Myriad debates have come up on the issue with diverse views and remedies: ‘some view informal workers as a nuisance to be eliminated or regulated; others see them as a vulnerable group to be assisted through social policies; still others view them as entrepreneurs to be freed from government regulations’ (Chen 2006:26). But neither the theoretic thoughts nor tangible ideas have provided a comprehensive framework on how to approach global informality and the new challenges it pose to policy makers.
This essay critically examines the position of ILO influenced by the legalist perspective on formalizing the informal economy. Are there vested interests in promoting the decent work agenda? Is the decent work agenda merely a guise behind which informality continues to operate? Does the decent work approach take into account structures and institutions? The essay will delve into the argument of who benefits in formalizing the informal economy recognizing the fact that the informal head porter pay daily levies to the local government systems in Ghana but do not receive any benefit. A synopsis on informal economy and decent work agenda will first be outlined and how this applies to the head porter in Ghana. Finally, a conclusion will be drawn with some policy recommendations.
Perspectives on Informality
The informal economy was first discovered in Africa in the early 1970s due to the dominance of large scale self employed who do not fall within the formal economy. Economic anthropologist Keith Hart coined the term in his series of studies in Africa on the urban labour markets where he distinguished between wage earning and self employment. He emphasized on entrepreneurial dynamism and diversity of people in the informal sector (Hart 1990). This led to the development of three schools of thought – dualist, legalist and structuralist perspectives which all try to conceptualize, explain and address the challenges of this complex phenomenon.
The dualist posit the view that informal economy is peripheral or marginal and result out of the inadequate jobs in the formal economy and will recede with the development of the modern sector (Hart 1973; ILO 1972; Sethuraman 1976; Tokman 1978). The perspective therefore call for policy focus on support for the informal economy enterprises and workers in the form of credits and business development services with the assumption that the informal economy will fade away with more formal jobs.
The structuralists, however, abruptly refute the dualist approach and contend that formal and informal economies are inextricably connected and interdependent – the informal economy continues to exist because it is subordinated to the formal economy and enables the formal economy to reduce costs and increase profits (Moser 1978; Castells and Portes 1989, Bromley 1994). Hence policy focus should be on altering the unequal relationship that exists.
The legalist approach spearheaded by De Soto (1989) subscribes to the notion that informality is as a result of the excessive over regulation by the state (‘rigid mercantilist’) and hence the solution to the problem of informality is a liberalizing framework – deregulate, de-bureaucratize and privatize. The approach therefore advocates for formalizing and the decent work agenda follows directly from this perspective despite influence from other frameworks.
Notwithstanding the diversity of these concepts, informality continues to grow in new guises and different forms even in the industrialized nations. It is worth mentioning that none of the perspectives adequately explains or prescribes solutions to the problems of informality given its heterogeneous and multi segmented nature. Consequently, policy makers are faced with the dilemmas of whether to eradicate or formalize the informal economy. This has led to the suggestion of different ways of providing support for those in the informal economy which include licensing, provision of micro credit, training as well as enabling environment for collective action (Chen 2006) with more emphasis on formalizing.
In spite of these suggestions, understanding of the formalization process varies and different actors tend to define formalization to suit them. Intrinsically, policy makers view formalizing as a way of licensing informal work and putting in place taxation structures. Conversely, the different informal workers and enterprises see formalizing as a means to attain support and receive the incentives and benefits of formality. Hence in formalizing, there are striking differences in terms of interests and needs which should reflect in the policies of countries. The institutional capacities, mechanisms and resources especially in developing countries are however, inadequate to cater for the wide variations.
The above problems question the feasibility of formalizing the informal economy and De Soto’s legalist approach to informal economy. Are the states in many countries well equipped to enable workers and enterprises in the informal economy move upward into formality? Formalization may not be that simple as envisaged – it can be problematic and a nightmare to policy makers. Despite the complication, the informal economy can be reframed to fruitfully interact with the context and actors as well as reduce the associated vulnerability and risks. Consequently, new frameworks have emerged to take care of ‘the policy challenge of decreasing the cost of working informally’ (Chen 2006:90-1) or reducing the decent work deficits of working informally (ILO 2002). The ILO decent work agenda champions the emerging consensus concerning the need to develop a framework that is appropriate and able to respond effectively to the problems faced by those in the informal economy. However is this agenda feasible in the mist of all these dilemmas?
What can the ILO Decent Work do for Informality?
