The Informal Sector
Aside for the four recognised economic sectors there is a fifth sector although it has no official figurers produced by government. This ‘informal sector’ is also referred to as the ‘black economy’ in the sense that its unofficial and unregulated. Yet this sector employs millions of people across the world, especially in LIC’s.
Causes of the Informal Sector
The Informal sector develops and exists because of people wish to make money and cannot or do not want to pay tax so al this off records payment (informal employment) creates the informal sector.
In many LIC’s today, large numbers of people are migrating from rural to urban areas.
The reasons for this are people are in search of jobs with regular wage and the belief that cities hold a better standard of living and quality of life. But jobs are limited this causes both unemployment and underemployment. It’s true wages are higher in LIC’s cities but is still not enough to feed a family.
This information activity might involve selling matches or shoelaces on the street, ice-cream vending, shoe shining, rubbish collecting or scavenging bottles, cans and other types of waste for recycling. Some people are so desperate, that there form of employment is begging, petty crime or prostitution. Informal economic activities fall mainly within the tertiary sector. Informal employment is closely linked to informal settlements.
Other informal activities include para-transit which is a substitute for regular transport caused by inadequate official transport in LIC tows and cities. These para-transits include: mini-buses, hard drawn and motorised rickshaw, scooters and tricycles used as taxis. This cheap para-transit causes large scale congestion.
Informal activities do have benefits, such as a wide range of cheap goods and services that would otherwise be unavailable to other people. This provides the un-wealthy with the means to survival, but this is not enough to break the cycle of poverty in LIC urban areas. Other cost associated with the informal sector are:
- No health care or unemployment benefits
- A high exposure to work related risks
- An uncertain legal statuses
The worst part of these sectors are that they involve children in economic activities rather than them being in education. For example in Dhaka (the capital of Bangladesh), where it is estimated to be 500,000 children in this sector, most of the children working dawn to dust, earning a meagre wage to support their families. The employment options range form begging and scavenger to domestic services and working as fare collectors for various forms of para-transit, these jobs can be vulnerable to children and expose them to hazards such as street crime, violence, drugs, sexual abuse, toxic fumes and carrying excessive loads. These conditions can often result in poor health and a range of development problems, there is little hope of breaking this cycle of poverty for these children.