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Labor and Social Protection

The challenges of informality

Shu Yu's picture

Download the January 2019 Global Economic Prospects report.

The informal sector — labor and business that is hidden from monetary, regulatory, and institutional authorities — accounts for about a third of GDP and 70 percent of employment (of which self-employment is more than a half) in emerging market and developing economies. While offering the advantage of employment flexibility in some economies, a large informal sector is associated with low productivity, reduced tax revenues, poor governance, excessive regulations, and poverty and income inequality.

Addressing the challenge of pervasive informality will require comprehensive policies that take into account country-specific conditions.  Initiatives to boost long-term development might include measures aimed at reducing regulatory and tax burdens, expanding access to finance, improving education and other public services, and strengthening public revenue frameworks.
 
One-half of the world’s informal output and 95 percent of its informal employment is in emerging market and developing economies. Both informal output and employment have declined since 1990, particularly in countries with higher output growth, rapid physical capital accumulation, and larger improvements in governance and business climates.

Share of informal output and employment

By when would universal social protection be achieved?

Ugo Gentilini's picture

I am 41 years old and, with business as usual, I would be 106 when universal social protection (USP) is realized.

The drive for USP – a definition of which is to  ensure that everyone is covered by some form of social assistance or insurance – lies at the heart of various efforts at country and global levels.

But where are we with attaining such goal, exactly? Here are some back-of-the-envelope calculations.

Gig economy growth pains

Rong Chen's picture

The gig economy matches businesses to consumers through digital platforms. It serves local communities such as Tutorama, an Egyptian online platform connecting students with local private tutors. In Jordan, refugee women who have limited mobility are able to make a living by selling home-cooked dishes through Bilforon, a food-delivery platform. In 2018, more than five thousand women domestic workers earned income through SweepSouth, a home cleaning service platform in South Africa.

Digital platforms in China

Rong Chen's picture

From the e-commerce site Taobao.com to the social media app WeChat, China has drawn global attention to its digital platform economy. A third of the top-200 digital platforms were born in China according to the Global Platform Survey 2016. They are also growing fast. A 2017 report published by Ali Research shows that the digital platform sector contributes to 10.5% of China’s GDP.

Corporate tax avoidance in an era of changing firms

Davida Connon's picture

It is widely accepted that corporate tax avoidance is commonplace, but experts disagree over the precise amount of tax that corporations successfully avoid. One estimate for 2012 suggests that 50 percent of all foreign income of multinationals is reported in jurisdictions with an effective tax rate below 5 percent; another suggests it’s more like 40 percent. The OECD estimates that governments worldwide are missing out on anything between four and ten percent of global corporate income tax revenue every year, or US$100–$240 billion. While the accounting varies, one fact is clear:  there is an unacceptable level of corporate tax avoidance, no matter how you do the math. 

What’s new in social protection – November edition

Ugo Gentilini's picture

Can cash transfers increase voting in elections? An upcoming article by Conover et al estimates that participation of Colombia’s Familias en Accion conditional cash transfer (CCT) program increases the probability that women cast a ballot by 2.8% (and women are more likely to vote for the incumbent candidate who supported the CCT).

What’s new in social protection – October edition

Ugo Gentilini's picture

How long do the effects of cash transfers last? A paper by Blattman et al found that after nine years from inception, cash grants for young-adults in Uganda had lasting impacts on assets and skilled work, but had little effect on mortality, fertility, health or education. See Ozler’s nice blog dissecting the study. A paper by Barham et al found that, after 10 years from inception, conditional cash transfers in Nicaragua did not lead to long-term impacts in learning, but did yield significant impacts on nutrition (body mass index), fertility, and subsequent labor market outcomes and income. 

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