What's Wrong with Informality: Rethinking the Language of the Global Political Economy

AUTHOR: Sadie Dittenber
FACULTY: Dr. Robert Dayley
DEPARTMENT: International Political Economy

ABSTRACT

The global economy is commonly split into two sectors-informal and formal. The informal sector encompasses unregulated and unprotected work and workers, comprising over sixty percent of the global economy, while the formal sector is made up of those workers in taxed, regulated jobs. As organizations attempt to decrease the social ramifications often associated with economic informality, such as high poverty rates, low wages, and a general lack of labor protections, the positioning of the informal and formal sectors as separate and diametrically opposed entities proves to impede progress. Specifically, this positioning creates a conceptual binary that is conducive to economic modeling rather than effective policymaking. This paper uses a constructivist framework to examine this informal-formal binary and its consequences through case studies. It finds that current concepts do not align with workers' lived realities, and orient policymakers toward ineffective solutions such as formalization policies. Rather than viewing the informal and formal sectors as opposites, scholars and policymakers should eliminate the informal-formal binary entirely, and reorient their work toward improving labor protection policies for all workers, both regulated and unregulated. Doing so would erase the idea that the current informal and formal sectors are separate entities, decrease the usage of false economic modeling, and begin to erase the stigma that accompanies the label 'informal.'