Informal Work in Developed Nations 0203874455, 0415777798, 9780415777797, 9780203874455

Table of contents :
Book Cover
Title
Copyright
Contents
Tables
Figures
Contributors
1 Introduction
Part I Historical and methodological foundations
2 The changing conceptualizations of informal work in developed economies
3 Measuring informal work in developed nations
Part II Informal work in Europe
4 Informal work in the diverse economies of “Post-Socialist” Europe
5 Informal employment in the workwelfare arrangement of Germany
6 Gender and informal work
7 Geographical variations in informal work in contemporary England
8 The fallacy of the formal and informal divide: Lessons from a post-Fordist regional economy
Part III Informal work in North America
9 Day laborers in New York’s informal economy
10 Effects of wage and hour law enforcement on informal work
11 The diverse nature of informal work in California
12 Informal work in rural America: Theory and evidence
13 Informal work in Canada
14 Conclusions
Index

Citation preview

Informal Work in Developed Nations

Almost everyone residing in a developed nation knows someone who has engaged in paid work that is licit but not reported to the government (e.g., babysitting, gardening, construction, financial consulting). However, though most acknowledge that such work is helpful to the individuals involved and that informal work may enhance a sense of community, most scholars view it as a pre-modern form of exchange and something that disappears as capitalist markets expand globally. Both mainstream and heterodox economics typically assume that there is an inevitable shift toward the formalization of goods and services provisioning as societies become more “advanced” or “developed” (the “formalization thesis”). In this view, the existence of informal activities is a manifestation of backwardness and it is assumed that they will disappear as an economy becomes more “modern.” This book challenges this conventional mainstream and heterodox thesis about the linear trajectory of informal work and economic development by arguing that informal work is not nontrivial for understanding modern capitalist economies and that heterodox theories must be altered to address the role of informal work in relatively developed economies. This edited collection focuses on informal work in various developed nations, including Canada, the United States, and several in Europe. It will, therefore, be of interest to policymakers, students and researchers in development studies, social policy, sociology, anthropology, public health, human geography, economics, and planning. Enrico Marcelli is Associate Professor of Sociology at San Diego State University, San Diego, California, USA. Colin C. Williams is Professor of Public Policy at the University of Sheffield, Sheffield, UK. Pascale Joassart is Associate Professor of Geography at San Diego State University, San Diego, California, USA.

Routledge Advances in Heterodox Economics Edited by Frederic S. Lee, University of Missouri-Kansas City

Over the past two decades, the intellectual agendas of heterodox economists have taken a decidedly pluralist turn. Leading thinkers have begun to move beyond the established paradigms of Austrian, feminist, institutional-evolutionary, Marxian, post-Keynesian, radical, social, and Sraffian economics—opening up new lines of analysis, criticism, and dialogue among dissenting schools of thought. This cross-fertilization of ideas is creating a new generation of scholarship in which novel combinations of heterodox ideas are being brought to bear on important contemporary and historical problems.   Routledge Advances in Heterodox Economics aims to promote this new scholarship by publishing innovative books in heterodox economic theory, policy, philosophy, intellectual history, institutional history, and pedagogy. Syntheses or critical engagement of two or more heterodox traditions are especially encouraged. 1. Ontology and Economics Tony Lawson and his critics Edited by Edward Fullbrook 2. Currencies, Capital Flows, and Crises A post-Keynesian analysis of exchange rate determination John T. Harvey 3. Radical Economics and Labor Frederic Lee and Jon Bekken 4. A History of Heterodox Economics Challenging the mainstream in the twentieth century Frederic Lee 5. Heterodox Macroeconomics Edited by Jonathan P. Goldstein and Michael G. Hillard 6. The Marginal Productivity Theory of Distribution A critical history John Pullen

7. Informal Work in Developed Nations Edited by Enrico Marcelli, Colin C. Williams, and Pascale Joassart

This series was previously published by The University of Michigan Press and the following books are available (please contact UMP for more information): Economics in Real Time A theoretical reconstruction John McDermott Liberating Economics Feminist perspectives on families, work, and globalization Drucilla K. Barker and Susan F. Feiner Socialism after Hayek Theodore A. Burczak Future Directions for Heterodox Economics Edited by John T. Harvey and Robert F. Garnett, Jr.

Informal Work in Developed Nations

Edited by Enrico Marcelli, Colin C. Williams and Pascale Joassart

First published 2010 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Avenue, New York, NY 10016 Routledge is an imprint of the Taylor & Francis Group, an informa business This edition published in the Taylor & Francis e-Library, 2009. To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk. © 2010 selection and editorial matter: Enrico Marcelli, Colin C. Williams and Pascale Joassart; individual chapters: the contributors All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Informal work in developed nations / edited by Enrico Marcelli, Colin C. Williams and Pascale Joassart.     p. cm.   Includes bibliographical references and index.   1. Informal sector (Economics) 2. Labor. I. Marcelli, Enrico. II. Williams,   Colin C., 1961- III. Joassart, Pascale.   HD2341.I5342 2009   330–dc22                       2009001429 ISBN 0-203-87445-5 Master e-book ISBN ISBN10: 0-415-77779-8 (hbk) ISBN10: 0-203-87445-5 (ebk) ISBN13: 978-0-415-77779-7 (hbk) ISBN13: 978-0-203-87445-5 (ebk)

Contents

List of tables List of figures List of contributors 1 Introduction

ix xi xii 1

E nrico Marcelli , C olin C. W illiams , and Pascale Joassart

Part I

Historical and methodological foundations 2 The changing conceptualizations of informal work in developed economies

9 11

C olin C . Williams

3 Measuring informal work in developed nations

34

Pascale Joassart

Part II

Informal work in Europe

45

4 Informal work in the diverse economies of “Post-Socialist” Europe

47

A drian S mith

5 Informal employment in the work-welfare arrangement of Germany B I R G I T P FAU - EFFING e R AND SLA ĐANA SAKA Č-MAGDAL eNIĆ

66

viii  Contents

6 Gender and informal work

82

Jan Windebank and C olin C. Williams

7 Geographical variations in informal work in contemporary England

97

C olin C . Williams

8 The fallacy of the formal and informal divide: lessons from a Post-Fordist regional economy

114

S imone G heZZ i

Part III

Informal work in North America

133

9 Day laborers in New York’s informal economy

135

E dwin M elÉ nde Z, N ik Theodore and Abel Valen Zuela , Jr .

10 Effects of wage and hour law enforcement on informal work

153

J ordan Rickles and Paul M. O ng

11 The diverse nature of informal work in California

168

E nrico Marcelli

12 Informal work in rural America: theory and evidence

177

T im S lack and Leif Jensen

13 Informal work in Canada

192

B ernard F ortin and G uy L acroix

14 Conclusions

220

C olin C . Williams and E nrico Marcelli

Index

233

Tables

4.1 Poverty rates in selected ECE and FSU countries 4.2 Average percent of food purchased, produced and received by households, 1999 4.3 Average percent of food purchased, produced and received by below median income and above median income households, 1999 5.1 Incidence of informal employment 5.2 Time spent in informal employment by informal employees 6.1 Informal wage rates in three regions of Canada 6.2 Relationship between gender divisions of informal work and unpaid domestic work in England: by task 6.3 Average hourly wage rates in second jobs, Germany 6.4 Motives of suppliers of informal work in English localities 6.5 Motives of purchasers of informal work 7.1 Areas studied in the English Localities Survey 7.2 Characteristics of the sampled population 7.3 List of tasks investigated in the English Localities Survey 7.4 Percentage of everyday tasks undertaken using informal work in England 7.5 Participation in informal work in England 7.6 Suppliers of informal labor in lower- and higher-income English neighborhoods 7.7 Character of suppliers of informal work in England 7.8 Motives for employing informal labor in England 7.9 Motives of suppliers of informal work in England 8.1 The size of informal economy, expressed as a percentage of GDP 8.2 Informal unemployment rate by economic sector 8.3 Informal labor by type 8.4 Informal employment rate by geographic area and economic sector 9.1 Average number of day laborers at hiring sites 9.2 Demographic characteristics, New York day laborers 9.3 Top tasks performed as a day laborer 9.4 Jobs for which day laborers have training 9.5 Typical number of days worked

50 57 58 69 73 84 86 89 92 93 98 100 101 102 103 104 105 106 109 117 118 119 120 141 142 143 144 144

x  Tables 9.6 9.7 9.8 10.1 10.2 10.3 13.1 13.2 13.3 13.4 13.5 13.6 13.7 13.8 13.9

Hourly wages of day labor jobs Monthly earnings of day laborers Frequency of employer abuses BOFE inspection and citation rates in 2001 BOFE inspection outcomes in 2001 Profile of garment industry firms with a BOFE case initiated in 2001 Comparison between the 1985 and the 1994 Survey, and the 1994 Surveys of Consumer Finances, Metropolitan Area of Quebec City Income and hours of work in the hidden market Expenditures on hidden goods and services Hidden income and expenditures Total unreported income and expenditures Provincial estimate Unreported income and expenditures A comparison of income and hours of work in the hidden market Unreported income and expenditures

145 145 146 161 161 164 197 198 200 204 206 208 211 212 217

Figures

4.1 Change in real GDP in East-Central Europe and the former Soviet Union, 1989–2003 4.2 Employment ratio, 1989 and 2002 4.3 Registered unemployment 2002 4.4 Income distribution, 1999 and 2002 5.1 How much confidence do you have in …? 9.1 Country of origin 10.1 California Department of Industrial Relations organizational chart 10.2 Annual number of BOFE inspections and inspection/citation rate 10.3 Workforce characteristics of targeted industries 11.1 Detailed civilian occupational levels of informality 11.2 Education among workers in jobs with low, medium, and high levels of informality 11.3 Percent high level of informality by metropolitan population size 12.1 Prevalence of informal work by household income 13.1 Hidden cigarette consumption

48 49 49 51 76 141 157 159 160 171 173 174 188 207

Contributors

Bernard Fortin is professor in economics at Laval University (Québec, Canada). He received his PhD from the University of California, Berkeley. He specializes in public economics, labor economics and applied microeconometrics. His research focuses on topics such as the underground economy, the informal sector, tax evasion, household labor supply, the marriage market, social assistance, workers’ compensation, peer effects, social networks, and physicians’ professional behaviour. His work has been published in journals such as American Economic Review, Journal of Political Economy, Journal of Econometrics, Economic Journal, Journal of Public Economics, Journal of Labor Economics, Journal of Human Resources, Journal of Health Economics, Journal of Population Economics, Economics Letters, Journal of Risk and Uncertainty, and Canadian Journal of Economics. Simone Ghezzi (MA and Ph.D in social-cultural anthropology, University of Toronto) is lecturer in anthropology at the Università di Milano-Bicocca. His research interests include informal economies, entrepreneurship, family firms, embeddedness, bilateral kinship systems. He has published articles in English and Italian on these topics. His article “Local discourses and global economy: production experiences of small family workshops in the Brianza,” published in International Journal of Urban and Regional Research in 2003, was the Winner of FURS (Foundation of Urban Research Studies) 2002 Essay Competition on Urban and Regional Themes by Young Authors. He is the author of Etnografia storica dell’imprenditorialità in Brianza (FrancoAngeli, 2007). Leif Jensen (PhD, sociology, University of Wisconsin-Madison) is professor of rural sociology and demography at the Pennsylvania State University. His research interests are found within three broad areas. The first is social stratification with emphasis on issues of poverty, employment hardship, and household economic strategies in rural and urban areas. The second is demography with special attention to migration and immigration. The third is the sociology of economic development with a focus on Latin America. He teaches graduate and undergraduate courses on poverty in the United States, international development, population and development, and related topics.

Contributors  xiii Pascale Joassart is associate professor of geography at San Diego State University. She received a PhD in political economy and public policy from the University of Southern California in 1999. Her research focuses on issues of urban poverty and accessibility to socio-economic resources and opportunities, including employment, social networks, and programs financed by local governments and nonprofits. She is particularly interested in understanding local labor markets from a geographic perspective, and how they shape the work experience of immigrant and lower-skilled women. Her work has been published in journals such as The Annals of the Association of American Geographers, Urban Geography, and Feminist Economics, and has been included in several edited volumes. Guy Lacroix holds a PhD in economics from Laval University and has completed postdoctoral studies at Princeton University. He is a full professor of economics at Laval University and is co-director of CIRPEE, a large interuniversity research centre. He specializes in labor economics and applied econometrics. His research focuses on social policy and on the effectiveness of training programs for disadvantaged individuals. His research has been published in The Journal of Political Economics, The Economic Journal, The Journal of Public Economics, The Journal of Urban Economics, The Journal of Health Economics, The Journal of Population Economics, Phamacoeconomics, Annales d’économie et de statistique, Revue économique, Économie et Prévisions, and Économie et Statistique. Slađana Sakač Magdalenić is a PhD student and research fellow at the Institute of Sociology and the Centre for Globalisation and Governance, University of Hamburg, Germany. She graduated in sociology from the University of Bremen. She is coeditor of International vergleichende Sozialforschung. She has previously worked within the Fifth EU Framework Research Project on “Formal and Informal Work in Europe” at the University of Hamburg. Her PhD research is on welfare state change in Central and Eastern Europe. Her main research interests are in the field of comparative social policy analysis, the relationships between institutions and culture, gender studies and the sociologies of work, and transformation. Enrico Marcelli is associate professor of sociology at San Diego State University. Formally trained in economics and demography at the University of Southern California, and in social epidemiology at Harvard University, Professor Marcelli’s work focuses on international migration, the social and geographic sources of health, and community-based statistical survey research. Specifically, during the 1990s he helped develop one of two leading methodologies employed in the United States to estimate the number, integration and effects of unauthorized migrants (the so-called “survey-based legal status estimation methodology”). More recently – using 2007 Boston Metropolitan Immigrant Health & Legal Status Survey (BM-IHLSS) data – he has begun studying the behavioral, biological and psychological mechanisms through which family

xiv  Contributors environment, neighborhood context and interpersonal networks influence the health of legal and unauthorized migrants from Brazil, the Dominican Republic and Mexico. Edwin Meléndez is a Professor of Urban Affairs and Planning at Hunter College and the Director of the Center for Puerto Rican Studies. He has conducted considerable research in the areas of Latino studies, economic development, labor markets, and poverty. In addition to numerous scientific papers and other publications, he is the co-editor of the recently published Latinos in a Changing Society (Praeger, 2007), and the author or editor of ten books including Communities and Workforce Development (Upjohn Institute, 2004), Working on Jobs: The Center for Employment Training (Mauricio Gastón Institute, 1996), and Hispanics in the Labor Force (Plenum Press, 1991). Paul M. Ong is professor in UCLA’s School of Public Affairs and Department of Asian American Studies. He has a master’s degree in urban planning from the University of Washington and a doctorate in economics from UC Berkeley. He was the founding director of the UC AAPI Policy Program and founding editor of AAPI Nexus: Asian American and Pacific Islander Policy, Practice and Community. He was the chair of UCLA’s Department of Urban Planning, director of the Lewis Center for Regional Policy Studies, and acting director of the Institute for Industrial Relations. He has conducted research on immigration, civic and political participation, economic status of minorities, welfare-to-work, health workers, spatial inequality, and environmental inequality. He has served on advisory committees for California’s Employment Development Department and Department of Social Services, the South Coast Air Quality Management District, the Getty Research Institute for the History of Art and the Humanities, the California Wellness Foundation, the California Community Foundation, the U.S. Bureau of the Census, the National Research Council, the California League of Conservation Voters, Asian Pacific Legal Center, and PIU of the British Cabinet. Birgit Pfau-Effinger is full professor of sociology, and co-director of the Research Centre on Globalisation and Governance at the University of Hamburg. Her special interests include theory and methods in the field of comparative sociology, institutional change, the relationship of institutions and culture, social policy analyses, gender arrangements, sociology of labour markets, the relationship of formal employment and informal work, family sociology, family policies, care for children and old people, and social services. She was vicechair of the European Network “Gender Inequality and the European Regions” (GIER) of the European Science Foundation; member of the management committee and chair of the gender issues group of the COST A13 Action Programme “Changing Labour Markets, Welfare Policies and Citizenship” of the European Union, and co-editor of Work, Employment and Society. She was also coordinator of a EU Fifth Framework research project on “Formal and informal work in Europe” that included seven research teams in six European

Contributors  xv countries, and is a member of the Network of Excellence “Reconciling Work and Welfare in European Societies” in the Seventh EU Framework Programme. Jordan Rickles is a doctoral student in the UCLA Graduate School of Education and Information Studies, where he is a fellow in the Advanced Quantitative Methods in Education Research program. He has a master of public policy degree from UCLA and a BS degree in industrial and labor relations from Cornell University. He worked for over four years at the Lewis Center for Regional Policy Studies as a researcher on welfare-to-work and labor market studies. He also spent over three years as a researcher within the Los Angeles Unified School District. Tim Slack (PhD rural sociology, The Pennsylvania State University) is assistant professor of sociology at Louisiana State University. His research interests are in the areas of poverty, social demography, work and labor markets, with a special emphasis on understanding the rural–urban continuum and other elements of geographic space as axes of social inequality. He teaches both undergraduate and graduate-level courses on related topics. Adrian Smith is professor of human geography and head of department at Queen Mary, University of London. His research focuses on the economic and social geographies of transformations from state socialism in East-Central Europe and on the restructuring of global industries. Publications include Theorising Transition (co-edited with John Pickles, Routledge, 1998), Reconstructing the Regional Economy (Edward Elgar, 1998), Work, Employment and Transition (co-edited with Al Rainnie and Adam Swain, Routledge, 2002), and Social Justice and Neoliberalism (co-edited with Alison Stenning and Katie Willis, Zed Books, 2008). He is currently working on a book entitled Domesticating Neoliberalism: Social Exclusion and Spaces of Economic Practice in Post Socialism for Wiley-Blackwell. In 2009 he became an editor of European Urban and Regional Studies. Abel Valenzuela Jr. is professor of Chicano studies and urban planning. He is also director of the Center for the Study of Urban Poverty at UCLA where he has directed several national studies on welfare reform, immigrant settlement and civil society, and day labor. He has published numerous articles on immigrant settlement, labor market outcomes, urban poverty and inequality, including co-editing Prismatic Metropolis: Inequality in Los Angeles (Russell Sage Foundation, 2000), Immigration and Crime: Race, Ethnicity, and Violence (NYU Press, 2006). He has also published in American Behavioral Scientist, Journal of Ethnic and Migration Studies, Annual Review of Sociology, New England Journal of Public Policy, Working USA, International Journal of Comparative Sociology, and Regional Studies. Colin C. Williams is professor of public policy and associate dean (research) in the School of Management at the University of Sheffield. He has a longstanding interest in measuring the extent and character of the informal sector

xvi  Contributors and evaluating possible policy responses. His recent books include the Hidden Enterprise Culture (Edward Elgar, 2008), Rethinking the Future of Work (Palgrave Macmillan, 2007) and A Commodified World (Zed, 2005). Jan Windebank is professor of French and European society in the Centre for Gender Studies in Europe at the University of Sheffield. Her interests are in the gender divisions of labour in contemporary societies and the meaning of work. She has published extensively in journals in the fields of sociology, social policy, geography and urban and regional studies.

