Informal Economy Absorbs Half of Workforce Worldwide

Human Wrongs Watch

Geneva, 18 September, 2014 (ILO)* – The informal economy absorbs about half of the workforce worldwide and it has not decreased significantly during recent decades, said Guy Ryder, Director-General of the International Labour Organization (ILO).


Speaking to EU member states at an international conference on “How to Make Formal Work Attractive” that took place in Vilnius, Lithuania, Ryder said the labour inspectorate has both an enforcement and preventive role in addressing undeclared work.

We firmly believe that policies to address undeclared work must be balanced, combining incentives and deterrence, said Ryder, outlining such measures as curtailing administrative burdens for businesses, tax credits and reducing social insurance fees—as well as labour inspections.

According to the ILO Director-General, ILO Convention No. 81 on Labour Inspection, ratified by all EU Member States, gives a solid foundation for consolidated action against fraud at the national and regional levels. Social dialogue is also vital in achieving compliance, while tripartism has also proven to be a key avenue for ensuring policy coherence, he added.

During the two-day conference in Vilnius (September 17-18), participants discussed measures to deal with formalizing the informal economy, which in Europe often takes the form of undeclared work. It refers mainly to lawful work that is not declared to the public authorities in order to reduce labour costs and evade taxation.

A high incidence of informality is a challenge not only for decent work but also for inclusive development, said Ryder, adding that it has a negative impact on government revenues and fair competition in national and international markets.

The ILO has been working with the EU to address this issue, for example by creating a platform against undeclared work and by providing a set of recommendations for improving compliance with registration obligations and protecting undeclared workers.

Ryder said the transition to the formal economy was a priority for the ILO, pointing to a standard-setting item which was on the agenda of the International Labour Conference this year. This is crucial and ground-breaking work that will enlarge the ILO’s ability to advance its values and standards by reaching out to the most vulnerable, he said.

During his two-day trip to Vilnius, Ryder met the Lithuanian President Dalia Grybauskaitė, Prime Minister Algirdas Butkevičius, the Minister of Social Security and Labour Algimanta Pabedinskienė, as well as representatives of the country’s employers’ and workers’ organizations. (*Source: ILO News).

2014 Human Wrongs Watch

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