How Informal Workers Contribute to Cities

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By Sally Roever

World Urban Forum 7 asks how urban equity in development can be achieved. As Vanessa Watson argues in her contribution to this blog series, visions of future cities with pristine boulevards and glass box apartments bear no relationship to the day-to-day reality of city life in the global South, where 45 to 82 per cent of total non-agricultural employment is informal. But how can a more realistic urban future be envisioned when formal planning ignores informal workers?

In part, the answer depends on having more credible, grounded research on the informal economy. The Informal Economy Monitoring Study, an initiative of the Inclusive Cities project launched today at WUF7, offers an innovative model. What is different about this 10-city study is that, in contrast to mainstream studies of the informal economy, it was conceptualized, designed, and implemented in partnership with informal workers’ organizations. This approach has paid huge dividends: it meant the study team asked better questions, gathered more reliable data, and interpreted the results with the benefit of deep and longstanding first-hand knowledge of informal workers themselves.

The study fills some critical information gaps about everyday working conditions in the informal economy. Focused on three occupational sectors — home-based work, street vending, and waste picking — it is based on a participatory methodology that enables workers to articulate key drivers of working conditions in the informal economy in their own words. The study also explores individual, household and enterprise characteristics through a survey questionnaire, and brings in key informant interviews to explore important city-specific themes. What do the study findings tell us about making cities more inclusive and, ultimately, more productive?

First, informal workers’ activities are linked to, and in fact sustain, the activities of formal enterprises. In the IEMS sample, 30 per cent of home-based workers buy their inputs from formal enterprises, and most sub-contracted workers’ finished products are directly or indirectly sold to formal enterprises (including multinational corporations). Fifty-one per cent of street vendors buy their stock from formal enterprises, and 76 per cent of waste pickers sell their recyclable materials to formal firms. Consider now that over half of urban workers in many regions are informally employed, and that these are just three of many occupational groups within the informal economy. If the glass-and-steel urban fantasies of master plans were to be realized, formal enterprises would lose a critical source of supply and demand.

Second, informal workers’ households depend on the earnings they generate through informal work. Fifty-eight per cent of workers in the sample provide their household’s main source of income, and another 24 per cent live in households dependent on the informal work of another household member. Meanwhile, just 10 per cent named formal wage employment as their household’s main source of income. All of these workers use their earnings from informal work to cover household consumption needs, often buying provisions from formal shops (and, it should be said, paying sales tax as they do so). Urban renewal projects that evict informal workers from their homes and workplaces to make way for fancy buildings also remove the main, and sometimes only, source of household income for scores of city residents.

Third, city government policies and practices are front and centre among the negative drivers in all three sectors. Home-based workers said that expensive and inaccessible transport, cramped housing where raw materials and machinery can’t be protected from floods, and an irregular supply of electricity undermines their productivity: “work stops due to no electricity,” said a home-based worker from Lahore. Street vendors said their voices are disregarded entirely by city officials: “we are not taken as people who also exist in this country,” said a vendor from Durban. And waste pickers must compete with multinational corporations for access to waste; yet, “this country goes on favouring millionaires,” said a waste picker from Bogotá, where the Asociación de Recicladores de Bogotá has spent decades battling for inclusion.

Fourth, informal workers make real and tangible contributions to city life. Not only do nearly all pay some form of tax — for example, two-thirds of all street vendors pay the city government for access to public space — they also provide crucial services to communities. Home-based workers note with pride the quality of the goods they make: “our products are beautiful and people enjoy them.” Street vendors clean the area near their stalls to attract customers and protect citizens from crime: “you cannot commit a crime in front of traders.” And waste pickers subsidize cities by doing their recycling: “so much difference we make! They get a clean city without paying us a paisa.”

In sum, informal workers are no less crucial to cities than the slick urban professionals expected to take up residence in those glass box apartments. Home-based workers make goods for city residents and sustain global value chains; street vendors expand retail distribution networks and keep their eyes on the streets; and waste pickers provide needed materials to industry while drastically reducing environmental contamination. How would cities survive if glass-and-steel urban fantasies became reality? Our answer is simple: they wouldn’t.