1 Introduction Enrico Marcelli, Colin C. Williams, and Pascale Joassart

Informal work in developed nations According to one recent conventional estimate (Schneider, 2006), informal economic activity is most prevalent in “developing” and “transition” nations (approximately 40 percent of official gross domestic product), less likely to occur in “Communist” countries (22 percent of GDP), and least probable in “developed” nations (16 percent of GDP)—like those located in Europe and the United States and the focus of this book. These recent estimates reflect the widely held belief among mainstream economists that informal work dissipates or disappears as nations or areas within them develop economically. That is, informal exchanges and work have historically been located conceptually in economically developing nations and, very recently, in relatively poor areas of “developed” nations (Williams and Windebank, 1998). The fact that many scholars have also linked such informal economic activities primarily to lower-skilled and lower-income workers regardless of country or place of residence should, consequently, come as no surprise. More formally, the macroeconomic evidence summarized in the first paragraph is consistent with conventional conceptions of informal work found in rural-tourban migration studies within various developing nations conducted between the 1950s and 1970s (Fei and Ranis, 1964; Harris and Todaro, 1970; Lewis, 1954). Despite its merits (e.g., migration of rural peasants to urban areas is stimulated by the opportunity to work informally for relatively higher wages until they can obtain even higher-paying formal work), and as the contributing authors of this volume show, this line of research has little geographic, temporal, or theoretical connection to labor market processes found within relatively developed European and North American countries today. Yet the dominant analytical perspective underpinning informal labor markets in developed nations continues to emphasize the lack of opportunity for formal employment and associated profits as the motivating factor for informal work. Only those seeking pecuniary gain—and most notably lower-wage, ethno-racial minority workers—are assumed to engage in informal labor market activities. International migrants in particular are presumed to pack their bags and head toward metropolitan regions in search of higher employment compensation

2  Enrico Marcelli, Colin C. Williams, and Pascale Joassart for themselves and their families or to start a business through informal means (Marcelli and Heer, 1997; Marcelli, Joassart, and Pastor, 1999). Though the hope of pecuniary gain frequently contributes to employment and migration decisions, few today question the notion that monetary factors alone cannot explain these practices. For instance, personal ties to one’s family and friends within various communities shape economic opportunities and outcomes (Marcelli and Cornelius 2001; Massey et al., 1993). Household composition and dynamics and ethnic and gender identities may also be very important. In addition, the political and economic context and associated attitudes toward work and the state influence the type of activities in which people engage. Yet the non-pecuniary motivations for working informally have so far received very little scholarly attention. Recognizing that economic activity is socially and culturally embedded, this book represents a first effort to understand informal work in developed nations by bringing together various empirical studies of informal work in different geographic contexts. Our goals are to emphasize the importance of placing informal work within its socioeconomic context, challenge the mainstream conceptualization of the economy as the domain of monetary transactions driven by universal laws and principles, and provide a more nuanced perspective on informal work.

Putting informal work in its place According to neoclassical economics, economic behaviors, such as working informally, are the consequence of an abstract individual’s optimizing mental calculus. One works informally only if no better-paid opportunities exist. This is the so-called universalistic or nomothetic view that seeks, and often identifies, one major cause of working informally (Carrier, 2005). In contrast, there are scholars who rely more heavily on contextualized empirical evidence than on psychological theories when trying to understand why some work informally and others do not. This approach emphasizes the need to observe interactions between personal characteristics (e.g., cultural and pecuniary motivations) and relatively heteronomous contextual-level circumstances (Illich, 1973) when investigating multiple possible determinants of informal work. In other words, informal work must be placed within its social, economic, cultural, and political context to understand its particular nature and dynamics. This latter contextual, particularizing, or idiographic view informs the research presented throughout this volume. For example, the economic and political context in post-socialist Europe (Chapter 4) differs from that of Italy (Chapter 8) or Canada (Chapter 13), creating unique nation-specific spaces for informal work. Similarly, the cultural practices of work vary between states, regions, and rural or urban areas (Chapter 7 and Chapter 12). Gender, race, and ethnicity, whose meanings are often locally defined, also play an important role in shaping informal work (Chapters 6, 9, and 11).

Introduction  3

Rethinking “the economy” Modernist thought regarding “the economy” has been dominated by dichotomies between market and non-market, formal and informal, developed and undeveloped, monetary and non-monetary economies, with the economy being increasingly defined by the former terms. As a result, until very recently, informal work has been seen as an anomaly destined to disappear with time, as economic growth continues its transformative, universalizing, and inevitable global expansion. Yet, there is a growing recognition that the economy can take multiple forms (GibsonGraham, 1996) and that these differences are not anomalies but instead are rooted in the cultural and institutional histories of places (Amin and Thrift, 2004). Economies, including informal work performed within them, can be distinguished based on a variety of characteristics or continuums that are developed throughout this volume and challenge simple informal–formal sector dichotomies and their theoretical underpinnings. First, informal work can be relatively self-regulated (autonomous) or otherregulated (heteronomous). For instance, deciding whether to trim your neighbor’s hedges when trimming your own or asking your babysitter to watch your neighbor’s children and your own at your house while you enjoy an evening out together are choices relatively free of explicit exogenous influence. So is your neighbor’s agreement to return the favor(s) with cash or services from his or her field of expertise (e.g., tax advice; Chapter 7). In contrast, informal work among lowerskilled immigrants tends to be more heavily regulated by others and exploitative (Chapters 5, 9, 10, and 11). However, there may exist some degree of autonomy and flexibility associated with these jobs. Day laborers in various metropolitan areas of the United States, for instance, are not required to show up at a hiring site at a specific time each morning but, if they do not, they are significantly less likely to obtain work that day. Day laborers are in this sense, even if they have fewer opportunities for other forms of work, relatively autonomous (Chapter 9). A second continuum, in addition to the autonomous–heteronomous one, is the proportional amount of one’s work that is undertaken formally and informally. As for the first continuum, here the strict formal–informal sector dichotomy of the early development economists and some contemporary commentators is rejected. For instance, many informal workers hold formal jobs or do so intermittently. Indeed, under certain circumstances, having a formal job may increase the probability of working informally as well (Chapter 13). Another continuum relates to the degree of monetization of informal work. The economy is often conceptualized as monetary exchanges, relegating informal work to the non-monetary sphere of barter and other forms of exchange. Yet, many formal and informal transactions do not involve cash or coin (e.g., checks, credit card, transfer payments). Moreover, the incentive or motives of selecting certain types of work often go beyond monetary rewards, including status, a sense of belonging, and flexibility. For example, the reciprocity associated with informal work can take the form of neighborly, community, or cultural admiration.

4  Enrico Marcelli, Colin C. Williams, and Pascale Joassart Leading contributors to this book have sought to move beyond a crude and simplistic reading of informal work and find that the nature and practice of informal work vary from place to place. By doing so, the authors bring together and build upon emerging evidence that has begun to challenge purely individualistic market-centered and economizing readings of informal work and the economy in general (Cornuel and Duriez, 1985; Jensen, Cornwell, and Findeis, 1995; Nelson and Smith, 1999; Williams and Windebank, 2001).

Outline and major themes This volume is organized in three parts. The first, Historical and Methodological Foundations, begins with an overview of the changing conceptualizations of informal work since the early 1970s when the topic began to receive considerable academic attention. Specifically, in Chapter  2, economic geographer Colin Williams distinguishes two views of informal work, emphasizing processes of economic modernization and globalization. Those who tend to use the term modernization see informal work as a pre-capitalist mode of production and thus assume it disappears with the geographic and temporal expansion of formal market activity. Informal work in modern societies like those studied in this volume, that is, in Europe and North America, should be a thing of the past. Alternatively, those who prefer the term globalization rather than modernization see a rise in informal work accompanying the worldwide expansion of neo-liberal markets and characterize it as exploitative and especially concentrated among ethno-racial minorities in global cities. The important point here is that both perspectives often seek to outline simple universalistic explanations (theories) of informal work without acknowledging that the same socioeconomic conditions can lead to different outcomes or that different socioeconomic conditions can stimulate similar outcomes. The presence of a large number of relatively small firms, for instance, has sometimes been used as a proxy for the level of informal economic activity. Yet it may be only in combination with relatively high tax rates that this provides an acceptable estimate of informal economic activity. In his chapter entitled The Changing Conceptualizations of Informal Work in Developed Economies, Williams illustrates how simplistic notions of what constitutes informal work can lead to very misleading estimates concerning its prevalence. He then argues that embracing such simplistic conceptualizations can also lead to incorrect readings of its character. Those who embrace the globalizing thesis, for instance, assume that informal work is organized, exploitative, and undertaken solely for pecuniary gain. However, sometimes informal work is organized and not exploitative and, furthermore, it may exhibit the same kind of heterogeneity and hierarchy extant in formal employment arrangements. The analytical turn beginning in the early 1990s toward viewing informal work as entrepreneurial and as the quintessential form of market competition (de Soto, 1989), for example, emphasizes the positive aspects of working informally (e.g., skill development, capital accumulation, local growth) but has generally failed to consider whether such work is stimulated by cultural factors in addition to profit-seeking motives. Why is it that some residing

Introduction  5 in Lima, Peru during the 1980s embraced “el otro sendero” while many others exposed to the same socioeconomic conditions did not? Regardless of the reasons, most of the chapters in this book emphasize moving beyond simple market explanations such as profit seeking. This sociocultural or idiographic intellectual stance should not be interpreted or—worse—dismissed as only an ideological left response to neo-liberal, libertarian, or neoclassical economics scholarship on informal work, however. The authors of this volume represent several disciplines with varying levels of attachment to reductionist approaches, and one thing that unites them is their commitment to empirical evidence. The third chapter, by economic geographer Pascale Joassart, illustrates the close connection between conceptualizations of informal work outlined in Chapter 2 and how scholars have attempted to measure informal work. The more traditional indirect macroeconomic approaches are aligned with the notion that informal work is done to avoid government regulation and to maximize pecuniary gain. More recent direct and indirect microeconomic approaches that survey informal workers (or subgroups of them as in the case of the method employed by Marcelli in Chapter 11, Meléndez et al. in Chapter 9, Windebank and Williams in Chapter 6, and Fortin and Lacroix in Chapter 13) are more empirically driven and, in addition to obtaining estimates of the number of informal workers, also produce information about their characteristics and effects on other workers. The author of Chapter 3 concludes that these more recent efforts among students of informal work, despite their great appeal, need to be more firmly grounded theoretically. Parts II and III of the volume are organized by region—the former including five chapters on European nations and the latter featuring five on Canada and the United States. These chapters may be more usefully introduced, however, by linking them by their major contributions rather than in the order they are presented. The most significant finding of many of the contributing authors—both in Europe and North America—is that much informal work is socio-culturally, as much as economically, motivated. For instance, as reported in Chapter  12 by sociologists Tim Slack and Leif Jensen, a study of informal work in nonmetropolitan Pennsylvania uncovers that informal work is by no means always underpinned by the motive of seeking monetary gain. They find in some 61 percent of all reported cases of informal work in this rural area that the chief rationale was to help neighbors. Similarly, evidence suggesting that neighbors exchange with one another for reasons unrelated to profit seeking has been steadily emerging in affluent and deprived urban and rural English localities. For example, in Chapter 7, Colin Williams finds that market-like income-oriented informal work, although the predominant form of informal work in affluent localities, constitutes a relatively small proportion of all informal work in deprived areas. In the latter areas, he finds that the bulk of informal work is composed of paid work conducted by friends, neighbors, and kin primarily for redistributive and community-building purposes. Adrian Smith (Chapter  4), Birgit Pfau-Effinger and Slađana SakaČ Magdalenić (Chapter 5), and Simone Ghezzi (Chapter 8) also provide evidence of the socio-cultural origins of informal work and its interaction with formal firms in post-Soviet Europe, Germany, and Italy. And Chapter 9, by Meléndez, Theodore,

6  Enrico Marcelli, Colin C. Williams, and Pascale Joassart and Valenzuela, focusing on New York City, illustrates important links between informal day laborers and formal construction firms, suggesting again that simple dichotomies are incapable of providing a thorough understanding of informal economic activity. Four chapters pay particular attention to the geography of informal work and its regulation. As noted earlier concerning neighborly exchange, and contrary to conventional wisdom, in Chapter 7 Williams also shows that informal work driven by economic motives is more likely in affluent rather than poorer areas of England. In poorer areas, community expectations are more important motivations. Chapter 11 provides corroborating evidence that informal work is more likely in more economically active areas in California. Specifically, economic demographer Enrico Marcelli finds that informal workers are more likely to be living in nonmetropolitan areas or smaller metropolitan areas compared to larger ones. Bernard Fortin and Guy Lacroix (Chapter 13) analyze data from two surveys in Canada to offer additional evidence suggesting that geography matters when trying to understand the level and characteristics of informal work. They also discuss the role of language as a barrier to migration and how this, combined with relatively higher tax laws, stimulated informal work. Jordon Rickles and Paul Ong further detail the importance of socio-spatial context for understanding informal work arrangements in California (Chapter 10) by investigating how work regulations are enforced differently across localities. Last, two chapters intimate that gender—a socio-culturally defined characteristic—is also a necessary variable when attempting to understand the motivations for and consequences of informal work. Specifically, in Chapter 6, Windebank and Williams, using the same data employed in Chapter 7, argue that it is now becoming increasingly apparent that the market-centered conceptualization of informal work is not only a reading influenced by class but is heavily gendered. Though market-centered readings of informal work are often in keeping with how men experience informal work, they are largely inappropriate when it comes to reporting women’s experiences in England. This finding is reiterated by Fortin and Lacroix in Chapter 13 regarding their study in Canada. By bringing together these studies of informal work from interdisciplinary perspectives and in a wide range of contexts, the intention in this book is to move toward a broader and deeper understanding of the nature of informal work in developed economies by challenging market-centered readings with empirical evidence. Throughout this volume, therefore, some of the leading authors that have pioneered such re-readings of the character of informal work are brought together for the first time to share their ideas on the meaning of this important socioeconomic sphere. In so doing, and as will be returned to in the final chapter, we hope to stimulate a significant step forward in our knowledge of this realm of economic life.

Introduction  7

Bibliography Amin, Ash, and Nigel Thrift. 2004. Introduction. In The Blackwell Cultural Economy Reader, edited by Ash Amin and Nigel Thrift. Malden, MA: Blackwell Publishing Ltd. Carrier, James G. 2005. Introduction. In A Handbook of Economic Anthropology, edited by J. G. Carrier. Northampton, MA: Edward Elgar. Cornuel, D., and B. Duriez. 1985. Local exchange and state intervention. In Beyond Employment: Household, Gender and Subsistence, edited by N. Redclift and Mingione. Oxford: Blackwell. Dressler, William W. 2007. Cultural dimensions of the stress process: Measurement issues in fieldwork. In Measuring Stress in Humans: A Practical Guide for the Field, edited by G. H. Ice and G. D. James. New York: Cambridge University Press. Easterlin, Richard A. 1996. Growth Triumphant: The Twenty-first Century in Historical Perspective. Ann Arbor, MI: University of Michigan Press. Fei, John C. H., and Gustav Ranis. 1964. Development of the Labor Surplus Economy: Theory and Policy. Homewood, IL: Richard A. Irwin, Inc. Gibson-Graham, J. K. 1996. The End of Capitalism (As We Knew It). Cambridge, MA: Blackwell. Harris, John R., and Michael P. Todaro. 1970. Migration, unemployment and development: A two-sector analysis. American Economic Review 60(1):126–142. Illich, Ivan. 1973. Tools for Conviviality. New York: Harper & Row, Publishers. Jensen, L., G. T. Cornwell, and J. L. Findeis. 1995. Informal work in nonmetropolitan Pennsylvania. Rural Sociology 60(1):91–107. Kuznets, Simon. 1966. Modern Economic Growth. New Haven, CT: Yale University Press. Lewis, Arthur W. 1954. Economic development with unlimited supplies of labor. Manchester School of Economic and Social Studies 22:139–191. Marcelli, Enrico A., and W. A. Cornelius. 2001. The changing profile of Mexican migrants to the United States: New evidence from Southern California. Latin America Research Review 36(3):105–131. Marcelli, E. A., and D. M. Heer. 1997. Unauthorized Mexican workers in the 1990 Los Angeles County labour force. International Migration 35(1):59–83. Marcelli, E. A., M. Pastor, Jr, and P. M. Joassart. 1999. Estimating the effects of informal economic activity: Evidence from Los Angeles County. Journal of Economic Issues 33(3):579–607. Massey, Douglas S., Joaquin Arango, Graeme Hugo, Ali Kouaouci, Adela Pellegrino, and J. Edward Taylor. 1993. Theories of international migration: A review and appraisal. Population and Development Review 19(3):431–466. Nelson, M. K., and J. Smith. 1999. Working Hard and Making Do: Surviving in Small Town America. Los Angeles: University of California Press. Schneider, Fredrich. 2006. Shadow Economies of 145 Countries All Over the World: What Do We Rally Know? Paper presented in the Brookings Institution conference entitled “Hidden in Plain Sight: Micro-economic Measurement of the Informal Economy,” London, September 4–5, 2006. Williams, Colin C., and Jan Windebank. 1998. Informal Employment in the Advanced Economies: Implications for Work and Welfare. New York: Routledge. ——2001. Beyond profit-motivated exchange: Some lessons from the study of paid informal work. European Urban and Regional Studies 8(1):49–61.

