Formalizing the Informal Economy? – A Policy Dialogue


by Deia de Brito

Marty Chen in Montevideo, Uruguay

Marty Chen, WIEGO’s International Coordinator.
Photo by: Patricia Carney

“Formalizing the Informal Economy?” brought together informally employed workers (domestic workers, street vendors and waste pickers), experts on the informal economy, and government representatives to share their perspectives and search for common understanding. It was organized by Women in the Informal Economy: Globalizing and Organizing (WIEGO), a global action-research-policy network that seeks to improve the status of those who work in the informal economy.

The question mark stems from the process of “formalization” itself, which involves numerous approaches and interests. Domestic workers, waste pickers, and street vendors all have their own particular needs, but what they all want the right to organize as workers and the right to social protection as they pursue their livelihoods. The policy dialogue sought to address these needs by asking: What would formalization mean to workers within the informal sector? What are the best ways to formalize? What works and what doesn’t?

A policy dialogue creates a space in which people can be helped to see problems from each others’ perspectives. The goal is to bring improvements to policies or programmes. Policy dialogues are powerful advocacy platforms for informal workers and invaluable sources of information and solutions for officials.

Marty Chen, WIEGO’s International Coordinator, opened the dialogue by providing its context. Between October 26 to 28, labour leaders from more than 40 countries met in Montevideo to organize domestic workers worldwide, share strategies across regions, and advocate for their rights. On the closing day, participants voted unanimously for a constitution that launched into being the International Domestic Workers’ Federation (IDWF). This significant step – the creation of the first global union run by women – had the support of Uruguayan President José Mujica, who gave a closing statement with a message of encouragement. He told the labour leaders and workers who had come from around the globe to be part of this historic event: “working collectively is our biggest strength.”

WIEGO is one of IDWF’s key supporters and organized the policy dialogue to follow in the wake of this significant conference, which is a part of the broader struggle in which informal workers are seeking to be recognized as workers. Chen made the connection between all sectors of the informal workforce: “In Latin America, half of non-farm workers are engaged in the informal economy.” Discussions like these are urgent, given that most who labour in the informal economy earn little, face great risks and are often denied their rights.


Waste Picker Worker in Montevideo, Uruguay

Photo by: Patricia Carney

Domestic Workers: Towards Recognition as Workers

Elizabeth Tang Yin Ngor, formerly the International Coordinator of the International Domestic Workers Network (IDWN) and now the first General Secretary of the IDWF, began her presentation with the question, “What makes them [domestic workers] informal?” She answered: “They do not receive the same rights and protection extended to other workers. They are not treated as workers.” Given this context, she said their goal is to formalize.

She explained that while gains have been made, such as the adoption of the ILO Convention on Domestic Workers two years ago, more work must be done. The Convention must be ratified – that is, governments must pass laws that give domestic workers rights. “Many governments are still resistant,” said Tang. So far, only 13 countries have ratified the convention, with Uruguay the first.

Right now the domestic workers’ movement is focusing on organizing – hence the formation of a Federation – and the integration of domestic workers into mainstream trade union movements is a crucial step towards recognition. In trade unions, domestic workers should be greeted with the support of other workers and allies. However, Tang said that while trade unions don’t deliberately exclude domestic workers, they do not always welcome them. Many trade unions are run mostly by men, and domestic workers, who are largely women, face exclusion. And, she noted, the men in charge often employ domestic workers themselves.

Tang stressed the difficulty of formalizing an even more silent group: migrant domestic workers. This group is not only invisible, lacking labour rights and facing exclusion from trade unions, but as a result of their status as “undocumented,” often they are even overlooked by domestic workers’ allies and support organizations. “No one knows the real picture of this group,” she said. “We need to integrate them into the mainstream movements in order to get support from workers and allies.”

Steps towards formalization, such as collective bargaining – a process of negotiation between employers and a group of employees aimed at reaching agreements that regulate working conditions – are also goals. Other forms of formalization include legal systems in which domestic workers can make formal complaints or take their employers to court if necessary. In addition, governments can register domestic workers in order to track the number of members and the needs of the population.


Formalizing Street Vendors: Towards A “Gradual, Ongoing Process”

Through their work, street vendors support their families – paying for school, food and other basic necessities. But they also provide goods for an ever-growing urban population that depends on vendors for basic necessities at reasonable prices. In addition, street vendors generate jobs for themselves and for other informal workers.

