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C H A P T ER 5
L O NG S HA D O W O F I N F O R MA L I T Y
Investing in human capital. Policies that expand job training are especially relevant for the young, who are commonly informally employed in MNA, to facilitate their entry into more productive, formal jobs (figure 5.11; Angel-Urdinola and Tanabe 2012). Training programs may be particularly effective if they are coupled with mechanisms to increase women’s mobility, which is constrained in the region, and offer a combination of soft and hard skills (figure 5.11). The extension of training to rural areas, where education levels are low, could also be especially beneficial; the region’s training programs currently tend to serve higher-income and more educated individuals (AngelUrdinola, Semlali, and Brodmann 2010). A holistic approach that combines job training with job creation, such as through public-private sector programs, could boost informal workers’ earnings (Steel and Snodgrass 2008). In MNA, unemployment rates are higher among university graduates than among low-skilled workers. Thus, education system reforms that are coupled with private sector development (the demand side of the labor market) may be more effective at generating high-quality employment.
South Asia Employment informality in SAR is pervasive. SAR is home to the highest number of informal workers among the six EMDE regions, accounting for close to two-fifths of the world total. Output informality has declined in recent decades, however. Low labor productivity is a long-standing feature of the region’s informal sector. The pervasiveness of employment informality reflects large artisanal and agricultural sectors and the dominance of micro and small business units, often family businesses. High unemployment among the low-skilled, rural, female, and young populations pushes workers into the informal sector. High informality in the region is also associated with weak institutions and poor business climates. Policies that focus on improving the business environment and addressing skills gaps in vulnerable groups can help promote movement to the formal sector. Evolution of informality in SAR Informal employment in SAR (measured by self-employment) was 59 percent of total employment in 2010-18, the second highest among all EMDE regions, and well above the EMDE average of 42 percent. However, employment informality has also declined the most of any region since the 1990s (figure 5.12). Using an alternative measure, lack of basic pension coverage, about 90 percent of the labor force in SAR works informally. Although there is evidence that the COVID-19 pandemic has been accompanied by a movement of formal workers into the informal sector, informal workers were more vulnerable to loss of employment in the early stage of the pandemic, when lockdown measures were most stringent (World Bank 2020d). In India, lockdown measures are estimated to have tripled the urban unemployment rate in the early stages of the pandemic. The income losses associated with these lost jobs were exacerbated by the fact that some 60-85 percent of urban workers had no access to social protection benefits,
