In the post-pandemic world, informality remains a majority reality in Latin America. Technological change and the platform economy deepen long-term trends and make what we mean by informality in the region more complex. There is a blurred, bidirectional zone between formality and informality that new technologies enhance. The boost of remote work and digital commerce augurs an increase in this type of informality in the future. It implies challenges for the definition of informality, social protection systems and technological governance.
After the sharp contraction of informal employment during the most critical phase of the pandemic (Q1-2020), informal employment has driven the labour market's recovery during 2021-22. (ECLAC, ILO).
During 2022, albeit unevenly, this decreases as formal employment recovers, showing that it essentially functions as an alternative to unemployment. However, there is little direct relationship between employment and growth. The IMF estimates Peru's GDP growth in 2022 of 2.7%, and the informality rate rose from 71% to 73.5% of the labour force between 2019 and 2022. On the other hand, Uruguay, with a projected GDP growth of 3.3%, saw the rate fall from 24% to 19%. In any case, the regional informality rate in the fourth quarter of 2021 was almost 50%, close to the 2019 record. One of every two regional workers is informal, representing a long-standing structural reality.
The Real Academia Española defines informal as: "who does not keep the forms and rules provided" or "street vendor". Since the 1950s, development economics had thought of the informal sector as a duality: a formal, advanced sector and an informal, backward sector that would gradually disappear. This idea worked better between 1950 and 1980 when, on average, 60% of new jobs in Latin America were in the formal sectors of the economy. But the trend changed in the 1990s. The sharp contraction of the economy during the 1980s, and the subsequent adjustments after 1990, provoked a substantial expulsion of workers that never returned after the economic reforms. Sixty-one per cent of the jobs generated in the region during the 1990s were informal. The share of the informal sector in urban employment expanded from about 30% to 50% between 1990 and 2000.
Globalisation imposes an increasing informalisation of production (linked to the shift from Fordism to Toyotism, outsourcing and specialisation of certain activities) with the advance of new information and communication technologies. Firms began operating with a small core of regular employees and a growing periphery of "non-standard" workers. With these profound changes, there is also a transformation in the conception of informality. A more complex relationship between the formal and the informal is beginning to be perceived: there is informality in formality and vice versa. The ILO finds that, between 2012 and 2019, the economy generated almost a quarter of informal jobs in formal enterprises or households.
That the "informal economy has thus replaced the "informal sector" concept. This new definition incorporates categories such as wage earners without a contract or outside labour laws - regardless of the size of the company - and workers who move from one situation to another or are in "lower" links in production chains. So-called "atypical forms of employment" appear as part-time work, agency work and other multi-party employment relationships, and disguised employment or economically dependent self-employment.
Since the early 2000s, structural reforms reduced regional informality, but the trend changed after 2015, now driven by growing "digital informality". Although it is still a complex reality to measure, according to ECLAC, detecting a particular profile of workers is possible. They are young, with an average age in developing countries of 30 years, and they are more qualified. The youngest is, on average, 22 years old and works on so-called "competitive scheduling" platforms; delivery drivers (RAPPI, GLOVO etc.) are, on average, 29 years old; and platform drivers (UBER, DIDI etc.) are on average 36 years old. All have a high level of education: 18% have secondary education, 25% have some technical certificate or have attended university, and 37% have completed a university degree.
The informal economy remains a daily reality for many Latin Americans. Technological change and the platform economy are already part of this reality and what we understand as the informal economy. The growth of remote work and digital commerce during the next few years augurs an even more significant increase in this type of informality in the coming years. With it, it will be necessary to redefine how we understand it, develop new formalisation strategies, and implement new forms of social protection designed for this continuum that are the new porous faces of informality.
[1] Post doctoral fellow DGAPA, Instituto de Investigaciones Económicas, member OBELA