Part I

Historical and methodological foundations

2 The changing conceptualizations of informal work in developed economies Colin C. Williams

Introduction The aim of this chapter is to chart how conceptualizations of work in the informal economy have shifted over time so as to help the reader situate the ways in which this volume advances knowledge. To do this, I commence by examining the literature on the variable magnitude of informal work (e.g., Feige, 1990; Fortin et al., 1996; Leonard, 1998; Renooy, 1990; Thomas, 1999; Williams and Windebank, 1994, 1995, 1998, 2001a). This will reveal how the earlier literature was dominated by two universal generalizations, namely the “modernization thesis” that viewed such work as slowly disappearing and the “marginality thesis” that depicted this work as concentrated among marginalized populations. In recent decades, however, it will be shown that there has been an accumulation of evidence to refute these generalizations. Indeed, in much of the recent literature, the opposite has been frequently argued. There has been a tendency to depict informal work as universally growing and always and everywhere concentrated in relatively affluent populations. In this chapter, however, there is revealed to be gradually emerging a growing appreciation that a fuller understanding will derive only from a more socially, culturally, and geographically embedded consideration of this sphere. The second section of the chapter then turns to how conceptualizations of the nature of informal work have shifted over time. This will reveal that although the representation of informal work as a form of low-paid, exploitative, organized employment conducted for profit-motivated purposes on the part of both the supplier and employer (e.g., Castells and Portes, 1989; De Soto, 1989; Matthews, 1983; Sassen, 1989) has proven remarkably resistant to change, especially in the media and political discourse, this is slowly and steadily beginning to be deconstructed, at least in the academic literature. Just as there is a move away from universal generalizations concerning the extent of informal work, therefore, a similar process is starting to occur also with regard to the nature of such work. The ways in which it is being recognized that depicting informal work as a form of exploitative organized employment oversimplifies and obscures the heterogeneous contemporary character of informal work will be outlined along with those aspects of its character that have so far gone relatively unquestioned.

12  Colin C. Williams In so doing, this chapter will highlight the specific ways in which this book takes forward understanding of the nature of informal work.

Conceptualizing the extent of informal work Studies of informal work have addressed the issue of its magnitude in a number of ways. On the one hand, whether it is growing or declining over time has been investigated. On the other hand, how its magnitude varies either on a crossnational basis, regionally or locally, by socioeconomic group or by gender, has been considered. Here, each of these sets of literature is reviewed to unpack the changes in how informal work is conceptualized.

Conceptualizing changes over time in the size of the informal sphere On the issue of whether it is growing or declining over time, two opposing perspectives can be identified, namely what I here call the modernization thesis that views informal work to be in long-term decline and the globalization thesis that asserts it to be growing. For adherents to the modernization thesis, there is seen to be a natural and inevitable shift toward the formalization of goods and services provision as societies become more “advanced.” All economies are considered to witness the same linear and unidimensional trajectory of economic development whereby informal work steadily disappears and is replaced by formal goods and services provision. To see the dominance of this conceptualization of economic development, one has only to consider how it lies at the heart of the view that different nations are at varying stages of economic development. The degree to which economies are formalized, that is to say, is frequently taken as the measuring rod used to define “third world” countries as “developing” and “first world” nations as “developed.” From the viewpoint of the modernization thesis, in consequence, the existence of supposedly traditional informal activities is taken as a manifestation of “backwardness,” and it is assumed that such practices will disappear with economic progress (modernization). In this conceptualization, informal work is primitive or traditional, stagnant, marginal, residual, weak, and about to be extinguished. It is a leftover of pre-capitalist formations, and the inexorable and inevitable march of modernization will eradicate such work. This view of informal work as some kind of traditional outdated type of work contract that is in long-term terminal decline and will vanish with the pursuance of modernization, however, has come under considerable criticism in recent years, not least owing to the recognition that in the contemporary era, it is growing rather than declining (Castells and Portes, 1989; International Labour Office, 2002; Sassen, 1997; Williams, 2002, 2004a). Rather than depict informal work as some leftover or a “a mere ‘lag’ from traditional relationships of production” (Castells and Portes, 1989: 13), an alternative conceptualization is that which reads informal work as a new form of advanced capitalism that is a direct product of the neo-liberal project of

The changing conceptualizations of informal work  13 deregulation taking hold. This is argued both by neo-liberals who celebrate such a trend and by some heterodox economists opposed to the exploitation inherent in such a mode of production (e.g., Amin, 1996; Castells and Portes, 1989; International Labour Office, 2002; Sassen, 1997; Ybarra, 1989). The argument by both camps has been that the processes associated with economic globalization are causing an expansion of informal work. In this economic reading, economic globalization refers to a dangerous cocktail of deregulation and increasing global competition that produces an expansion of informal work (e.g., Castells and Portes; International Labour Office; Sassen, 1997). This form of employment is thus seen to have emerged as a new facet of contemporary capitalism. Particularly prevalent in the United States (but less so in Europe), this globalization thesis views such work to be especially prevalent in global cities and among immigrant/ ethnic minority populations (e.g., Marie, 1999, 2000; Ross, 2001; Sassen, 1991, 1994a,b, 1996, 1997; Snyder, 2003; Sole, 1998; Waldinger and Lapp, 1993). As will be shown throughout this volume, however, although replacing the modernization thesis with the globalization thesis moves toward a more accurate portrayal of the current state of affairs, great care needs to be taken. This is because first, it simply replaces one universal generalization of the direction of change with another and, second, it ascribes a universal logic to the processes supposedly under way. This is ultimately misleading. On the one hand, informal work is not always and everywhere growing. Locations can be identified where the size of the informal sphere is either remaining relatively static relative to the formal economy or is even declining (e.g., Williams, 2004a). On the other hand, there is growing evidence that the informal sphere is not everywhere solely a product of neo-liberal economic globalization. Indeed, beyond this economic narrative, more embedded understandings are emerging that argue that a fuller understanding will derive only from a socially, culturally, and geographically embedded consideration of this sphere (e.g., Renooy et al., 2004; Williams and Windebank, 1998). In this volume, in consequence, the intention is to show that once one starts unpacking the range of different processes taking place in various locations, it starts to become apparent that universal generalizations about the trajectory of development and its causes need to be replaced by more embedded understandings if a fuller comprehension is to be achieved.

Conceptualizing how its magnitude varies across populations Measuring and explaining how the magnitude of informal work is changing over time, however, has not been the only focus when considering issues regarding the extent of such work. There has been, in addition, a large volume of literature examining how the size of the informal sphere varies across populations. Economists have explored the cross-national variations in its size (e.g., Feige, 1990, 1999; Fortin et al., 1996; Friedman et al., 2000; International Labour Office, 2002; Ott, 1999; Schneider, 2000, 2001; Thomas, 1999), geographers have analyzed the local and regional variations in its magnitude (e.g., Jensen et al., 1996; Renooy, 1990; Williams and Windebank, 1998), and sociologists and

14  Colin C. Williams political scientists have unpacked how the level of such exchange varies across socioeconomic groups (e.g., Leonard, 1994, 1998; Pahl, 1984) or by gender (e.g., Cornelius, 1992; Fernandez-Kelly and Garcia, 1989; Hoyman, 1987; Leonard, 1994; McInnis-Dittrich, 1995). The earlier literature on how the size of the informal sphere varies across all of these population types was dominated by the marginality thesis, which holds that informal work is concentrated among marginalized populations, whether these be poor nations, deprived localities and regions, lower-income socioeconomic groups, or women (e.g., Castells and Portes, 1989; De Soto, 1989; International Labour Office, 2002; Lagos, 1995; Maldonado, 1995; Rosanvallon, 1980). For some two decades or so, a Popperian-like mode of enquiry ensued. Numerous studies, that is, principally subjected this thesis to critical evaluation to either corroborate or refute it. Here, the results are reviewed. Starting with the economists and their cross-national studies, a long-standing interest has been to decipher the variable size of informal work in different nations, particularly whether it is concentrated in poorer nations (e.g., Dallago, 1990; Feige, 1990; Feige and Ott, 1999; Pedersen, 1998; Schneider, 2001; Schneider and Enste, 2000). On the whole, the common finding has been that although such work is more substantial in poorer nations, it is by no means confined to such countries. Rather, its presence and even growth is seen as ubiquitous (e.g., International Labour Office, 2002; Pedersen, 1998; Schneider, 2001). On the whole, therefore, these economistic cross-national comparative surveys have confirmed the marginality thesis that such work is concentrated in poorer nations, even if there is now widespread recognition that it is prevalent in every corner of the globe. When its distribution among various socioeconomic groups has been subject to investigation, however, a very different conclusion has been reached. For the sociologists and sometimes economists and geographers considering this issue, the widespread conclusion has been that the marginality thesis does not hold (e.g., Fortin et al., 1996; Pahl, 1984; Williams and Windebank, 1998). On this issue, therefore, there has started to be a significant change of opinion in the last two decades. During the 1970s and 1980s in particular, and stretching into the 1990s, it was commonly held that informal work was concentrated among deprived populations (e.g., Blair and Endres, 1994; Gutmann, 1978; Parker, 1982; Robson, 1988; Rosanvallon, 1980; Stauffer, 1995). A multitude of studies of the socioeconomic distribution of informal work, however, have countered this popular conceptualization concerning who engages in informal work. The widespread finding of direct surveys conducted throughout the developed nations has been that informal work chiefly benefits those already in employment. This has been found to be the case in France (Barthe, 1988; Cornuel and Duriez, 1985; Foudi et al., 1982; Tievant, 1982); in Germany (Glatzer and Berger, 1988; Hellberger and Schwarze, 1987); in Greece (Hadjimichalis and Vaiou, 1989); in Italy (Cappechi, 1989; Mingione, 1991; Mingione and Morlicchio, 1993; Warren, 1994); in the Netherlands (Koopmans, 1989; Van Eck and Kazemeir, 1990; Van Geuns et al., 1987); in Portugal (Lobo, 1990b); in

The changing conceptualizations of informal work  15 Spain (Ahn and Rica, 1997; Benton, 1990; Lobo, 1990a); in the United Kingdom (Economist Intelligence Unit, 1982; Howe, 1990; Morris, 1994; Pahl, 1984; Warde, 1990; Williams, 2001, 2004a,b; Williams and Windebank, 1999, 2001a– e, 2002a, 2003); and in North America (Fortin et al., 1996; Jensen et al., 1996; Lemieux et al., 1994; Lozano, 1989). On the whole, therefore, the marginality thesis has been largely refuted so far as the socioeconomic distribution of such work is concerned. It is similarly the case that although earlier studies often assumed that informal work was concentrated in deprived regions and localities, such a view has become much less common recently. Even if some studies continued to assert that such work was concentrated in lower-income areas such as deprived inner-city localities (e.g., Blair and Endres, 1994; Elkin and McLaren, 1991; Haughton et al., 1993; Robson, 1988) and poorer peripheral regions (e.g., Button, 1984; Hadjimichalis and Vaiou, 1989), the overwhelming finding of the detailed studies conducted over the past two decades has been that this is not the case. Instead, it has been found that people in lower-income areas conduct less informal work than those in more affluent localities. This has been identified in the Netherlands (e.g., van Geuns et al., 1987); in Britain (e.g., Bunker and Dewberry, 1984; Williams and Windebank, 2001a); in France (e.g., Barthe, 1985; Cornuel and Duriez, 1985; Foudi et al., 1982); and in Italy (e.g., Mattera, 1980, 1985; Mingione, 1991; Mingione and Morlicchio, 1993). It is also the case that the view in the marginality thesis about the gendering of informal work has started to come under some pressure. The vast majority of studies have found that men do a greater proportion of such work than women (e.g., Van Eck and Kazemeier, 1989; Fortin et al., 1996; Lemieux et al., 1994; MacDonald, 1994; McInnis-Dittrich, 1995; Mingione, 1991; Mogensen, 1985; Pahl, 1984; Renooy, 1990; Vinay, 1987), although the relative gap is on the whole found to be quite small. Nevertheless, even if the findings of the majority of studies in developed nations have refuted the marginality thesis, this is by no means a universal finding. A host of studies display that in some circumstances the marginality thesis is applicable (e.g., Kesteloot and Meert, 1999; Leonard, 1994, 1998). As a result, a more embedded understanding has begun to emerge. This recognizes that although in most circumstances informal work is concentrated among the affluent, there are particular economic, institutional, cultural, and geographical circumstances where this does not hold (e.g., Kesteloot and Meert, 1999; Mateman and Renooy, 2001; Renooy et al., 2004; Williams and Windebank, 1995, 1998). Rather than simply seek to introduce a wider range of variables (e.g., social, cultural, and environmental factors) when explaining the size of the informal sphere in a particular population, this literature has instead argued that it is how various factors combine together in particular circumstances, rather than individual causal factors per se, that produce an informal sphere (e.g., Mateman and Renooy, 2001; Renooy et al., 2004; Williams, 2004a; Williams and Windebank, 1998). The existence of a plethora of very small enterprises in a locality or the increase in the general rate of taxation, for example, is thus no longer seen as a proxy indicator of a sizeable

16  Colin C. Williams informal sector but, rather, it is whether a host of other factors also exist and how these factors interrelate that matter. This is reflected in the call of Williams and Windebank (1998: 46) to investigate “the ways in which economic, social, institutional and environmental conditions combine in multifarious ‘cocktails’ in different places to produce specific local outcomes.” Reviewing the vast literature on the various reasons for the existence of the informal sphere, they identify that it is influenced by the following determinants: • • • • • • • • • • • • • • • • • • • • • • • •

Economic regulators Level of unemployment Level of affluence Duration of unemployment Industrial structure Level of subcontracting Tax and social contributions Social regulators Socioeconomic mix of area Social cohesiveness of population Existence of shared “political” values Local and regional cultural traditions, social mores and moralities The nature of social networks Education levels Institutional regulators Welfare benefit regulations Taxation levels Labor law State interpretation and enforcement of rules and taxation regulations Corporatist agreements Environmental regulators Size and type of settlement Type and availability of housing Access to formal goods and services

More recently, other models have emerged that adopt slightly different typologies of the factors that combine together to explain the size of the informal economy (e.g., Mateman and Renooy, 2001; Renooy et al., 2004). Renooy et al (2004), for example, divide the factors that “mix” together as follows: • • • • • •

Market factors The labor market Goods and services market The information market Institutional relations Degree of trust in government

The changing conceptualizations of informal work  17 • • • • • • • • •

Degree of inclusion in society Strength of bureaucracy Tax level Characteristics of individuals/households Stage in life cycle Employment status Income situation Available skills Level of education

These various models cover many of the same determinants of the size of the informal sphere even if they aggregate them together in different ways. What is important to note here is not so much the individual factors and how they are aggregated together but rather the emerging understanding that individual factors per se are no longer seen to inevitably lead to a higher and/or lower level of informal work. Instead, it is becoming much more widely accepted that it is how factors combine together in different circumstances that matter. As Renooy et al. (2004: 9) put it, There are no general, universal causes for the existence and development of an informal economy. It is brought about by a complex interplay between various variables that varies between countries. For example, to assert that high taxation rates cause informal work is not everywhere and always the case. High taxation will not always result in the same outcome (e.g., high levels of informal work). If there is a lack of trust in government and little “buying into” the necessity of taxation for social cohesion and inclusion in a society, higher taxes might lead to a growth in informal work. Where trust in government is higher and there is awareness of the benefits of taxation for social cohesion, an expansion of informal work will not necessarily result from higher tax levels, although this also depends on a host of other factors such as attitudes toward tax evasion, the labor and welfare laws, whether rules and regulations are strictly enforced, and so forth. In sum, it is now increasingly recognized that the size of the informal sphere cannot be explained using mono-causal explanations (e.g., higher tax levels, illiteracy, local cultural traditions) and that individual factors will have varying impacts depending upon how they interplay with the overall constellation of conditions in existence at any time in a particular place. The outcome is that there is emerging a much more embedded understanding of the size of the informal sphere that has not only moved away from the use of simple mono-causal economic narratives and toward a host of economic, cultural, social, and geographical explanations but that recognizes that it is how these conditions combine together in any time and/or place that produces a large/small and growing/declining informal sphere.

