Urban Informal Employment Share 2018

In 2018, Guinea-Bissau led the world with the highest Urban Informal Employment Share at 98.23%, while the global range spanned from 0.68% in Malta to this peak. The global average share of informal employment in urban areas was 38.43%, providing a benchmark for understanding the economic landscapes across countries.

Economic Factors Influencing High Informal Employment

Countries with high Urban Informal Employment Shares, such as Guinea-Bissau (98.23%), Chad (96.92%), and Burkina Faso (95.58%), often face significant economic challenges. These nations typically have limited industrialization, which constrains formal job creation. In such environments, the informal economy becomes a critical employment provider, compensating for the lack of formal job opportunities. Furthermore, these countries may have regulatory frameworks that are not conducive to formal job growth, making informal employment a more viable option for many workers.

Additionally, the presence of large agricultural sectors transitioning to urban economies without adequate infrastructure can exacerbate the reliance on informal employment. For example, Mali (93.51%) and Sierra Leone (93.11%) both have substantial rural populations migrating to urban centers, where informal work is often more accessible than formal employment.

Low Informal Employment Share in Developed Economies

In contrast, countries with the lowest Urban Informal Employment Shares, such as Malta (0.68%), Iceland (0.8%), and Slovenia (0.93%), benefit from robust formal economies supported by strong labor laws and social safety nets. These nations typically have comprehensive regulatory environments that encourage formal job creation and compliance. Additionally, these countries often boast high levels of education and skill development, leading to a workforce that is well-integrated into formal sectors.

Such economies also tend to have lower levels of poverty and inequality, reducing the necessity for informal employment as a means of survival. The economic stability and opportunities available in these countries significantly diminish the informal sector's role in urban employment.

Year-over-Year Trends and Notable Changes

The average change in Urban Informal Employment Share from previous years was a decrease of 0.30% (-4.0%). Some countries, however, experienced notable shifts. Jordan saw the largest increase, with a rise of 3.79% (8.5%), potentially due to economic pressures that pushed more workers into informal jobs. Similarly, Panama and Saint Lucia reported increases of 1.96% (4.0%) and 1.61% (5.0%), respectively, possibly reflecting economic adjustments or labor market changes.

Conversely, Republic of Moldova experienced a significant decrease of 3.62% (-6.0%), which may be attributed to economic reforms and improvements in formal job creation. Thailand and Bosnia and Herzegovina also saw reductions in informal employment shares, with 2.80% (-4.2%) and 2.67% (-10.8%) declines, respectively. These changes suggest positive economic developments and potentially successful policy interventions aimed at reducing informality.

Implications for Policy and Economic Development

The data on Urban Informal Employment Share underscores the crucial role of policy in shaping employment dynamics. Countries with high informal employment need to focus on creating conducive environments for formal job growth through improved regulatory frameworks, investment in education, and infrastructure development. For nations with low informal employment, maintaining regulatory standards and encouraging innovation in formal sectors will be key to sustaining economic stability.

Overall, addressing the factors that drive informal employment is essential for enhancing economic resilience and improving living standards. Policymakers must consider tailored approaches that reflect the unique economic and social contexts of their countries to effectively reduce the reliance on informal employment and promote sustainable economic development.