Informal Economy Definition

The informal economy is the part of an economy that is not taxed, regulated, or monitored by any form of government. The informal economy includes activities such as street vending, child care, waste picking, and sex work. The informal economy is often hidden from view and operates outside of the formal economic system.

The informal economy is a large and growing part of the global economy. In developing countries, the informal economy makes up a significant portion of the total economy. In sub-Saharan Africa, for example, the informal economy accounts for 60% of the total economy. In Latin America, the informal economy makes up 40% of the total economy.

The growth of the informal economy is often attributed to structural changes in the global economy. These changes have led to an increase in precarious and low-wage work, which has driven workers into the informal sector in search of livelihoods. The rise of the gig economy has also contributed to the growth of the informal sector, as many gig workers are not formally employed and lack social protections such as health insurance and paid leave.