18  Colin C. Williams

Conceptualizing the nature of informal work If there has been a concerted shift toward adopting more embedded understandings of the variable magnitude of the informal sphere, such an approach has been far less prevalent when contemplating the character of work in the informal economy. It will be here revealed that representations of its nature have remained grounded in a rather simplistic portrayal more reflective of popular but untested assumptions than of in-depth academic research. In a vast swathe of previous literature, that is, such work has been assumed to be composed of exploitative organized forms of informal employment conducted for the purpose of monetary gain. Such a representation of informal work, for example, is clearly depicted in many accounts of a political economy persuasion that propounds the globalization thesis discussed earlier. Viewing such work as a form of organized exploitative employment conducted by a weak and unprotected workforce for unscrupulous employers reinforces their economistic reading that this endeavor is a new form of work emerging in late capitalism as a direct result of economic globalization (a dangerous cocktail of deregulation and increasing global competition), which is encouraging a race-to-the-bottom. In this reading, in consequence, informal workers are seen to share characteristics subsumed under the heading of “downgraded labor.” They receive few benefits and low wages and have poor working conditions (e.g., Castells and Portes, 1989; Gallin, 2001; Portes, 1994; Sassen, 1997; Ybarra, 1989). In this volume, however, many of the leading commentators have been brought together who have sought to move beyond this crude and simplistic reading of work in the informal economy. Here, and to show not only how a more sophisticated reading of this work is being developed but how this book advances knowledge about its character, the various steps that have been taken to reread such work are reviewed so as to show where the literature stands at present and how this volume pushes forward knowledge on work in the informal economy.

Toward the conceptualization of a segmented informal labor market To get to grips with how the character of informal work has been advanced, the first step is to recognize that the depiction of such work as being always and everywhere “organized” in character and a peripheral form of exploitative employment positioned at the bottom of a hierarchy of types of employment has been transcended. For a decade or so now, there has been an ongoing attempt to disaggregate the various forms of informal work (and latterly, to more fully integrate such a practice with formal employment). The principal way this has been achieved is by analysts identifying a continuum of types of informal work, ranging from “organized” varieties of informal employment conducted by employees for a business that undertakes some or all of its activity informally at one end of the spectrum to more “individual” or “autonomous” forms of informality at the other (for a review, see Williams and Windebank, 1998). These latter autonomous

The changing conceptualizations of informal work  19 activities cover forms of informal employment conducted by the self-employed concealing a proportion, or indeed all, of their earnings and casual one-off jobs undertaken on an informal basis, such as for a neighbor, friend, or relative. The outcome of identifying this continuum of types of informal work has been that not all such informal endeavor is now viewed as low-paid and exploitative and undertaken by marginal groups. Besides forms of organized exploitative informal employment, such as in labor-intensive small firms with low levels of capitalization, utilizing old technology and producing cheap products and services for local markets and export, which involve on the whole marginal populations engaging in low paid exploitative activity (e.g., Lin, 1995; Sassen, 1991), other forms of informal work have been identified. There are organized forms of informal work that are autonomous in orientation, in highly capitalized small firms that are modern and use high-technology equipment to produce higherpriced goods and services and whose informal employees are well paid, employ higher skills, and have more autonomy and control over their work, with relations between employers and employees based more upon cooperation than domination (Benton, 1990; Cappechi, 1989; Warren, 1994). There are also forms of individual informal work that can be relatively well recompensed. Not all types of informal work, therefore, are now seen as low-paid and exploitative in character. The result is that rather than view informal work as an exploitative form of low-paid employment sitting at the bottom of a hierarchy of types of formal employment, it is now much more common for informal work to be discussed as a heterogeneous labor market with a hierarchy of its own. In other words, just as there is a segmented formal labor market, a segmented informal labor market is also seen to exist. As Williams and Windebank (1998: 32–33) put it, [E]xisting alongside the formal labor market is a heterogeneous informal labour market composed of very different groups of people engaged in widely varying types of informal employment for diverse and contrasting reasons and receiving varying rates of pay. This informal labour market, to adopt a simplistic dual labour market model, ranges from ‘core’ informal employment which is relatively well-paid, autonomous and non-routine and where the worker often benefits just as much from the work as the employer, to ‘peripheral’ informal employment which is poorly paid, exploitative and routine and where the employee does not benefit as much as the employer. Just as in the formal labour market, moreover, there exist those excluded from even the most exploitative peripheral informal employment. Indeed, recently, it has been argued that this recognition of relatively wellpaid forms of autonomous informal work necessitates a rethinking of whether it is always appropriate to focus upon the negative attributes associated with the informal sector (Jones et al., 2006; Williams and Round, 2007). Identifying that autonomous or self-employed forms of informal work are conducted not only by the established self-employed who conduct either all or a proportion of their business off-the-books but by fledgling entrepreneurs who use the informal sector

20  Colin C. Williams as a start-up strategy, it has become increasingly common to highlight some of the positive attributes of the informal sector, such as how it acts as a school for entrepreneurs and/or seedbed for entrepreneurship (e.g., Bàculo, 2006; Evans et al., 2004; Sepulveda and Syrett, 2007; Small Business Council, 2004; Williams, 2004a,c, 2006). The outcome is that this identification of self-employment and entrepreneurship in the informal sector has started to result in some viewing this sphere more as an asset that needs to be harnessed rather than an obstacle to economic development (e.g., Global Employment Forum, 2001; International Labour Office, 2002; Small Business Council, 2004; Tabak, 2001; Williams, 2004a,c, 2006). Despite its becoming much more common in the literature on informal work to distinguish between its “organized” and “autonomous” varieties (e.g., Leonard, 2000; Maloney, 1999) and to conceptualize a heterogeneous labor market with a hierarchy of its own, however, little attempt has so far been made to consider whether the economic relations within which informal work takes place are always market-like and whether the motives of participants are universally profitmotivated.

Beyond market-centered readings of informal work In conventional discourse, to repeat, informal work has been viewed as conducted under economic relations akin to formal employment for the purpose of profit. This reading of informal work prevails whatever part of the world is studied (e.g., Castells and Portes, 1989; De Soto, 1989; Lagos, 1995; Lemieux et al., 1994; Matthews, 1983). So too does it pertain equally whether such work is viewed in a positive or negative light. For neo-liberals focusing upon the more autonomous micro-scale activities of petty entrepreneurs in both advanced and underdeveloped economies, such exchange is seen as a form of self-employment that informal laborers pursue as rational economic actors confronted by rules and regulations that are inherently unfair (De Soto, 1989; Matthews, 1983; Sauvy, 1984). For those of a structuralist persuasion focusing upon its organized forms, meanwhile, it is perceived as a form of exploitative employment that a weak and unprotected workforce is obliged to undertake for unscrupulous employers (Amin, 1996; Castells and Portes, 1989; Frank, 1996; Portes, 1994; Ybarra, 1989). Such a market-based reading even predominates when multiple types of informal work have been recognized ranging from organized to autonomous forms (e.g., Fortin et al., 1996; Jensen et al., 1995; Jordan, 1998; Jordan and Redley, 1994; Leonard, 1994, 1998; MacDonald, 1994; Pahl, 1984; Renooy, 1990; Williams and Windebank, 1998). This market-centered reading even applies, by and large, to whatever groups are considered as partaking in such work. Whether one accepts that such work is conducted by marginalized populations (e.g., Blair and Endres, 1994; Button, 1984; Castells and Portes, 1989; Elkin and McLaren, 1991; Gutmann, 1978; Kesteloot and Meert, 1999; Matthews, 1983; Portes, 1994; Rosanvallon, 1980) or recognizes that it can also be undertaken and even concentrated amongst

The changing conceptualizations of informal work  21 more affluent populations (e.g., Fortin et al., 1996; Jensen et al., 1995; Pahl, 1984; Renooy, 1990; Williams and Windebank, 1998, 2001a), such exchange is primarily viewed as embedded in profit-motivated market-orientated relations. This continuing dominance of a market-centered reading of informal work, however, is very much at odds with broader shifts in social enquiry with regard to monetary exchange. Across the social sciences, the cultural turn, by which is meant a growth of interest in culture and a turn away from economy (Ray and Sayer, 1999), has led to many new topics being investigated and new explanations for established issues. One issue that has recently benefited from some fresh thinking is monetary exchange. Although it is now widely accepted that “Monetary relations have penetrated every nook and cranny of the world and into almost every aspect of social, even private life” (Harvey, 1982: 373), numerous cultural theorists have begun to ask whether this seemingly endless and deeper intrusion of monetary relations always and necessarily marches hand-in-hand with the profit motive. Until now, the conceptualization that the only type of monetary exchange is that which is profit-motivated has run deep in most economistic discourse of both the neo-classical and Marxian variety (Ciscel and Heath, 2001; Harvey, 1989; Sayer, 1997). The general non-anthropological view of exchange is that it is always rational and profit-motivated: it is essentially market-like and that is what is important about exchange (see Carruthers and Babb, 2000; Crang, 1996; Crewe and Gregson, 1998; Davis, 1992; Lee, 2000a; Zelizer, 1994). As Sayer (1997: 23) argues, The commodity may be valued by the user for its intrinsic use value, but to the seller it is unequivocally a means to an end, to the achievement of the external goal of making a profit, and if it is unlikely to make a profit it will not be offered for sale. This reading of monetized exchange in economistic discourse is reinforced by a “formalist” anthropological tradition that sees exchange mechanisms in advanced economies as less “embedded” than those in pre-industrial societies. From this perspective, the idea is that there has been a separation of the “economy” from “culture,” resulting in exchanges in Western societies being “thinner,” less loaded with social meaning and less symbolic than traditional exchanges (see Mauss, 1966). Is it really the case, however, that the market has left no other nexus between people than naked self-interest and callous profit motivation? Or is such a perception a consequence of both how analysts look at exchange and where they look? For those influenced by the “cultural turn/s,” the intention in unpacking the nature of monetary exchange has been to de-center the notion that the only type of monetary exchange is that which is profit-motivated and market-like and in so doing, to re-embed the economic within the wider society (e.g., Byrne et al., 1998; Carrier, 1997; Crang, 1997; Crewe and Gregson, 1998; Gibson-Graham, 1996; Gibson-Graham and Ruccio, 2001; Kovel, 2002). As Carrier (1997) puts it, “the Market Idea” has played a central role in organizing the modern West’s

22  Colin C. Williams conceptual and normative universe. Indeed, and as Jessop (2002) explains, this image of monetized exchange as always profit-motivated serves the interests of both neo-liberals whose belief is that this must be met with open arms, and radical theorists who believe that this requires fierce resistance. The result is the perpetuation of a crude reading of monetized exchange as always market-like and profit-motivated. In recent years, however, there has been a concerted effort to transcend such abstract universal hues that view all monetary exchange as market-like and profit-motivated (e.g., Amin and Thrift, 2000; Crang, 1997; Crewe, 2000; Crewe and Gregson, 1998; Lee, 1997; Thrift and Olds, 1996). As Crewe and Gregson (1998: 41) incisively point out, “the major defect of such market-based models of exchange is simply that they do not convey the richness and messiness of the exchange experience” in the advanced economies. Drawing upon the earlier work of Polanyi (1944), the formalist anthropology approach that assumed price-fixing and profit-motivated markets to be the universal economic mechanism in Western economies has started to be challenged from a “substantivist” anthropological position that argues how economic relations are always socially embedded (see Crang, 1996; Crewe and Gregson, 1998; Davis, 1992; Lee, 2000a; Zelizer, 1994). The result of such a cultural rereading of monetary exchange is the emergence of a stream of writing that has sought to unpack the messy and complex nature of monetary exchange in late capitalist societies by showing the alternative work relations, motives, and pricing mechanisms that prevail (e.g., Bourdieu, 2001; Comelieau, 2002; Community Economies Collective, 2001; Crang, 1996; Crewe and Gregson, 1998; Davis, 1992; Lee, 1996, 1997, 2000a,b; Slater and Tonkiss, 2001). The outcome has been a raft of studies that have investigated “alternative economic spaces” (Leyshon et al., 2003). To display the complex characters and logics of monetary exchange and/or to illuminate alternative futures for monetary transactions, studies have begun to investigate sites such as the garage sale (Soiffer and Herrmann, 1987), the car boot sale (Crewe and Gregson, 1998), and local currency schemes (Boyle, 1999; Lee, 1996; North, 1999; Offe and Heinze, 1992; Williams et al., 2001a,b). These uncover different work relations, motivations, and pricing mechanisms of exchange that are not always and necessarily marketlike and imbued with the profit-motive. For example, Crewe and Gregson (1998), in their study of the car boot sale, highlight how these “marginal and/or resistant spaces” have been neglected, resulting in partial theorizations of exchange. They explore how conventions of the marketplace are suspended here and replaced by forms of sourcing, commodity circulation, transaction codes, pricing mechanisms, and value quite different from those that typify more conventional exchange, thus showing how exchange is socially, culturally, and geographically embedded. Similarly, a burgeoning literature on local currencies has revealed how it is wholly feasible for monetary exchanges to take place under alternative economic relations beyond market-like exchange and for motives other than profit (e.g., Cahn, 2000; Lee, 1996; North, 1999; Offe and Heinze, 1992; Williams et al., 2001a).

The changing conceptualizations of informal work  23 The problem with the studies so far conducted of particular alternative economic spaces, of course, is that they investigate only small spaces that are viewed by most people as existing on the “margins” of the mainstream economy. As such, these studies that unpack how monetized exchange does not have to be profit-motivated will doubtless largely fail to provide any significant challenge to the hegemonic ideology that imbues monetized exchange with the profit motive and which views the “economy” as separate from the wider “society.” Such sites where the profit motive is absent can be simply explained away as minor or marginal practices existing on the outer edges of the mainstream commodity economy and labeled “peripheral” or even “superfluous” spaces. By seeking to consider whether such a rereading of monetary exchange applies to the informal sphere, however, what one is doing is investigating a realm that is often considered to be the exemplar of the worst excesses of the advent of profit-motivated monetized exchange. If this sphere, so often seen as epitomizing the neo-liberal project of unregulated profit-motivated monetized exchange can be shown to be sometimes conducted under different economic relations and for alternative motives, the possibilities that other forms of monetary exchange might also be conducted under relations other than market-like exchange and for motives other than profit would become much more open to question. In consequence, the unpacking of the relations and motives underpinning informal work has much wider relevance than simply more fully understanding the nature of this sphere. It has important implications for rethinking monetary exchange as a whole and thus the nature of “the economic.” In this volume, therefore, many of the leading commentators who have started to unpack the relations and motives underpinning informal work are brought together for the first time. The intention, in so doing, is to bring together the emerging evidence that is challenging the market-centered readings of informal work in particular and the disembedding of the economic from the social more generally. Over the past decade or so, that is, there has started to emerge deep in the interstices of the literature on the informal sphere a number of studies that have identified how such work is sometimes conducted under very different economic relations and for motives other than economic gain (e.g., Cornuel and Duriez, 1985; Jensen et al., 1995, Nelson and Smith, 1999; Pfau-Effinger, 2003; Smith and Stenning, 2006; Williams, 2004a; Williams and Windebank, 2001a,b,e, 2002b). Here, these findings are for the first time brought together in specially commissioned chapters so as to mount a challenge to the conventional reading of informal work. As Travers (2002: 2) so succinctly puts it, “most research gives short shrift to the motivations of people to do this work. It is usually said that people do the work to earn extra money and left at that.” Yet as early as the 1980s, Cornuel and Duriez (1985) in their study of relatively affluent households in French new towns found that favors are exchanged on a paid basis between neighbors primarily to forge fledgling networks of social support rather than to make extra money. At the time, however, such a finding prompted few, if any, commentators to engage in any wholesale rethinking of the nature of informal work.

24  Colin C. Williams More recently, nevertheless, the number of studies identifying the presence of non-market relations and rationales other than making extra money, many of which are reported in the chapters in this book, has started to reach a point where the weight of evidence has begun to cast doubts over the validity of the so far dominant market-centered reading of informal work. As is reported in Chapter 12, a study of informal work in non-metropolitan Pennsylvania uncovers that informal work is by no means always underpinned by the motive of seeking monetary gain. They find in some 61 percent of all reported cases of informal work in this rural area that the chief rationale was to help out neighbors. In Europe, meanwhile, much the same finding has begun to steadily emerge. In a study of affluent and deprived urban and rural English localities, for example, Williams and Windebank again identify that market-like income-oriented informal work, although the predominant form of informal work in affluent localities, constitutes only a relatively small proportion of all informal work in deprived areas. In the latter areas, they find that the majority of informal work is composed of paid work conducted by friends, neighbors, and kin primarily for redistributive and community-building purposes. These geographical variations in the nature of informal work identified in the English Localities Survey are reported in Chapter 7. Using the same database, moreover, it is now becoming increasingly apparent that the market-centered conceptualization of informal work is not only a reading in keeping with how such work is experienced in affluent populations but is a heavily gendered reading of such work. As Windebank shows in Chapter  6, though market-centered readings of informal work are in keeping with how men experience informal work, they are largely inappropriate when it comes to reporting women’s experiences. In recent years, this emergent reconceptualization of informal work as composed of not only income-orientated but also community-oriented activity has been explored for its applicability across other areas of Europe. In Chapter 5, therefore, Pfau-Effinger reports some of her ongoing work on this issue in relation to Germany whereas in Chapter 4, Smith explores in the context of post-socialist Europe this rereading of the character of the informal sphere in particular and the economic more generally. By bringing together these leading commentators on informal work who are in a range of different contexts starting to move the conceptualization of informal work beyond a market-centered reading that disaggregates the economic from the social, the intention in this book is thus to start to move toward not only a much fuller but a more embedded understanding of the nature of work in the informal economy in advanced economies.