The ILO (2002) defines ‘decent work as productive work which generates an adequate income, in which workers’ rights are protected and where there is adequate social protection – providing opportunities for men and women to obtain productive work in conditions of freedom, equality, security and human dignity’. Decent work has been categorized into two different approaches. Some analysts have classified it into eleven measurement categories based on ’employment opportunities, acceptable work, adequate earnings and productive work, decent hours, stability and security of work, balancing work and family life, fair treatment in employment, safe work environment, social protection, social dialogue and workplace relations, and the economic and social context of decent work’ (Ghai 2006:27). The other approach views decent work from the perspective of security in which there are seven security indicators – labour security, employment security, job security, work security, skill reproduction security, income security and representation security (ILO 2002). Therefore lack of access to these indicators at ‘the macro (national), meso (enterprise) and micro (Individual) (Ghai 2006:27) levels leads to decent work deficits. These securities and indicators are inaccessible to workers in the informal economy albeit pockets of workers in the formal economy also have deficits for example the ‘working poor’.
Hence in looking at the situation of those in the informal economy, decent work deficits are the main characteristics and apparent are ‘poor quality unprotected and remunerated jobs, the absence of rights to work, inadequate social protection and lack of representation especially among women and young workers’ (ILO 2002:8). The decent work approach therefore recognizes that ‘all those who work have rights at work, irrespective of where they work’ (ILO 2002: 8) and should have decent work.
Notwithstanding this, a one-size-fit all policy cannot be developed for all segments. Decent work programmes need to take into consideration the diversity in labour markets, multi-segmented nature of informality, the role of government, institutions as well as cultural and historical backgrounds of nations. Decent work should therefore be seen as a goal to be achieved progressively from immediate to long term (ILO 2002). The immediate term focus is to recognize and give protection to those working in the informal economy, the short/medium and long term strategies are to enhance upward movement into formal decent jobs and the creation of formal decent employment opportunities for all respectively. Work should therefore meet decent work conditions which are seen as ‘a source of dignity, satisfaction and fulfillment to workers’ (Ghai 2006:11).
Limitations of Decent Work Paradigm
The decent work agenda is a benign attempt to informality but ILO unlike the World Bank and IMF do not have the capacity to enforce and ensure that governments adhere to the decent work programme. Also, while the ILO outlined the securities that will make informal work decent, it does not provide insights into how these securities can be met and whose responsibility (individual, state, market, and other actors) it is to address and find solutions to the deficits. Moreover, ILO does not point out how to prioritize the securities in situations where it is impossible to have all seven fulfilled. The question is shall we prioritize or shall we try to achieve at the same time all the seven securities?
Furthermore, whiles Chen (2006:27) assert that ‘capacity of institutions, funding for incentives and social protection, inadequate formal jobs and employers not willing to convert’ as the problems that impede formalizing, she seems to forget about the vested interest and structural determinants that could hinder decent work. For example institutional obstacles such as the local government units in Ghana may stifle the decent work agenda as incorporating decent work framework will hinder the benefits they enjoy from the informality.
Who benefits from formalizing: local government or head porter (Kayayei)?
Before looking at the head porter and the local government systems in Ghana, it is important to have background information on the head porter business. The head porters popularly referred to as ‘kayayei’ in Ghana are female young girls who migrate from northern parts of Ghana to the south predominantly Accra and Kumasi. Like other informal businesses, the ‘kayayei’ are self employed and engage in carrying goods on their head from one place to the other, unpacking stores especially in market places as well as assist buyers in carrying purchased goods to various locations for a negotiated fee (Argawal et al 1997, Opare 2003, Awumbila 2007). Agarwal et al (1997) further indicates that these girls are part of the informal transport structure of Ghana that transport load from one place to the other and this commercial head load carrying is to be understood within the structure of economic activities of women in the informal economy, and the importance of petty trading as the predominant occupation of women. Similarly, ILO (2004) and Awumbila (2007) notes that jobs engaged by these Kayayei pay low wages, have low productivity which leads to unstable incomes. The purpose of their involvement however, is ‘to attain sufficient savings to convert to a more lucrative and less arduous occupation’ (Awumbila 2007:3).
These head porters lack official registration, work in highly competitive market places, have deficits in all seven securities, and are exposed to diverse risks and shocks. Their daily vulnerability goes from running after busses for business to harassment from metropolitan agents for payment of daily levies. These head porters however, have various survival strategies which include collective credit and insurance (susu and adashi) schemes and organization of semi-permanent conjugal unions to reduce their vulnerability within the labour market (Awumbila
What Macroeconomics Is About And What Macroeconomists Do Economics Essay
Economics is the study of how individuals and groups make decision with limited resources to meet their best want and needs.
