisation of the labour force, the study calls for a flexible survey instrument that caters for various definitions of the informal worker. The inclusion of additional questions, for example to measure workers' perceptions of exploitation and satisfaction with working conditions, is encouraged. These suggestions would facilitate effective investigation of alternative conceptualisations of the informal economy through means of the survey instrument.


Thesis (M.Dev. Studies)-University of Natal, Durban, 2003.


Informal sector (Economics)--South Africa., Self-employed--South Africa., Household surveys--South Africa., Cost and standard of living--South Africa., Theses--Development studies.