Conclusions The intention in this chapter has been to set the scene for the rest of this book by reviewing how the conceptualization of informal work in the advanced economies has evolved. In so doing, it has been shown that many of the earlier crude and

The changing conceptualizations of informal work  25 simplistic depictions of informal work have now begun to be replaced by richer more complex understandings of this sphere. Starting with the variable magnitude of this realm, although some continue to make universal generalizations about its changing size and the reasons for these changes, there is emerging a fledgling recognition that heterogeneous processes are taking place in different places and that these are occurring for a diverse array of reasons. The intention in the forthcoming chapters is to put some flesh on this broad recognition by depicting the range of different processes that are occurring in varying places so that this heterogeneity can start to be charted and explained. Turning to the character of informal work, it is similarly the case that the previously dominant depiction of such work as being universally a low-paid exploitative form of organized employment undertaken primarily by marginalized populations has come under intense scrutiny. In its place is emerging a more embedded understanding of this phenomenon that recognizes not only the heterogeneity in this realm but the need to re-embed the economic in the social if a fuller understanding is to be achieved. In particular, there is a growing recognition that it is necessary to view the informal sphere as a segmented informal labor market with a hierarchy of its own and that a market-centered reading of such work is not always applicable. Throughout this book, therefore, some of the leading authors that have pioneered such rereadings of the character of informal work are brought together for the first time to collate their ideas on the meaning of this sphere. In so doing, and as will be returned to at the end of this book, our intention is to provide a significant step forward in our knowledge of this realm of economic life. Before considering in depth these pioneering studies that individually and collectively rewrite how the extent and nature of informal work is to be understood, it is first of all necessary to review the differing ways in which informal work is investigated. Unless the emergent understandings on how informal work is most appropriately investigated are reviewed, the reasons for taking the decision to primarily select those authors who have undertaken direct surveys of informal work will not be fully understood.

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3 Measuring informal work in developed nations Pascale Joassart

Introduction The previous chapter argued that an early scholarly focus on the magnitude and nature of informal work, emphasizing its organized concentration among lowerpaid workers for profit maximization (the so-called marginalization thesis) and its eventual disappearance with economic development traditionally defined (the socalled modernization thesis), has been increasingly challenged by an alternative conceptualization. This alternative stresses the widespread existence of informal work among demographically diverse populations in various places within relatively developed nations, and its global diffusion facilitated by international investment, migration, and trade (the neo-liberal globalization thesis). In this chapter, we extend this historic conceptual review by looking back to the advent of systematic methodologies for estimating the level and characteristics of informal work and tracing their development to the present. Because the informal economy is usually kept “off-the-record,” measuring its size and characteristics is a challenging task. Although researchers generally agree in defining the informal economy as the production and sale of goods and services that are unregistered by the state but otherwise legal, they generally disagree on the methods to estimate these activities. The diversity of measurement approaches reflects important explicit or implicit theoretical differences regarding the nature and causes of informality. For instance, those who argue that informality is primarily a means to avoid taxation are likely to use national accounting data to estimate the size of forgone government revenue. In contrast, those who suggest that informal work is a more complex phenomenon embedded in a geographical and social context are more inclined to use individual estimates based on surveys of participants in the informal economy. What we learn from these very different types of studies shapes the policies that are advocated for or against the informal economy. In this chapter, we review and critique the dominant approaches to measuring the informal economy, with an emphasis on developed economies. There exist two primary types of measures: macro and micro, with many variations within both categories.

Measuring informal work in developed nations  35

Macro measures A number of economic studies concern themselves with the estimation of the size of the informal economy. This is usually expressed as a percent of gross national product, employment, or establishments. The common thread to these macro estimates is the fact that they are built on inconsistencies between different data sets. For instance, researchers have compared the number of jobs reported with employment figures, the amount of cash versus total transactions, and the level of national income with national expenditures. To simplify, we can distinguish between monetary and non-monetary estimates. Monetary General currency ratio One of the first attempts to measure the informal economy was undertaken by Cagan (1958), who looked at the ratio of currency to deposits or money supply. Assuming that we can identify a period when all economic activities were formal, that informal transactions are carried out using cash only, and that the cash-deposit ratio and velocity are constant over time, the size of the informal economy can be estimated based on the amount of cash in excess of what is needed in the formal economy. Gutmann (1997) used the same approach and estimated the size of the underground economy in the United States at 9.4 percent of GNP in 1976. Tanzi (1983) refined this basic general currency ratio approach by relaxing the constant cash-deposit ratio assumption and instead estimating it based on economic indicators such as the interest rate, per capita income, the share of wages in national income, and average tax rates as a proxy for the informal economy. Though an improvement of Cagan’s measure, Tanzi’s approach still relies on the unrealistic assumption that only cash is used in the underground economy (Windebank and Williams, 1998) and that the predictors of the cash-deposit ratios are known and identical in both sectors (Giles, 1999). The questionable assumption that there exists a reference stage where informal economic activities did not exist remains necessary in all these approaches. Moreover, by using tax rates as the only predictors of the change in the size of the hidden economy, it also presumes that all informal economic activities are motivated by a desire to avoid taxation. Economists continue to build on Tanzi’s regression-based estimates and construct ever-more sophisticated econometric models to take into account differences in the demand for money between the formal and informal sectors of the economy (Bhattacharyya, 1990, 1999), incorporate various measures of taxation and intensity of state regulations (Schneider, 1997), and add a time component by using time-series data (Giles, 1997, 1999). Transactions method Feige’s (1979) approach comes from a national accounting perspective and consists of comparing the value of total transactions and observed income. Though

36  Pascale Joassart the latter comes from the official statistics, the former includes both formal and informal transactions and intermediate, final, and financial transactions. A gap between transactions and income could be due to three main factors: inflation, a structural change in the economy linked to the share of financial or intermediate transactions, or a change in the size of the so-called irregular economy. Subtracting the first two from the gap leaves us with an estimate of the informal economy. Feige’s calculations attribute 26.6 percent of the total economy to the irregular economy in 1978, suggesting that it is “of staggering proportions and growing rapidly” (1979: 12). This approach, however, requires a considerable amount of data to compute change in prices in various sectors and isolate intermediate and financial transactions from gross transactions. Financial transactions are particularly difficult to estimate in a context of high volatility. And small changes in the rate of currency turnover can lead to very large variations in the total estimates of the irregular economy, lending it limited reliability. Latent variable models More recently, economists have turned to structural econometric models to estimate the size of the underground economy. These models, first developed by Frey and Weck-Hannemann (1984), are an improvement over previous methods because they take into account a number of potential causes of informality and multiple indictors of its presence in the economy. As such they are often referred to as MIMIC models: multiple-indicators multiple-causes. The hidden economy is estimated as a latent variable in a structural equation model that includes potential causes (i.e., taxation, regulation, real income, and “tax morality”). This unobserved variable is then linked to indicators of the informal economy’s size (i.e., monetary transactions, labor force participation rates, rate of economic growth). Thus, although not solely a monetary approach, this perspective continues to rely on the demand for cash as a primary indicator of informality over time. Aigner, Schneider, and Ghosh (1988), Giles (1997, 1999), Schneider (1997, 2006) and others have applied this method to several countries, leading to estimates of the hidden economy ranging from 6 to 68 percent and averaging 32 percent of the official gross domestic product (GDP). In contrast to the other macro approaches described earlier, this type of analysis does not assume a single cause of informality (i.e., tax avoidance) and does not suggest that it could be measured by a single indicator such as the cash demand. As such, it represents an improvement over previous methods. However, it continues to suffer from several limitations, including the lack of stability of estimated coefficients and the large variations in estimates associated with small changes in parameters.

Measuring informal work in developed nations  37 Non-monetary Labor force participation Just as informal economic activities may not be reflected in official income statistics, they may also be absent from employment figures. Thus, a discrepancy between the number of jobs and the number of people working could be attributed to the informal economy. Such methods yield estimates of the number of people and the percent of the labor force that are employed informally. Joassart and Flaming (2003) and Flaming, Haydamack, and Joassart (2005) use this approach to estimate the size of the informal economy in Los Angeles County. Given a rapid increase in the labor force noted in various sources of data including the current population surveys, a declining official unemployment rate, and a relatively constant number of reported jobs by the California Employment Development Department ES202 data, these authors conclude that a significant proportion of these additional workers must have found jobs in the informal economy. After excluding potential discrepancies linked to methodological differences in the collection of various data, they estimate that the size of the informal economy ranges between 9 and 29 percent of the Los Angeles labor force, with an average of 15 percent. They also control for the fact that workers may hold multiple jobs, commute to other counties, or work for themselves. Because jobs and employment data are readily available by industry and by county on an annual basis, this approach has the advantage of providing geographically and industry-specific estimates of the informal economy that can be tracked over time. However, it requires several assumptions regarding the nature of self-employment, the average number of jobs held per worker, and the probability of people working both formally and informally. Electricity consumption Yet another discrepancy-based approach focuses on comparisons between the level of electricity consumption, which presumably reflects true economic activity, and the official GDP figures. Any difference between the two can be attributed to informal economic activity (Kaufmann and Kaliberda, 1996; Portes, 1996). Though the simplicity of this method is attractive, it suffers from several limitations. In particular, it assumes that the demand for electricity is similar across sectors with identical price and cross elasticities of demand and that the relationship between electricity consumption and GDP is constant over time and across sectors. It is possible, however, that activities typically performed underground require less electricity (Schneider, 2006). It is also possible that efficiency gains in the consumption and distribution of electricity vary between the formal and informal sectors, with the latter less able to take advantage of technological improvements. Both monetary and non-monetary macro measures of the informal economy provide a general estimate of the size of the informal economy. Though it may be interesting to know how large the informal economy is and whether its size

38  Pascale Joassart is growing over time, this information is of limited use to policymakers. At best, it provides an alarm signal warning of the importance of the issue. Yet, the wide range of estimates obtained, even when applying the same method, undermines their credibility. In addition, the inability of most of these approaches, particularly the dominant monetary perspective, to distinguish between informal and criminal activity is problematic to the extent that they require very different policy responses. Moreover, if the goal is to develop effective policies, additional information is needed to learn more about who the informal workers are, where and in what type of occupations they work, why they work informally, and how this type of work compares to formal employment with regard to wages, taxes paid, labor standards, hours and flexibility, turnover rate, and so on. Without answers to these questions, claims that the informal economy is a result of heavy taxation and regulation are mere assumptions. Thomas (1988, 1992, 1999) and Windebank and Williams (1998) have been among the most vocal opponents to these macro approaches. According to Thomas (1999: 387), “the question of size has become an end in itself and more important issues are not addressed.” To address these issues, we must have more detailed information about the components of the large “guestimate.” Though the job-employment discrepancy studies permit the decomposition of the informal labor force into specific industries, they still lack individual-level data such as gender, age, income, race, and ethnicity of participants. To obtain this type of information, we must turn to micro approaches.

Micro measures To understand the dynamics of the informal economy, we must obtain information about the participants themselves—whether self-employed workers, employees, or employers. This has been done both directly through surveys and indirectly by predicting the informal status of firms, individuals, or neighborhoods in existing datasets. Indirect The indirect methods consist of using variables associated with informal economic activity, such as worker immigration status, self-employment, and firm size, to identify informal workers or firms in publicly available data sets. For example, Marcelli, Pastor, and Joassart (1999) and Marcelli (2004) use data on unauthorized immigration status from random household surveys of Mexicanborn population in Los Angeles County to predict the proportion of unauthorized Latino immigrant by occupation in the 1990 and 2000 U.S. Census Public Use Microdata Sample (PUMS). Because unauthorized immigrants are more likely to work informally owing to their legal status, their concentration in a specific occupation is a proxy for its level of informality. Presumably, occupations that rely heavily on unauthorized immigrants are likely to be characterized by

Measuring informal work in developed nations  39 other violations of labor, tax, and health regulations. Thus, workers employed in occupations with a disproportional share of unauthorized Latino immigrants are likely to be involved in the informal economy. Because this method links informality to unauthorized Latino immigration, it provides biased estimates that emphasize the low-wage and low-skill nature of the underground economy. It is also likely to reinforce the stereotypes that the majority of informal workers in developed countries are immigrants from the Third World and that immigration causes informality—a hypothesis rejected by Portes and Sassen-Koob (1987). Yet, it sheds some light on that segment of the informal economy and dispels some myths regarding the prevalence of self-employment among informal workers. Flaming et al. (2005) develop a similar method using Census data of non-citizen immigrants and INS data on unauthorized immigrants in Los Angeles County to create a hierarchy of industries by informality level. These findings correspond closely to those they obtained though the job-employment discrepancy approach described earlier, given some credibility to these estimates. Others, including Schuetze (2002), Mirus and Smith (1996), and McManus (2000), have associated informality with self-employment. Again, individuals who either are self-employed or work in industries or occupations characterized by a high proportion of self-employment have a higher probability of working informally and can be identified as such in public use individual-level data. This approach, however, has been more widely used in developing economies wherein very large proportions of urban workers, such as street vendors and taxi drivers, are self-employed and assumed to be working informally (De Soto, 1989). Firm size has also been used by several researchers as a predictor of informality, with the assumption that very small firms enjoy greater flexibility and lower visibility and are thus more likely to engage in informal labor practices (Castells and Portes, 1989; De Leeuw, 1985; Portes and Sassen-Koob, 1987). This approach excludes informal home workers and large sweatshop employees but includes formal small businesses such as medical practices and law offices. A promising approach has been developed by Social Compact, a nonprofit organization interested in uncovering the market strength and investment potential of low-income neighborhoods, which include the presence of a large informal sector. Their market analysis estimates the size of the informal sector in several large U.S. cities (see Social Compact, 2005, for an example from Santa Ana, California), by relying on eight neighborhood-level proxies related to income, household expenditure relative to income, banking relationship or credit history, utility payments in cash, check-casher operations, housing costs, and foreignborn population (Alderslade, Talmage, and Freeman, 2006). The strength of this approach is its ability to provide geographically specific estimates at the neighborhood level and its reliance on a number of indictors. It does not, however, provide a comprehensive picture of the informal economy to the extent that it focuses primarily on low-income neighborhoods. These indirect approaches, not unlike the macro approaches, suffer from the need to make specific assumptions about who the participants in the informal economy are. Often, researchers assume that the informal economy is

40  Pascale Joassart concentrated in marginalized populations (e.g., unauthorized immigrants, ethnic minorities, women, unemployed workers, employees of small businesses) and use these characteristics to define informal workers. Doing so can bias the results and provide a one-sided picture of the informal economy. However, unlike the macro approaches, these indirect micro estimates begin to answer the why, who, where, and how questions needed to develop effective policy, even if only targeted at one segment of the informal economy. Moreover, their use of publicly available data makes them more affordable than the direct survey methods described below. Direct Economists in general have been critical of direct survey methods, arguing that the data obtained by questioning workers or employers is likely to underestimate informal economic activities because of the incentive not to report these for fear of legal repercussion. Yet, social scientists who have collected such data in confidential ways report that participants in the informal economy showed willingness to discuss these matters openly (Leonard, 1994, 1998; MacDonald, 1994). Moreover, results showed consistency between the payments made by consumers of informal labor and those received by the performers of such work lending credibility to these surveys (Williams and Windebank, 2001, 2003). Portes and Haller (2006: 418) argue that direct surveys are problematic in industrialized nations where regulations are better enforced and consequently “informal activities are better concealed and, […] generally embedded in tighter social networks.” As the high response rate obtained by Marcelli (2004) suggests, however, relying on these social or ethnic networks can circumvent people’s reluctance to reveal their participation in the informal economy. Because direct random surveys are expensive to plan and conduct, most current examples consist of small-scale experiments that focus on specific areas or neighborhoods. In the United Kingdom, Williams and Windebank (2001) have conducted surveys in deprived and affluent as well as rural and urban communities. In the United States, Jensen, Cornwell, and Findeis (1995), Nelson and Smith (1999), Nelson (1999), and Tickamyer and Wood (1998) have collected data in rural areas. Raijman and Tienda (2000) collected data on informality from a random stratified sample of small businesses in Little Village, an urban neighborhood on the south side of Chicago. Ethnographic studies (Dangler, 1994; Fernandez-Kelly and Garcia, 1989; Hondagneu-Sotelo, 1997; Pessar, 1994; Snyder, 2004), although rarely based on a random and generalizable sample, have also yielded useful results regarding the participants in the informal economy and the nature of their work. For instance, Lozano (1989) interviewed home workers in electronic production and computer programmers in the San Francisco area, a largely understudied component of the informal economy. Her results suggest that flexibility may be a driving factor behind participation in the informal economy. The OECD, ILO, IMF, and other international organizations concerned by informal economic activities have suggested that national labor force surveys be

Measuring informal work in developed nations  41 revised to include a set of questions regarding informal employment (Hussmanns, 2004; International Labour Office, 2000; OECD, 2002). No such reforms have been implemented yet in developed economies. Until national representative surveys are undertaken, the most detailed information regarding the nature of informal work will continue to be specific to geographical areas and demographic groups surveyed.

