In Italy, 4 workers out of 100 fall into the informal economy

Before the Covid-19 epidemic, around 2 billion people around the world were employed in the informal economy, according to the Organization for Co-operation and Development (OECD). This context includes all those remunerated but unregulated economic activities that take place at the family level or on a slightly larger scale.

The pandemic emergency has had a major impact on these workers, who often found themselves without employment and without the possibility of claiming contracts and protections that would allow them to support themselves immediately. Work inactivity has also made these people less competitive on the market, making their reintegration into work even more complex. These dynamics have highlighted the need to expand the social protection system also to informal workersgiving them the possibility of accessing, even in situations like this, a network of protections that allow them to limit the economic vulnerability of families.

The complexity of measuring the informal economy

First of all, it is important to clarify what is meant by this expression. It is, as defined by the United Nations, a sector that includes activities in family-type or slightly larger contexts.

This includes workers employed in self-production (as in the case of subsistence agriculture) or who contribute some occupations to family work without an explicit contract (for example care work). The companies do not have a legal entity separate from the owners and are not registered and this is the main difference compared to the underground economy sector: in the latter, the company is a structured and registered reality in which not all the transactions. The informal economy is however a sector in which exchanges of goods and services take place both in terms of sale and barter, it is therefore part of the broader scope of unobserved economics.

This is by its nature a particularly difficult phenomenon to detect. The incidence indicator is managed by the International Labor Organization (ILO) mainly on the basis of surveys on the workforce which, through specific questions, allow us to establish whether or not the person works within an informal sector of the economy.

These are dynamics that mainly involve the poor countries of the world. Before the Covid-19 pandemic, informal work accounted for 89% of workers in low-income countries and 81.6% in low- and middle-income countries. However, for those where the highest income was recorded, the incidence was equal to 15.9%. Even within European countries, informal workers can be found.

The country with the highest incidence of workers in the informal economy is Poland (9.8%), followed by Portugal (4.6%), Greece (4.5%), Slovakia (3.9) and Italy (3.8). The lowest values ​​are recorded in Bulgaria (1.3%), Belgium (1.3%) and Slovenia (1%).

It is also interesting to compare the data compared to 2019, before the restrictions related to the pandemic emergency. The country in which the share increased the most was Slovakia (2 percentage points), while the largest decrease was recorded in France (2 percentage points). In Italy there was a drop of 1.1 percentage points.

Looking further into the Italian case, between 2007 and 2022 the values ​​fluctuated between 4.0% (recorded in 2012, 2016, 2018 and 2019) and 3.1% (2009 data). In this period of time, the incidence among women has always been higher than that among men. However, the gap between the two genders has narrowed compared to the period of the pandemic emergency.

The highest incidence of informal female work was recorded in 2012, when this made up 6% of all employed women. As regards men, however, the highest percentage was recorded in 2016 (4.3%).

At the industry level, the one in which informal work has a greater weight is agricultural work. We are talking about 13.7% of the workforce in the sector. As we have explored in detail, this is a particular area in which there is not always a formalization of employment contracts which often have a seasonal or undeclared nature. Furthermore, businesses in the sector are very often family-run, a further reason why informal work is important.

Work informality is a multifactorial and complex phenomenon. As explained by the OECD, the factors can concern multiple areas: the structure of an economy, socio-economic development, the regulatory capacity and role of institutions, attitudes and behaviors at a social level, the individual characteristics of the worker and company . As complicated as it is to act on these contexts, it is important to insert the employment relationship within formal dynamics: the legal and economic protections that the worker has the right to have guarantee less economic and social marginalization of the family unit and greater stability. It is crucial to act on those sectors in which relationships of this type are traditionally used (as in the case of agriculture) but also on newer ones, like digital professions carried out on online platforms, require continuous attention. In fact, OECD states that it is also necessary to understand the new dynamics and new spaces of the world of work to avoid creating new pools of informality.

Photo: Romain Dancre – license