The informal sector; onwards and upwards

17 May 2019

According to the National Statistics Institute (INEI) in a report released last week, the number of Peruvians working in the informal sector reached 8.6 million, up nearly 3% on the first quarter of 2018. Of every ten Peruvians in the labour market, seven are in the informal sector. Along with Bolivia, Peru has the largest proportion of informal workers anywhere in Latin America.

The latest round of statistics will almost certainly fuel debate as to the policies that would help reduce informality, a status closely correlated with high levels of poverty.

Increased growth is generally considered the palliative for high levels of informal employment, drawing more workers into the formal sector of the economy. But this argument has to contend with the fact that years of fast growth (remember the Peruvian ‘miracle’ of 2002 to 2013?) hardly affected the rate of informality at all.

On the right, reducing the privileges of formal employment (eg job stability) is often considered the answer. However, this is a self-serving argument for employers who are reluctant to afford their employees the few (and scant) privileges they have managed to win over the years. Organisations like the Peruvian Economy Institute (IPE) routinely put forward this argument. Its president, Roberto Abusada, uses his weekly column in El Comercio to this end.

But on the left, the answer lies more with a greater measure of state intervention, especially using Keynesian fiscal policies to promote employment through public spending. Also, public policies geared to specific key sectors can help boost proper jobs, especially in sectors employing high numbers of women workers (informality is higher among women than men).

La República summarises some of the data in the INEI report, breaking down the figures by age, gender and geographical location 

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    The Peru Support Group exists to promote social inclusion, sustainable development and the observance of human rights in Peru. To that end the PSG highlights shortcomings in observance of established norms, whether international or local in nature, in its research, advocacy and publications. In so doing, it underscores the relationships that exist within the political system, how institutions work, and the effectiveness of policies that aim to reduce poverty and inequality within the context of sustainable development.

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