Conclusion A growing number of studies, including those collected in this volume, suggest that the informal economy consists of a wide range of activities, including lowwage sweatshop work, unpaid favors between family members and friends, micro-entrepreneurship, and high-skill self-employment, that are closely linked to the formal economy. This emerging consensus challenges the crude assumptions made by earlier studies regarding the nature of informal economic activity (e.g., the avoidance of taxation) and calls for improved measurements to capture these different aspects of informal employment. Indeed, much of the information made available by micro studies contradicts the assumptions underlying the macro approaches. It is important for researchers to acknowledge that most measures of informal economic activities are based on preconceptions regarding the nature of such activities and, in turn, reinforce these beliefs, which often carry important political dimensions. This is true of the macro estimates that assume that the underground economy is primarily an attempt to escape taxation. It is also true of the micro studies that target immigrants and low-income neighborhoods. If we want more than a “guestimate” of the overall size of the informal economy and are concerned about issues such as the relationship between formal and informal work, the motivations of participants, the extent to which they escape taxation, the working conditions, and the role played by the social, economic, and cultural local environment, we need to develop comprehensive measures of the informal economy. Our approach must be informed by a theoretical framework that includes the determinants of informal economic activities and their place within the broader economic structure.

Bibliography Aigner, D., F. Schneider, and D. Ghosh. 1988. Me and my shadow: Estimating the size of the US informal economy from time series data. In Dynamic Econometric Modeling,, edited by E. R. B. W. A. Barnett and H. White. Cambridge, MA: Cambridge University Press. Alderslade, J., J. Talmage, and Y. Freeman. 2006. Measuring the informal economy—one neighborhood at a time. Bhattacharyya, D. K. 1990. An econometric method of estimating the hidden economy, U.K. (1960–1984): Estimates and tests. The Economic Journal 100:703–717. ———. 1999. On the economic rationale of estimating the hidden economy. The Economic Journal 109(456):348–359.

42  Pascale Joassart Cagan, P. 1958. The demand for currency relative to the total money supply. Journal of Political Economy 66:303–28. Castells, M., and A. Portes. 1989. World underneath: The origins, dynamics, and effects of the informal economy. In The Informal Economy: Studies in Advanced and Less Advanced Developed Countries, edited by A. Portes, M. Castells, and L. Benton. Baltimore: Johns Hopkins University Press. Dangler, J. F. 1994. Hidden in the Home: The Role of Waged Homework in the Modern World Economy. New York: State University of New York Press. De Leeuw, F. 1985. An indirect technique for measuring the underground economy. Survey of Current Business 65(4):64–72. De Soto, H. 1989. The Other Path: The Invisible Revolution in the Third World. New York: Harper and Row. Feige, E. L. 1979. How big is the irregular economy? Challenge 12:5–13. Fernandez-Kelly, P., and A. Garcia. 1989. Informalization at the core: Hispanic women, homework, and the advanced capitalist state. In The Informal Economy: Studies in Advanced and Less Advanced Developed Countries, edited by M. C. A. Portes and L. Benton. Baltimore: Johns Hopkins University Press. Flaming, D., B. Haydamack, and P. Joassart. 2005. Hopeful Workers, Marginal Jobs: LA’s Off-the-Books Labor Force. Los Angeles: Economic Roundtable. Frey, B., and H. Weck-Hannemann. 1984. The hidden economy as an “unobserved” variable. European Economic Review 26(1):33–53. Giles, D. E. A. 1997. Causality between the measured and underground economies in New Zealand. Applied Economics Letters 4:63–67. ———. 1999. Measuring the hidden economy: Implications for econometric modeling. The Economic Journal 109(456):370–380. Gutmann, P. 1997. The subterranean economy. Financial Analysts Journal 35:26–28. Hondagneu-Sotelo, P. 1997. Affluent players in the informal economy: Employers of paid domestic workers. International Journal of Sociology and Social Policy 17:130–158. Hussmanns, R. 2004. Measuring the informal economy: From employment in the informal sector to informal employment. Working Paper No. 53. Geneva: International Labour Office. International Labour Office. 2000. Resolution concerning statistics of employment in the informal sector. In ILO. Geneva: Current International Recommendations on Labour Statistics. Geneva: ILO. Jensen, L., G. T. Cornwell, and J. L. Findeis. 1995. Informal work in nonmetropolitan Pennsylvania. Rural Sociology 60(1):91–107. Joassart-Marcelli, P., and D. Flaming. 2003. Workers without Rights: The Informal Economy in Los Angeles. Economic Roundtable Briefing Paper. Kaufmann, D., and A. Kaliberda. 1996. Integrating the unofficial economy into the dynamics of post-socialist economies: A framework of analyses and evidence. In Economic Transition in Russia and the New States of Eurasia, edited by B. Kaminski. London: M. E. Sharpe. Leonard, M. 1994. Informal Economic Activity in Belfast. Aldershot: Avebury. ———. 1998. Invisible Work, Invisible Workers: The Informal Economy in Europe and the U.S. New York: St. Martin’s Press. Lozano, B. 1989. The Invisible Workforce: Transforming American Business with Outside and Home-based Workers. New York: The Free Press. MacDonald, R. 1994. Fiddly jobs, undeclared working and the something for nothing society. Work, Employment and Society 8(4):507–530.

Measuring informal work in developed nations  43 Marcelli, E. 2004. Unauthorized Mexican immigration, day labour and other low-wage informal employment in California. Regional Studies 38(1):1–13. Marcelli, E., M. Pastor, Jr., and P. Joassart. 1999. Estimating the effects of informal economic activity: Evidence from Los Angeles County. Journal of Economic Issues 33(3):579–607. McManus, P. 2000. Market, state, and the quality of new self-employment jobs among men in the U.S. and Western Germany. Social Forces 78(3):865–905. Mirus, R., and R. S. Smith. 1996. Self-Employment, Tax Evasion, and the Underground Economy: Micro-Based Estimates for Canada. Working Paper No. 1002. Cambridge, MA: International Tax Program, Harvard Law School. Nelson, M. K. 1999. Between paid and unpaid work: Gender patterns in supplemental economic activities among white, rural families. Gender and Society 13(4):518–539. Nelson, M. K, and J. Smith. 1999. Working Hard and Making Do: Surviving in Small Town America. Los Angeles: University of California Press. OECD. 2002. Measuring the Non-Observed Economy. Paris: OECD. Pessar, P. 1994. The elusive enclave: Ethnicity, class, and nationality among Latino entrepreneurs in greater Washington, DC. Human Organization 54(383–392). Portes, A. 1996. The informal economy. In Exploring the Underground Economy: Studies of Illegal and Unreported Activity, edited by S. Pozo. Kalamazoo, MI: W. E. Upjohn Institute for Employment Research. Portes, A., and W. Haller. 2006. The informal economy. In The Handbook of Economic Sociology, 2nd edition, edited by N. J. Smelser and R. Swedberg. Princeton, NJ: Princeton University Press. Portes, A., and S. Sassen-Koob. 1987. Making it underground: comparative material on the informal sector in Western market economies. The American Journal of Sociology 93(1):30–61. Raijman, R., and M. Tienda. 2000. Immigrants’ pathways to business ownership: A comparative ethnic perspective. International Migration Review 34(3):682–706. Schneider, F. 1997. The shadow economies of Western Europe. Journal of the Institute of Economic Affairs 17(3):42–48. ———. 2006. Shadow Economies of 145 Countries all over the World: What do we really know? Paper presented at “Hidden in Plain Sight: Micro-economic Measurements of the Informal Economy: Challenges and Opportunities,” September 4–5, London. Schuetze, H. J. 2002. Profiles of tax non-compliance among self-employed in Canada: 1969 to 1992. Canadian Public Policy/Analyses Politiques 28(2):219–238. Snyder, K. 2004. Routes to informal economy in New York’s East Village: Crisis, economics, and identity. Sociological Perspectives 47(2):215–240. Social Compact. Santa Ana Neighborhood Market Drilldown. 2005 [cited March 22, 2007]. Available from http://www.socialcompact.org/santa_ana.htm. Tanzi, V. 1983. The underground economy in the United States: Annual estimates, 1930– 1980. International Monetary Fund Staff Papers 30:283–305. Thomas, J. J. 1988. The politics of the black economy. Work, Employment and Society 2(2):169–190. ———. 1992. Informal Economic Activity. Hemel Hempstead: Harvester Wheatsheaf. ———. 1999. Quantifying the black economy: “Measurement without theory” yet again? The Economic Journal 109(456):381–389. Tickmayer, A. R., and T. Wood. 1998. Identifying participation in the informal economy using survey research methods. Rural Sociology 63(2):323–339.

44  Pascale Joassart Williams, C. C., and J. Windebank. 2001. Revitalising Deprived Urban Neighbourhoods: An Assisted Self-help Approach. Aldershot: Ashgate. ———. 2003. Poverty and the Third Way. London: Routledge. Windebank, J., and C. C. Williams. 1998. Informal Employment in the Advanced Economies: Implications for Work and Welfare. London: Routledge.

Part II

Informal work in Europe

4 Informal work in the diverse economies of “Post-Socialist” Europe Adrian Smith

Introduction This chapter examines the development and role of “informal” work in the “postsocialist” economies of East-Central Europe. It argues that though there may have been some expansion of the role of such work, as households and individuals have experienced declining living standards and increasing social exclusion since the collapse of state socialism, it is not possible simply to “read off” these activities from such wider contexts. Drawing upon research in Slovakia, along with a series of other studies, this chapter explores the ways in which informal work—as a set of economic practices—is constituted through the articulation of “formal” and “informal” economies and “cultural” and “economic” practices. In this sense, such practices cannot easily be seen as the survival strategies of the poor but as complex cultural and socioeconomic phenomena. The chapter highlights the importance of a historical and nuanced understanding of the constitution of such conventionally conceived survival strategies in East-Central Europe. It argues that consideration of the almost mundane practices of informal activity, everyday household production, and reciprocity enables a deeper understanding of economic forms in post-socialist societies.

Economic crisis and social polarization in post-socialism The collapse of state socialism in East-Central Europe in 1989 and in the former Soviet Union in 1991 instigated a long period of economic crisis and decline across the region. In attempting to dismantle the institutions and practices of the centrally planned economies across the region, and—in the minds of neo-liberal market reformers—to replace it with market economic relations, a widespread economic crisis resulted. The structures of the planned economy were rapidly opened to global economic pressures but—in most cases—were unable to sustain economic activity in the way that it had previously been undertaken. Indeed, the process of shock therapy created a market free-for-all that in Russia led to what Burawoy (1996) has termed “economic involution” in which the economy is seen to feed on itself rather than to create the conditions for national economic growth and capital accumulation (Burawoy, Krotov, and Lytkina, 2000). There are

48  Adrian Smith clear sectoral and national/regional variations to this process—for instance in the clothing industry (Begg and Pickles, 1998; Pickles and Begg, 2000; Smith, 2003) and across national and regional space (Dunford and Smith, 2000)—but one result of the economic crisis has been the dramatic decline of national economic output (Dunford, 1998). For example, Figure 4.1 shows the trajectory of change in real gross domestic product (GDP) between 1989 and 2003 for the four main regional groupings across the post-socialist world: (1) East-Central Europe, (2) the former Yugoslavia, (3) the former Soviet Union, and (4) the Baltic States.1 It was not until the year 2000 that real GDP in East-Central Europe returned to the level it had reached in 1989, and in 2003 it was only 12 percent above the level of 14 years earlier. Elsewhere in the region, the economic crisis has been much deeper, and real GDP has yet to return to 1989 levels. For example, in 2003, real GDP in the Baltic States—each of which is now a member state of the European Union— was 86.7 percent of 1989 levels. In the former Soviet Union, real GDP was 74.4 percent of 1989 levels, and in the Former Yugoslavia—largely owing to economic dislocation resulting from civil war—it was 64.7 percent.2 Alongside the overall economic crisis that has affected the region, there has been a dramatic reduction in employment in the formal economy, as enterprises restructured and as the state-sector downsized. Between 1989 and 1996, according to the International Labour Office (ILO) data reported in Smith et al. (2002), nearly 12 million jobs were lost across the region, with the largest proportion (62 percent) being lost by women. One measure of employment change is the employment ratio—the percentage of the working age population considered employed (Figure 4.2).3 In every country for which data are available, with the exception of Turkmenistan, the employment ratio fell. At the end of the state socialist period, employment ratios were relatively high (above 75 percent in most cases), reflecting commitments to full employment and the participation of women in the labor force. By 2002, however, the employment ratio had fallen to less than 70 percent in the majority of countries for which data are available. 120.0 100.0

East-Central Europe Former Soviet Union Baltic States

80.0 60.0 40.0

Former Yugoslavia

20.0

03

02

20

01

20

00

20

20

97

98 19 99

19

96

95

19

19

94

92

93

19

19

19

91

19

19

19

90

0.0

Figure 4.1  Change in real GDP in East-Central Europe and the former Soviet Union, 1989–2003 (1989=100) (Source: Innocenti Research Centre, 2004)

Informal work in the diverse economies of “Post-Socialist” Europe  49

100 90 80 70 60 1989

50

2002

40 30 20 10 Estonia

Lithuania

Uzbekistan

Tadjikstan

Turkmenistan

Krygyzstan

Kazakhstan

Armenia

Azerbaijan

Russia

Ukraine

Moldava

Belarus

Bulgaria

Romania

Slovenia

Poland

Slovakia

Czech R

0 Hungary

No. of persons employed (% of population aged 15– 59)

Concomitant with the decline of formal employment has been a steep rise in (or at least a significant amount of  ) unemployment in most countries (Figure 4.3). Of course, there was no official unemployment during the state socialist period across the region, despite the fact that there was large-scale underemployment and underutilization of workers. Even so, the widespread economic crisis created a significant problem of unemployment across the region. Registered unemployment in 2002 ranged from nearly 18 percent in Slovakia, Poland, and Bulgaria, to as low as 1 to 2 percent in parts of the former Soviet Union. The registered unemployment figures reported in Figure 4.3, however, tend to underreport unemployment rates owing to the fact that many of the unemployed are not

Figure 4.2  Employment ratio, 1989 and 2002 (Source: Innocenti Research Centre, 2004) 0.50 0.45 0.40 0.35 0.30 0.25 0.20 0.15

1989

0.10

2002

0.05 Krygyzstan

Georgia

Azerbaijan

Armenia

Ukraine

Russia

Moldava

Belarus

FYR Macedonia

Bulgaria

Lithuania

Latvia

Estonia

Slovenia

Slovakia

Poland

Hungary

Czech R

0

Figure 4.3  Registered unemployment 2002 (Source: Innocenti Research Centre, 2004)

50  Adrian Smith registered as such. For example, in Russia, where labor hoarding in enterprises has been widespread, a more accurate estimate of unemployment based on labor force survey figures suggests that unemployment levels were around 13 percent in 1999 (Smith, Swain, and Rainnie, 2002). Even in Central Europe, where economic growth has now returned, an emerging trend is of “jobless growth” in which economic change fails to translate into aggregate improvements in overall employment levels. Indeed, across the region unemployment is becoming “structural” in that long-term unemployment levels are increasing (United Nations Economic Commission for Europe [UNECE] 2004). In many studies of the effects of the economic crisis across these nations, it is clear that there is a close link between economic decline, employment loss, and emerging levels of impoverishment (World Bank, 2002). Of course, measuring poverty is very difficult, but Table 4.1 provides two measures of absolute poverty derived from a recent World Bank study (2002). Poverty levels, measured on the basis of a standard U.S. $4.30 purchasing power parity per person per day, ranged from less than 1 percent in the Czech Republic and Slovenia to just under 20 percent in Estonia and Poland, to a staggering 50 percent in Russia. According to a UNECE (2004) survey of the region, levels of absolute and relative poverty increased during the 1990s, notably in the former Soviet Union and the countries of South-East Europe. Alongside increasing poverty, income inequality has emerged as a key element of social change after 1989 (Figure 4.4). Again, there are considerable variations across the region, but in all countries (except in Russia, where the time period is different), income inequality has increased. In the majority of countries, inequalities have increased from below the mid-1990s average for the Table 4.1  Poverty rates in selected ECE and FSU countries Country

Year

At US$2.15 ppp/ person/day

At US$4.30 ppp/ person/day

Slovenia

1998

0

0.7

Czech Republic

1996

0

0.8

Hungary

1997

1.3

15.4

Slovakia

1996

2.6

8.6

Estonia

1998

2.1

19.3

Poland

1998

1.2

18.4

Croatia

1998

0.2

4

Lithuania

1999

3.1

22.5

Russian Federation

1998

18.8

50.3

Latvia

1998

6.6

34.8

Source: World Bank, 2002

Informal work in the diverse economies of “Post-Socialist” Europe  51 0.50 0.45 0.40 0.35 0.30 0.25 0.20 0.15

1989

0.10

2002

0.05 Georgia

Krygyzstan

Azerbaijan

Armenia

Russia

Ukraine

Moldava

Belarus

Bulgaria

FYR Macedonia

Lithuania

Latvia

Estonia

Slovenia

Slovakia

Poland

Hungary

Czech R

0

Figure 4.4  Income distribution, 1999 and 2002 (Gini coefficients) (Source: Innocenti Research Centre, 2004)

Organization for Economic Co-operation and Development (OECD) countries (a Gini coefficient of 0.31) to a higher level. Only in some of the Central European states, such as Romania and Belarus, have inequalities not reached OECD, although in each of these cases, inequality has increased over this period.

