Economic growth has been sustained for many years pre-crisis in the region, but this has not resulted in the creation of an adequate number of jobs and has succeeded, at best, in generating low-quality, informal jobs. This World Bank report addresses one margin of exclusion: informal employment and the vulnerabilities and lack of opportunities associated with it. The report analyses the constraints that prevent informal workers from becoming formal and discusses policy options to effectively address these constraints.
This report looks at informality through a human development angle and focuses particularly on informal employment. Informality is a complex phenomenon, comprising unpaid workers and workers without social security or health insurance coverage, small or micro-firms that operate outside the regulatory framework and large registered firms that may partially evade corporate taxes and social security contributions.
This report has two main objectives. The first is to provide an understanding of the extent, determinants, and challenges posed by informal employment, bringing together new evidence, data, and country-specific analyses. The second objective is to open up and inform a debate on feasible policy options to better manage vulnerability through social security coverage extension, promote fulfilling work, and support an inclusive development process.
With the exception of the evidence presented in chapter 1, which relies in part on standardised International Labour Organization data and thus allows for full coverage, this report focuses on the countries in the MENA region for which household-level data with information on social security coverage were available: the Arab Republic of Egypt, Iraq, Jordan, Lebanon, Morocco, the Syrian Arab Republic, and the Republic of Yemen. With the exception of household data for Egypt and administrative data provided by the Jordan Social Security Corporation, none of these surveys’ data track individuals over time.
To overcome these constraints, this project cosponsored four new surveys that were fielded in 2009 and 2010: the Egypt and Morocco youth surveys, the Lebanon Labor Force Survey, and the Syria matched employer-employee module. In these four surveys, questions were included about social security coverage, job characteristics, workers’ attitudes, willingness to contribute to social security, and the like. The Lebanon and Syria surveys also included innovative modules reporting the results of direct cognitive and non-cognitive skills tests, which are linked to informality for the first time in this literature.
Key Findings:
The evidence in this report suggests the need to rethink policy making, especially concerning labour markets and social security reform, because many of the intended beneficiaries operate beyond the reach of legislative reform.
Policy options in five complementary areas emerge as the key to promoting social security coverage extension, better job quality and a more inclusive development process: (1) creating a level playing field for small and large firms to compete; (2) addressing regulatory barriers in labour markets; (3) realigning incentives, pay, and benefit packages in the public sector; (4) redesigning key features of pension systems and extending social security coverage; and (5) increasing access to skills-upgrading instruments for informal workers.