Also it study the changes in choices that may occur in future economics divides into two subjects: microeconomics and macroeconomics where microeconomics is the study of the choices that individuals and business make and how it interact and influence other decision, and macroeconomics is the study of the effect on the national economy and the global economy of the choices that individuals the business make.
In my essay I will be explaining two point in details what is macroeconomics is about, what macroeconomists do.
What macroeconomics about? As I mention in my introduction macroeconomics is studying the performances of natural economy and the policies that government use to effect the economy.
Its study the 4 issues:-
-Long run economics growth.
LONG RUN ECONOMIC GROWTH:- In general economic growth is increase the capacity of the economy to produce goods and services which come of the increase of population although long run economics growth is related in the increase of the quantity and quality of the factors of production :-
For example traveling to a developing country bring into mind the difference in living standards relative to those countries and the problems of food , shelter and health cares that the pour citizen experience in a rich nation which that represent the average for the people.
Looking to it from macroeconomics view the difference between the rich and developing nation is that rich nations might have in some point experienced extended periods of fast economic growth but the poor nation either have never experience or have had periods of growth setoff by economics deadline .
BUSINESS CYCLES:- The business cycle show up when there is fluctuation that the economy experience over the short run, business cycle most describe changes in the demand side of the economy by measuring GDP.
GDP= C I G NX.
In the short run the GDP doesnâ€™t stay constant and will show some changes for many reasons. Such as changes in government polices of taxes and interest rate (economic reason) and war, natural disasters (non economic reasons).
Macroeconomist put a lot of effort to figure what causes business cycles and decides what should be done about it.
Looking out the figure (1) we can tell that:-
-The downward phase of business cycle show recession where is the nation output may be falling or growing very slowly.
– The upward phase of business cycles shows expansion where there is increase in the growth rate during economic.
UNEMPLOYMENT :- Unemployment is the state where a person or group are looking for paying job but not having any retired full time students , children’s and those not actively looking for a paying job does not called unemployment.
There are many reasons same of it economic , social , political and other reason.
Increasing in the rate of population growth tend the scientific and technological revolation affect in the rate of unemployment.
The cost of unemployment include output lost when fewer people are working and the personal or psychological costs for unemployed workers and families.
INFLATION:- The economy describe inflation as it is the increase of the prices level of goods and services over period of time .
While the opposite decreasing in the price level of good and services over period of time called deflation.
Inflation and deflation are mostly related to the money because they are controlling the level of the prices therefore money is losing value.
For example if the price level rises persistently people need more money to make transactions. Incomes rise so firms must pay productions and if prices rise consumers must take more money with them for shopping but the value of money get smaller and smaller .
Inflation is a problem that government take it seriously and preventing inflation is the main task of monetary policy .
Inflation mostly result from increasing in demand or decreasing in supply which is called :
Demand pull inflation can a rise from any factor that effect and increase the demand such as increasing the quantity of money , increasing government purchases and increasing in export while cost push inflation can result from any factor that effect and decrease the supply such as increasing the money wages rates and increasing the money prices of raw materials.
Whether inflation is demand pull or cost push inflation is costly it anticipated or unanticipated. The costs of anticipated inflation which are relatively minor ( resources used by individuals and firms to reduce their holding currency) and menu cost ( cost of changing during the inflation) further more unanticipated inflation causes unpredictable transfers of wealth for individuals and firms.
The cost of unanticipated inflation is the risk gain and losses and the resources that people expend in trying to reduce this risk. Also it may reduce the efficiency of the market system by making it more difficult for people.
WHAT MACROECONOMISTS DO : In this part of the essay I will explaining more how do macroeconomists use their skills and what they do with the data they gather.
Macroeconomists do many activates such as forecasting, macroeconomic analysis, basic research and data development for government.
MACROECONMIC FORECASTING:- Forecasting is a minor, part of economic the reason that macroeconomists donâ€™t emphasize forecasting is that on the whole they are not terribly good at it, forecasting difficult not only because we have imperfect understanding of how economy works, but because it is ( impossible ) to take into account all the factors that may affect future economics trends.
MACROECONOMIC ANALYSIS:- Macroeconomic analysts monitor the economy and think about the implication of the economic events. Analysts employed in private sector ”bank” to determine how general economic will affect their employers, their opportunities for expansion and the product demand.
But in the public sector such as national government there main function is the assist in policy making, writing reports that solve macroeconomic problems.
Macroeconomic research :-
It takes variety of forms. From mathematical analysis to psychological. The goal of the research is to make general state how economic work.