Economic crisis and the informal economy Within this context of economic crisis, increasing inequality, job loss, and impoverishment for some groups in the societies of post-socialist Europe, many authors argue that the informal economy has become a means of sustenance and survival (Bridger and Pine, 1998; Seeth et al., 1998). For example, a study in Russia by Seeth et al. (1998: 1611) “addresses the question of how households respond to the economic stress of the transition economy” (my emphasis). They seek to understand how households “cope with poverty by increasing subsistence food production,” and find that “the majority of the [Russian] population now produces its own food supply to a considerable extent” (1998: 1611). Of course, household food production is but one of a range of activities associated with the informal economy. As Bernabè (2002: 1) has argued in her review of research on the informal economy in post-socialist countries, The informal sector is important because it provides a considerable source of income and employment in countries where formal employment opportunities are limited and social security is almost non-existent. Indeed many have suggested that an explanation for why the unprecedented collapse in living standards has not been accompanied by social explosion in the Commonwealth of Independent States (CIS) is that people have managed to

52  Adrian Smith survive by engaging in a multitude of “informal” undeclared activities such as street trading, subsistence agriculture, and unofficial taxi services. Consequently, “[w]ith no private income from employment and no state social safety net, people have resorted to a variety of informal, low-skilled, precarious activities to survive” (Bernabè, 2002: 2). What is the extent of the informal economy in post-socialist nations? Using estimates of the “hidden economy” through measuring the gap between official national income and electricity consumption, Dobozi and Pohl (1995) argue that in 1994 the unofficial economy accounted for between about 25 percent of GDP in the Economic Commission for Europe (ECE) nations and about one-third of GDP in the former Soviet Union (cited in: Bernabè, 2002). Despite the significance of the informal and “second” economies under state socialism, the extent of informal economic activity is also said to have increased during the economic crisis, enabling individuals and households to seek out the means to survive job loss, declining real incomes, and increasing social polarization. Schneider and Enste (2000), for example, discuss the size of what they call the “shadow economy” across different countries by using measures of physical input and other measures of its extent. The shadow economy is defined by Schneider and Enste (78–79) as “unreported income from the production of legal goods and services, either from monetary or barter transactions, hence all economic activities that would generally be taxable were they reported to the tax authorities.” Schneider and Enste find that the size of the shadow economy in the countries of the former Soviet Union increased from around 16 percent of GDP in 1989–90 to between 35 and 44 percent of GDP in 1994–95. For the countries of Central and Eastern Europe, Schneider and Enste estimate that the size of the shadow economy grew from nearly 18 percent of GDP in 1989–90 to between 21 and 32 percent in 1994– 95 (see also Smith and Stenning, 2006). These treatments of the informal economy and economic crisis—and these are just a few examples from a wide literature—discursively construct the development and growing significance of the informal economy as a response to economic collapse. Though these material transformations provide one context in which to understand the informal economies of post-socialism, Meurs’ (2002) study of rural household economies and survival strategies in Bulgaria suggests that any growth is relative rather than absolute. Meurs argues that rather than adapting to the economic crisis, peripheral households have simply seen their livelihoods “truncated” by the collapse of employment in the formal economy. Equally, research in Russia by Clarke (2002a,b) and Clarke et al. (2000) and in Slovakia by Smith (2002a,b) finds that those most engaged in, for example, food production for household consumption on domestic plots of land—what Clarke et al. (2000) call the “dacha economy”—are not the poorest and the most excluded, but those who have access to the resources necessary to sustain a relatively inefficient form of food production. Together, then, these critiques are suggestive of the need to consider alternative ways of interpreting the informal economies of post-socialism. Drawing upon some of my earlier research in Slovakia (Smith

Informal work in the diverse economies of “Post-Socialist” Europe  53 2002a,b), the following sections consider what such alternative conceptions might look like.

Alternative conceptions of the informal economy in post-socialism A starting point in an alternative conceptualization of the informal economy of post-socialism is to reject the binary constitution of “formal-informal,” present in virtually all of the existing research in this area. Seeing activities associated with the informal economy as “economic practices” (Smith, 2002a; Smith and Stenning, 2006)—as part of a range of economic and resource activities engaged in by households and individuals—avoids constructing a dualistic reading. Indeed, a focus on economic practices resonates with, on the one hand, a wide body of work on “social practices” in the social sciences which is attempting to eschew forms of binary thinking, and, on the other hand, with a set of literatures focused on the “diverse economies” of social formations. Over the past decade, one attempt to move beyond the impasse of structure and agency in the social sciences has been the turn towards practice theory (de Certeau, 2002; Schatzki, 1996; Schatzki et al., 2001). Part of this “turn” has been about exploring in much greater detail the everyday—and often mundane— practices that constitute social life. The focus of much of this work has been on repositioning our conceptions away from an emphasis on large-scale structures or on individual agency and to examine, instead, the way in which practices and networks of practices create what Schatzki (1996) calls the “held-togetherness” of social life. Such a perspective eschews a focus on the economy as an outcome of individualized activity or of a set of structures beyond which agency is severely constrained, if not impossible. Rather it situates “economy” in the networked practices of action that may create certain stabilizations at particular points in time—some of which may be relatively long-term—but which leave “economy” open to continual construction and reconstitution through practices in everyday life. Accompanying this attempt to rethink the ontology of social life through practices, there has also emerged a concern over the need to move beyond our conceptions of economy as what Gibson-Graham (1996) call capital-centric. Emerging out of Gibson-Graham’s influential The End of Capitalism (As We Knew It) has been a body of work associated variously with conceptualizing diverse economies (Community Economies Collective 2001; Gibson-Graham, 1996; Leyshon and Lee, 2003; Pickles, 2004; Smith, 2000, 2002a; Smith and Stenning, 2006). Central to the work on diverse economies has been an antiessentialism involving a critical reading of over-determination (Gibson-Graham 1996; Gibson-Graham, Resnick, and Wolff, 2001)—an argument concerning the non-reducibility of causation to single or simple forces.4 This theoretical positioning is helpful in shifting the focus of attention in understanding “survival strategies” and the informal economies of post-socialism away from a response to austerity (Smith, 2002a). This move enables the repositioning of the “informal” as part of a diverse economy of post-socialism constituted by a range of forces,

54  Adrian Smith not only those corresponding to capitalist induced austerity. In this sense, such practices cannot easily be seen as the survival strategies of the poor but as complex cultural and material (socioeconomic) phenomena. Indeed, considering the almost mundane practices of informal work, everyday household production, and reciprocity enables an opening of our conceptions of economic forms in postsocialist societies (Smith and Stenning, 2006).

Household economic practices and post-socialism in Slovakia Using these conceptions of economic practices and of diverse over-determined economies, the following sections draw upon research in two contrasting urbanregional economies in Slovakia: Bratislava, the economically dynamic capital city of the country, and Martin, a mid-size town in central Slovakia that has historically been very dependent upon one large heavy engineering enterprise (Smith, 1998).5 The research involved two rounds of interviewing with households in each region. The first stage involved in-depth structured interviews with 100 households. Households were selected to provide a range of different occupational groups, although there are differences between the two groups in each region. As far as was practicable and relevant, interviews were undertaken with adult members of the household together. This raised a number of issues concerning the disclosure of information that may be considered sensitive and contested between adult members of households, but it was the most practicable method of organizing interviews. The second stage involved more in-depth and open-ended, semistructured interviews with a smaller number of households (approximately 10 in each area). The purpose of these interviews was to put some qualitative depth on the first round of interviewing. The research was undertaken with households resident in the largest high-rise urban structures in the two urban areas: Petržalka in Bratislava and Ľadoveň in Martin. The two regional research environments differ considerably. Bratislava, with a population of just fewer than 500,000, has experienced considerable economic and social restructuring since the collapse of state socialism. The city has received something in the order of 70 percent of total inward investment in Slovakia and, in 2002, per capita GDP was 2.3 times the Slovak average, increasing from 2.1 times the average in 1995. Unemployment in Bratislava was just below 7 percent in 2003, and employment levels have stayed more or less constant within a context of significant national employment decline (34,000 jobs lost nationally between 1998 and 2003 alone). In Martin, by contrast, economic decline has been centered on the crisis of the locally dominant heavy engineering and armaments industry (Smith, 1994, 1998). Per capita GDP in 2002 in the wider region of which Martin is a part was 80 percent of the average for Slovakia, and unemployment was around 17 percent in 2003. However, between 1990 and 1996, nearly half of all employment was lost in Martin (24,000 jobs), a trend that continued in the wider region of which the town is a part between 1998 and 2003 (18,200 jobs lost over this period).

Informal work in the diverse economies of “Post-Socialist” Europe  55 Both of the high-rise apartment settlements in Bratislava and Martin that provide the research foci here were established as large, mass-built estates in the 1970s. Petržalka became the largest such structure in Slovakia, with a resident population in 1991 of just more than 128,000. The construction of both settlements was associated with the industrialization of Slovakia, through the provision of housing for the growing industrial workforce of urban areas. In Martin, for example, the construction of the above estate was connected with the expansion of the workforce in the large, locally dominant ZTS-TEES heavy engineering and armaments plant (Smith, 1994, 1998). Both settlements, although quite different in overall population size, became dominant in the urban structure of their respective cities. In-migrant residents from surrounding peri-urban areas and longer-distance migrants populated both estates. New migrants were often young families with small children, often from rural areas, and migration was connected with new employment opportunities for these groups in the expanding industrial base of the two urban areas. Consequently, though households became part of the urban social fabric of these two cities, many retained important linkages back into the rural economies in which their relatives often remained, or they developed access to land in the nearby vicinity. For example, the members of one household in Martin who had previously moved from rural East Slovakia utilized a plot of land that was rented from the local gardener’s association. The plot was located in a nearby village, some 30 minutes away by bus. Since the death of their parents, who remained in East Slovakia, household members also inherited familial land in the rural east and, during periodic visits to their parents’ homes in the past, they had received various products from the land.

Income inequality and poverty in post-socialist Slovakia Before examining the changing economic practices of households, this section explores the overall changes to household economic life since 1989 in Slovakia. Data from the Slovak micro-census indicate that income differentiation during the 1990s increased (Filipová, Valná, and Myslíková, 1998). The difference in the ratio of income accruing to the bottom quintile of households compared to the top quintile increased from 1:2.4 to 1:3.2 between 1992 and 1996, and to 1:5.8 in 2002. In addition, the proportion of income accruing to the bottom quintile of households fell between 1992 and 1996 from 12.7 percent to 10.5 percent of the total. The average income accruing to different social groups also underwent a process of polarization over this period. Peasants and pensioners saw a relative decline in income whereas all other groups (especially whitecollar, independent productive activity, and other household heads) saw a relative increase. Households with heads younger than age 29 and without children also saw a relative increase in income (Filipová et al, 1998). Together, these changes have meant that by the late 1990s, an estimated 9 percent of the Slovak population could be considered “poor,” and 3 percent could be considered to be living in “extreme poverty” (World Bank, 2002).6 More recent estimates provided by the

56  Adrian Smith European Commission suggest that poverty levels in Slovakia in 2002 were 21 percent of the population, placing it as the poorest new EU member state. Though there has been an increase in the levels of household inequality in Slovakia since 1989, the level of inequality tends to be lower in comparison with other ECE countries. The Gini coefficient for household income in Slovakia has increased, but the level of increase and the absolute value place Slovakia below many other ECE countries in the early part of the 2000s (see Figure 4.4). Furthermore, the number of individuals and households living in poverty in Slovakia tends to be below levels found in most other ECE countries, except the Czech Republic and Croatia (Smith, 2000; World Bank, 2002). However, over the past four years, a series of price liberalizations that have been implemented in Slovakia have significantly added to the costs of living and potentially to the degree of inequality among the population.

Food production, land, and household economic practices In the context of increasing inequality, poverty, and territorial differentiation, has there been a development of, or expansion of, household economic practices such as food production among urban households? This section of the chapter considers this question using the results of the research with urban households in Martin and in Bratislava. Household food production As shown in Table 4.2, households involved in our research relied quite considerably on the market to purchase essential food items. The level of reliance varied somewhat, however, by type of food item. Dairy and meat products were purchased more often than potatoes, fruit, and vegetables. This no doubt reflects the greater preponderance of home-growing fruit and vegetables, compared to the more difficult and greater financial intensity of rearing animals. There is also quite significant regional variation in the level of food self-provisioning. In Martin, households relied less on the purchase of potatoes, vegetables, and fruit through the market than did households in Bratislava. Indeed, non-market provisioning of potatoes and vegetables in Martin represented an average of more than one-fourth of the total, and provisioning of fruit was just more than one-fifth. This pattern of provisioning may well reflect the greater use of land by households in Martin: 54 percent of interviewed households stated that they had used land in the last 12 months, compared to 23 percent of households in Bratislava. Household income and domestic food production Is there any evidence that households in different income positions were more or less reliant upon market exchange compared to self-provisioning of food? Is there any evidence to suggest that lower-income households relied more upon household food production and exchange than more affluent households, as

Informal work in the diverse economies of “Post-Socialist” Europe  57 Table 4.2  Average percent of food purchased, produced and received by households, 1999 All households Potatoes bought

Martin

Bratislava

82

73

91

Potatoes produced

9

14

3

Potatoes received

9

13

6

Vegetables bought

78

72

85

Vegetables produced

17

23

10

Vegetables received

5

5

5

Fruit bought

82

79

84

Fruit produced

14

18

10

Fruit received

4

3

6

100

100

100

Dairy products produced

Dairy products bought

0

0

0

Dairy products received

0

0

0

97

97

97

Meat bought Meat produced

1

1

0

Meat received

2

2

3

100

52

48

N Source: household interviews, 1999

claims over the deepening of informal economic and household relations with self-provisioning in the context of economic austerity would suggest? Table 4.3 reports data from the interviewed households classified by median income. The most significant differences were apparent in the provisioning of vegetables, other than potatoes, which were the most widely domestically grown food items. Those households below median income levels in Martin tended to rely more fully on domestic (“non-market”) production and exchange, whereas those households with incomes above the median levels tended to purchase a greater proportion of vegetables. In Bratislava, however, the reverse was the case. Indeed, in Bratislava there was some evidence across all of these food products to suggest that above median income households relied more heavily on domestic production and receipt of produce than those below the median. These differences may then reflect the different patterns of access to land between these groups. Unlike in Martin, where land is more fully used by below median income households (68 percent of households using land in Martin were below median household income), the situation in Bratislava suggests that higher income is important in having access to food production resources. Indeed, only one household using land was below the median income level.

58  Adrian Smith Table 4.3  Average percent of food purchased, produced and received by below median income and above median income households, 1999 Martin Below median income Potatoes bought

74

Bratislava Above median income

Below median income

70

95

Above median income 90

Potatoes produced

14

15

0

4

Potatoes received

12

14

5

6

Vegetables bought

69

81

92

82

Vegetables produced

25

17

2

13

6

2

6

5

Fruit bought

Vegetables received

79

80

85

84

Fruit produced

18

18

3

12

Fruit received

3

2

12

4

100

100

100

100

Dairy products produced

Dairy products bought

0

0

0

0

Dairy products received

0

0

0

0

97

95

98

97

2

0

0

0

Meat bought Meat produced Meat received N

1

5

2

3

38

14

12

36

Source: household interviews, 1999

Household occupational structure and domestic food production Though there was some limited, but variable, evidence to suggest the greater usage of land and production of food for lower income groups in one of the two regions (the relatively less urban Martin), was there evidence that those in lowerpaid and lower-status occupations relied proportionately more on domestic food production? There was some evidence that household per capita incomes were affected by job status, but not in a way that indicates poorer lower-status households using land as a survival strategy. In both Bratislava and Martin, households with heads that were in professional and managerial occupations had higher per capita household incomes, although the differences across all occupational groups were not great.7 In both Bratislava and Martin, there was no clear link between households in lower-category occupations and the higher usage of land, although in each region the relationship worked in different ways. In Bratislava, most of the households that used land had a household head in a managerial or professional occupation. In Martin, there was much greater dispersion of usage of land across

Informal work in the diverse economies of “Post-Socialist” Europe  59 these occupational groups, to the extent that the same number of households used land in the professional and managerial group as did in the lowest paid group of industrial and manufacturing workers. Furthermore, in Bratislava, professional and managerial households, which are more engaged in food production anyway, produced a much larger share of their food than all other occupational groups. In Martin, professional and managerial households also produced a variety of food items, but those in service and industrial occupations tended to rely upon domestic food production to a much greater extent (nearly 30 percent of total sourcing of vegetables and fruit). Consequently, there is no clear evidence that poorer and lower-status households in these two regions relied to a greater extent on food self-provisioning than higher income/status groups. One reason for the apparent differences in land utilization and food production between higher and lower socioeconomic-status households in Martin and Bratislava lies in the nature of the local economies of these two regions. Even though land utilization was lower in Bratislava than in Martin, one-half of those using land in Bratislava did so to provide additional food for the household compared to 42 percent of households utilizing land in Martin. In Martin the majority of households both above and below median income levels said that they used land because it was a hobby, whereas in Bratislava the figure was 40 percent of those above median income. The key to the higher utilization of land for additional food in Bratislava in above median income households may well lie in the differences between the costs of living in these two regions and the pressures that this places on the reasons for household utilization of land. A household with an above national median income in Bratislava may still have to rely upon self-provisioning to a much greater extent than in a region such as Martin because of the relatively high cost of living in the capital city compared to that of more provincial regions, such as Martin. However, this still does not provide clear evidence that households use domestic food production as a survival strategy in conditions of austerity. Indeed, it could be argued that such regional, occupational, and income differences resulted from historical continuities and long-standing “cultural” practices, rather than responses to transition. This issue is pursued in the following section.