“Street vendors recognize the valuable contributions they are making to their households, to their families, to their communities, and to their cities,” said Sally Roever, WIEGO’s Street Vending Sector Specialist. Roever quoted Fandy Clarisse Gnahoui, a WIEGO board member and the treasurer of the trade union for street vendors at the Dantokpa Usynvepid Market in Benin: “We [vendors] have to play our own part in improving the informal economy. It is not easy but gradually and through sustained effort, we will get there.”

The gradual, ongoing process of formalization must recognize the contributions and the basic rights of vendors, and consider both the costs and the benefits for all partners. As Roever said, “It may mean having a registered business, and paying more taxes and fees, but it also means realizing basic rights: the right to work and to earn without harassment, without discrimination, and with dignity.”

Formalization also means having a secure vending site in a good location in the city. But in most cities, this is not the case for street vendors. In many cases, formalization means moving off the streets or to workspaces that aren’t economically feasible, and paying taxes and fees vendors can’t afford.

For formalization efforts to work, Roever stressed, cities must first recognize the value of public space as a foundation for livelihoods as well as for social and cultural interaction. In too many cities, however, priority is given to imposing costs on vendors and accruing benefits for the city government. Roever pointed out that if vendors don’t also benefit, formalization cannot be achieved or sustained. But “where vendors are viewed as assets to cities, and are treated as partners in finding sustainable solutions, formalization can work for everyone,” Roever said.

Some of the principles behind successful formalization efforts include: permanent collective bargaining forums and participation in policy processes; transparent regulations that prevent arbitrary evictions and confiscation of merchandise; and support mechanisms that help vendors sustain their livelihood over time.


Waste Pickers: Towards Inclusive Policies and Participatory Processes

Walter Rodríguez, a waste picker and president of the UCRUS trade union in Uruguay, echoed similar thoughts about struggle that the other speakers had raised: that of recognition for the important service they provide. He explained recent efforts among waste pickers’ networks and allies to gain acknowledgment at least by the International Labour Organization (ILO).

“As representatives of the Latin American Network of Waste Pickers (Red Lacre), we have solicited the ILO to recognize waste pickers as a profession,” he said. “We need to be recognized on a global level.”

When waste pickers are recognized as workers with rights, practices like waste incineration are viewed as a threat to livelihoods. In many developing countries in Latin America and around the world, the struggle is not only for inclusive waste management on a local level but is also one against global economic forces that treat the working poor – especially informal workers – as expendable.

Rodríguez gave the example that incineration will become phased out in Europe over the next decade while the practice is on the rise in Latin America. “This makes it seem as though those in Europe are human and we in Latin America are not,” he said. In other words, while the global north invests in comprehensive Zero Waste programs, the global south is left with incineration as a method of “formalizing” its solid waste management.

On the local level in Montevideo, the “formalization” of waste pickers has been strongly criticized by trade unions and waste pickers. They say that big producers are now prohibited from handing over their recyclables to waste pickers who collect in the streets and that private companies are taking over recycling. “Recycling is benefitting the rich so that they become richer,” said Rodríguez.

“Recycling in Uruguay is going through an unjust period,” he said. “They’re applying laws that go against waste pickers. There is no credibility in our government’s policies.”

Rodríguez discussed the importance of unifying all waste pickers and creating solutions that benefit all groups. He said a proper formalization process that benefits waste pickers and citizens would involve the creation and enforcement of laws making recycling mandatory for all residents, government support for waste pickers’ cooperatives, and benefits and payments to waste pickers as service providers.


Open Discussion

Waste Cooperative, Recycling Cooperative Field Visit

Photo by: F. Parra

The event began with conversations around 10 tables, at which informal worker representatives, government representatives and members of the WIEGO team shared their perspectives. Finally, after the featured speakers, government officials were given an opportunity to respond.

A representative from the Institute of Social Security spoke about the “simple tax” – a single payment that allows informal workers to receive the benefits of social security. A representative from the Ministry of Social Development and Inclusion explained some of the initiatives the government has undertaken to increase opportunities, especially for waste pickers, and alternative jobs through training and placement. However, she noted, it is a slow process and not yet as successful anyone would like.


Good Intentions and Good Outcomes

In introducing the speakers at the policy dialogue, Lucia Fernandez, WIEGO’s Global Waste Picker Program Coordinator joked, “The path to hell is paved with good intentions. We need to share best practices because there are a lot of bad practices.”

It’s time to examine what works and what doesn’t among formalization processes. It’s time to talk with the workers whose lives and livelihoods are most affected. While there are no quick fixes or easy formulas, as Roever emphasized in her presentation on street vendors, there are examples that have produced successful outcomes for workers, for the environment and for the economy.

Felipe Cordoso Dump Site

Photo by: Patricia Carney