Historical continuities of food production and domestic selfprovisioning In Bratislava, the average length of time that households with access to land had used the land to produce food was 27 years. In Martin, the average number of years using land was 12, and only eight households started to use land since 1989. In Bratislava, only one household had acquired land since 1989. For the majority of households in both regions (and particularly for the majority in Bratislava who are mainly professional and managerial heads), then, the utilization of land was a household activity that was undertaken prior to the collapse of state socialism. Indeed, it was also an activity that was not undertaken for household survival. For example, as noted above, in Martin and Bratislava, the majority of households

60  Adrian Smith said that they used land because it was a hobby. Additionally, households produced food in addition to that which they purchased. For example, one-half of those using land in Bratislava did so to provide additional food for the household, compared to 42 percent of households utilizing land in Martin. However, for those who have started to use land for home food production since 1989, was there any evidence to suggest that they were doing so because of economic hardship? In Martin, average per capita household income levels for “new users” were below the level for those who had a longer history of land utilization. Additionally, the majority of new users reported having experienced significant financial problems in the previous 2 years, and half were not at all satisfied with their household income level. The existence of only one new user in Bratislava suggests that we need to be careful about asserting significant patterns to the results, but overall this household was at a lower status and level of income than those who had used land for quite some time. This suggests, then, that there is some evidence of households accessing land because of difficult economic circumstances. Indeed, in Martin, half of those who got access to land since 1989 did so to provide additional food for the household table, but this is not a clear indication of a survival strategy that deepens the relations between urban based households and peri-urban and rural economies. However, the overall level of new acquisitions of land was very low, and what seems more important is the continuance of practices developed in the past. Indeed, the overall evidence points to the use of land as the continuation of household practices which may have their own cultural and economic “logics” not reducible to a simple response to the austerity of transition (Smith, 2002a). Take, for instance, the case of the Sýkora family8 in Martin, who shared the use of a cottage garden with one of their sets of parents some 20 minutes away from the town by bus. The family had two small children but was relatively secure financially. One partner (the husband) was an accountant; the other was on maternity leave. Work on the plot of land was shared with their parents and, during the summer, involved daily bus trips to the garden. They produced mainly vegetables and potatoes, which allowed the household to be self-sufficient in potatoes, garlic, onions, and root vegetables. Ms. Sýkora explained the significance of the household’s plot of land as being in the maintenance of a hobby, in producing healthy and less chemically treated food, but also in allowing the family to save money on cash purchases of food. Such views are not atypical. A second household in Martin provided a clear case of the continuities of food production between communist and post-communist periods. Located in a small village some 30 minutes from Martin by bus, the land used by this household was primarily for the production of food for domestic consumption. However, as Mr. Murajda explained, the household had used the land since 1982 and, for them, gardening was largely a hobby. For lower-income households, the continuities of land usage were also apparent. The Zlatko family, for example, which was composed of a retired mother and her 26-year-old daughter who was a teacher, had a piece of land quite close to the town where they grew potatoes. The mother suggested that they certainly

Informal work in the diverse economies of “Post-Socialist” Europe  61 consumed what they produced but that retiree participation in this activity has always been considered a hobby.

Legacies, sociality, and household practices in post-socialism The preceding discussion has emphasized the importance of understanding domestic food provisioning and the use of the informal economy of land in Slovakia within the context of locally embedded historical and cultural continuities. There is no doubt that households and individuals have had to deal with and develop strategies to manage the dramatic transformations in economic life and in employment that have occurred as a result of the end of state socialism. However, this is not to say that the kinds of strategies discussed here are a simple result of responses to austerity, job loss, and declining real income. Indeed, any understanding of the continuance of quite inefficient, yet culturally and socially significant, forms of self-provisioning must be situated in a recognition of the recent agrarian past of countries such as Slovakia. As Smith (2002a: 236) has argued, In 1921, for example, 61% of the Slovak population was employed in agriculture, and three-quarters of the … population lived in rural areas (Swain 1994: 8-9). While Slovakia saw relatively rapid industrialization during soviet times, the existence of family members with knowledge and … [experience] involved in the agrarian peasant economies of Slovakia prior to 1948 and with access to plots of land are significant to understanding the kinds of food production practices seen today. Furthermore, reciprocal exchange of household labour is also a practice which has its roots in the soviet and presoviet eras in which individuals engaged in activities such as self-built housing construction to a significant degree. Indeed, in soviet societies such practices of food production and reciprocal exchange of labour and goods constituted a form of anti-politics. In a system in which political and economic forms of participation were largely determined by the state it was not uncommon for citizens opposed to such enforced formalization to retreat to the private sphere of household, home, family plot and close inter-family relations. In this sense, then, the historical creation of a culture of ambivalence and its concerns for the “private” has its links with the rejection of soviet systems. But such a particular culture of ambivalence and private resistance could only come about because of the historical role of a predominantly agrarian society in Slovakia in which care for, and knowledge of, the land was deemed a central component of social configuration (Swain, 2001). Such agrarian pasts and generational knowledge economies are key to any understanding of “informal” economic practices in post-socialism. Their importance, however, lies not only in sustaining household economies and generational knowledge but in wider networks of sociality. Smollet (1989) has called the way in which various products enter into systems of (often) reciprocal

62  Adrian Smith gift giving as “the economy of jars” (see also Pickles, 2002). The economy of jars is a deep-seated set of cultural/economic practices, which blurs the boundaries between the categories of the “economic” and the “cultural.” The importance of this historical sensibility is driven home in the context of the emphasis in much of the neo-liberal, shock therapy approach to seeing the “transition to capitalism” as occurring on a tabula rasa (Grabher and Stark, 1997; Smith and Pickles, 1998). Instead, an understanding of the continuities and legacies that constitute post-socialism and the informal economies across the region might be usefully situated within a contextual reading of “trace” (Pickles, 2004). History and the trace form a critical part, for Pickles, of any deconstructive reading of the political economies of post-socialism. Through reading Derrida’s Specters of Marx, such an approach eschews the singularities and linear logics of transition theory and requires, instead, that we position the social formations of post-socialism within a sensitized reading of local context. In this way, the sociality of household practices are seen not simply as informal economic activities but as situated, specific practices, which hold meaning for their participants, which provide some of the “glue” that enables the so-called “held-togetherness” (Schatzki, 1996) of societies in traumatic times, and which require an opening of our conceptions of “economy” as a multiple set of practices resulting from over-determined social action. As such, the mundane, the daily temporal rhythms of everyday life (Lefebvre, 2004) have to be positioned as key moments in any rendering of the “economy” of post-socialism.

Acknowledgements The research reported in this chapter arises from two projects. The first project, which took place in 1998 and 1999, examined household “survival strategies” and regional economic change in Slovakia and was funded by the Nuffield Foundation. The second and ongoing project on “Social exclusion, spaces of economic practice and post-socialism” (award number RES-00023-0695) is funded by the Economic and Social Research Council and involves collaborative research with Alena Rochovská at Queen Mary, University of London, and Alison Stenning and Darek Swiatek at the University of Newcastle. I thank Zuzana Kusa of the Institute of Sociology, Slovak Academy of Sciences, and Andrea Gonová for their assistance with data collection during the Nuffield Foundation funded project, and Alison Stenning and Alena Rochovská for the development of some of the ideas presented here. Parts of this chapter have previously appeared elsewhere in Smith (2002b).

Notes 1 East-Central Europe includes the Czech Republic, Hungary, Poland, Slovakia, Slovenia, Bulgaria, Romania, and Albania. The former Yugoslavia includes FYR Macedonia and Serbia and Montenegro. The former Soviet Union includes Belarus, Moldova, Russia, Ukraine, Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan,

Informal work in the diverse economies of “Post-Socialist” Europe  63

2 3

4 5 6

7 8

Tajikistan, Turkmenistan, and Uzbekistan. The Baltic States includes Estonia, Latvia, and Lithuania. This figure does not include data for Bosnia-Herzegovina. The employment ratio is different from the employment rate, which measures levels of employment relative to those of working age who are eligible to work. However, for comparative purposes across the region, data limitations allow only for the employment ratio to be reported for the majority of countries. Glassman (2003) offers a critical consideration. The following sections of the chapter draw upon and extend material in Smith (2002b). The World Bank report uses an absolute poverty level of $4.30 PPP/day, which is considered suitable for medium-income countries, and an extreme poverty level of $2.15 PPP/day. The data for Slovakia are derived from the Slovak micro-census for 1996. These ranged from Slovak Koruna (SK) 3,808 to SK 5,078 in Martin, and from SK 6,484 to SK 6,871 in Bratislava. All names have been changed to protect the identity of respondents.

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64  Adrian Smith Dunford, M., and A. Smith. 2000. Catching up or falling behind? Economic performance and regional trajectories in the “new” Europe. Economic Geography 76:169–195. Filipová, J., S. Valná, and I. Myslíková. 1998. Analýza prímovej situácie domácností Slovenskej republiky v r. 1992 a v r. 1996 (na základe výsledkov Mikrocenzov) [Analysis of the Incomes of Slovak Households in 1992 and 1996 (on the basis of the Microcensus)]. In Research Report 31. Bratislava: Employment, Social and Family Research Institute. Gibson-Graham, J. K. 1996. The End of Capitalism (As We Knew It). Oxford: Blackwell. Gibson-Graham, J. K., S. Resnick, and R. Wolff. 2001. Towards a poststructuralist political economy. In Re/Presenting Class: Essays in Postmodern Marxism, edited by J. K. Gibson-Graham, S. Resnick, and R. Wolff. Durham, NC: Duke University Press. Grabher, G., and D. Stark, eds. 1997. Restructuring Networks in Post-Socialism: Legacies, Linkages and Localities. Oxford: Oxford University Press. Lefebvre, H. 2004. Rhythmanalysis: Space, Time and Everyday Life. London: Continuum. Leyshon, A., and R. Lee. 2003. Introduction: Alternative economic geographies, in Leyshon. In Alternative Economic Geographies, edited by A. Lee and C. Williams. London: Sage. Meurs, M. 2002. Economic strategies of surviving post-socialism: changing household economies and gender divisions of labour in the Bulgarian transition. In Work, Employment and Transition: Restructuring Livelihoods in Post-Communism, edited by A. Rainnie, A. Smith, and A. Swain. London: Routledge. Pickles, J. 2002. Gulag Europe? Mass unemployment, new firm creation, and tight labour markets in the Bulgarian apparel industry. In Work, Employment and Transition: Restructuring Livelihoods in Post-Communism, edited by A. Rainnie, A. Smith, and A. Swain. London: Routledge. ———. 2004. Disseminated Economies and the New Economic Geographies of PostSocialism: Notes on the Way to an Installation. Paper read at Rethinking “Economy” in Post-Socialism. Queen Mary, University of London. Pickles, J., and R. Begg. 2000. Ethnicity, state violence, and neo-liberal transitions in postcommunist Bulgaria. Growth and Change 31:179–210. Schatzki, T. 1996. Social Practices: A Wittgensteinian Approach to Human Activity and the Social. Cambridge: Cambridge University Press. Schatzki, T., C. Knorr, D. Karin, and E. von Savigny, eds. 2001. The Practice Turn in Contemporary Theory. London: Routledge. Schneider, F., and D. Enste. 2000. Shadow economies: sizes, causes and consequences. Journal of Economic Literature 38(1):77–114. Seeth, H., S. Chachnov, A. Surinov, and J. von Braun. 1998. Russian poverty: Muddling through economic transition with garden plots. World Development 26(9):1611–1623. Smith, A. 1994. Uneven development and the restructuring of the armaments industry in Slovakia. Transactions of the Institute of British Geographers 19:404–424. ———. 1998. Reconstructing the Regional Economy: Industrial Transformation and Regional Development in Slovakia. Cheltenham: Edward Elgar. ———. 2000. Employment restructuring and household survival in ‘postcommunist transition’: rethinking economic practices in Eastern Europe. Environment and Planning A 32(10):1759–1780. ———. 2002a. Culture/economy and spaces of economic practice: positioning households in post-communism. Transactions of the Institute of British Geographers 27(2):232–250. ———. 2002b. Economic practices and household economies in Slovakia: Rethinking ‘survival’ in austerity. In Work, Employment and Transition: Restructuring Livelihoods in Eastern Europe, edited by A. Smith, A. Rainnie, and A. Swain. London: Routledge.

Informal work in the diverse economies of “Post-Socialist” Europe  65 ———. 2003. Power relations, industrial clusters and regional transformations: PanEuropean integration and outward processing in the Slovak clothing industry. Economic Geography 79:17–40. Smith, A., and J. Pickles. 1998. Introduction: theorising transition and the political economy of transformation. In Theorising Transition: the Political Economy of Post-Communist Transformations, edited by J. Pickles and A. Smith. London: Routledge. Smith, A., and A. Stenning. 2006. Beyond household economies: articulations and spaces of economic practice in post-socialism. Progress in Human Geography 30:190–213. Smith, A., A. Swain, and A. Rainnie. 2002. Employment and work restructuring in “transition.” In Work, Employment and Transition: Restructuring Livelihoods in ‘postCommunist’ Eastern Europe, edited by A. Rainnie, A. Smith, and A. Swain. London: Routledge. Smollet, E. 1989. The economy of jars. Ethnologie Europa 19(2):125–140. Swain, N. 1994. Czechoslovak agriculture prior to system change. In Rural Transition Series Working Paper No. 28,, edited by Centre for Central and Eastern European Studies. University of Liverpool. ———. 2001. Traditions of household farming and gardening in Central Europe. In Working Paper No. 51, Rural Transition Series, edited by Centre for Central and Eastern European Studies. University of Liverpool. United Nations Economic Commission for Europe. 2004. Economic Survey of Europe. World Bank. 2002. The Slovak Republic: Living Standards, Employment and Labor Market Study. Washington, DC: World Bank.

5 Informal employment in the workwelfare arrangement of Germany Birgit Pfau-Effinger and Slađana Sakač Magdalenić

Introduction During the transition to modern industrial society, diverse forms of work were gradually transformed into formal employment. However, beyond formal employment, various informal forms of work have survived and sometimes grown in importance during the transition to a post-industrial service society. One such form of work is informal employment, or what is sometimes referred to as undeclared work. Until now, however, and owing to its hidden nature, knowledge about the way it is developing and the reasons why it is developing have been rather limited. Indeed, insofar as informal employment has been the subject of theoretical reflections and empirical research, the approaches and assumptions are often highly controversial. Theoretical approaches that seek to explain the development of informal employment often assumed that one specific set of factors is relevant. Here, it is argued that there are various types of informal employment that are connected in different ways with broader socioeconomic structures. The development of each type is influenced by a particular set of factors. This argument is developed for the case of Germany. In the first section, we explain the main approaches for trying to understand the development of informal employment. This will be followed in the second section by an analysis of the specific features of informal employment in Germany. These will be explained in the context of the German work-welfare arrangement in the third section. In the fourth and final section, the degree to which our findings match theoretical approaches will be explored. We refer to “informal employment” as the production of goods and services that is undeclared or has illegal features: for example, if tax evasion or social security fraud occurs (Thomas, 1992: 3). This does not include “illegal employment,” where illegal goods are produced illicitly. It is assumed here that informal employment is not restricted to a specific sector or type of activity. Instead, the distinction between “formal” and “informal” employment is seen as a social construction (Williams and Windebank, 1998: 4).

Informal employment in the work-welfare arrangement of Germany  67

Three main approaches to explaining the development of informal employment In the history of academic research on informal employment, different explanations of this phenomenon have emerged. Here, three main approaches will be explored—modernization theory, neoclassical economic theory, and globalization theory. Modernization theory: informal employment as pre-modern type of work The concept of the informal economy was originally used in the academic discourse on developing countries. Informal economic activity—which mainly meant informal employment—was seen as referring to traditional parts of developing economies that were not yet included in modern sectors. In a way, informal work was seen as characterized by “backwardness” (Hart, 1973). Grounded in this view, the concept of the “dual economy” was developed in the 1960s by Geertz (1963). He made a distinction between the “bazaar-economy” and the “firmcentred economy.” According to this concept, the bazaar-economy is based on low productivity, is highly labor-intensive, and is small-scale, with low incomes for workers and a high capacity for absorption. The firm-centered economy, conversely, is based on the efficient conduct of business, high productivity, and the use of large quantities of capital and advanced technology. This view is grounded in a modernization theoretical approach. Informal employment is seen here as a kind of traditional, pre-modern type of work which will vanish in the process of further modernization. This argument is contested, however. Some authors argue that informal employment also has a specific role and provides innovative capacities in the further development of capitalist societies (Castells and Portes, 1989); Burroni and Crouch, 2007). Neoclassical economics approach: the informal economy as a reaction to state intervention into the economy In more recent debates about the development of welfare states that were in part influenced by neo-liberal thinking, and in stark contrast to modernization theory, state regulation is seen as the main cause for the increase of informal employment. The existence of an informal employment sector is explained by over-regulation, by strong state intervention into the economy by tax policies and policies in relation to contributions to the social security system. According to this argument, individuals create informal economic activity by circumventing legal regulations, thereby establishing the “real” free market. Informal employment itself is not seen as the main problem here but the restrictions on the formal economy that force individuals to escape into the “black economy” (e.g., Schneider and Enste, 2000). However, the empirical evidence from cross-national research does not support this argument. In Europe, for example, the share of informal employment seems

68  Birgit Pfau-Effinger and Slađana Sakač Magdalenić to be particularly high in countries with a weak welfare state and a relatively low degree of state regulation. Greece, Italy, Rumania, and Bulgaria are good examples (Renooy et al., 2004: 7, 10). Informal employment as a result of globalization Globalization theory offers a different approach for trying to explain informal employment and mainly stresses the role of globalization processes and structures of social inequality. As Sassen (1994, 1997, 1999) has argued, informal employment is a reaction to increasing globalization. Informal employment, that is, located primarily in the “global cities” of the West is the other side of globalization. According to Sassen, people with low incomes who live in global cities are no longer able to afford the goods and services that are provided by the formal economy. The demand of the “winners”—highly mobile groups of well-qualified urban employees—conversely, has shifted toward specialized highquality goods that are provided only at very high prices by the formal economy. Both groups, therefore, rely on the informal economy that provides the goods and services for both segments at a lower price; for the globalized highly professional employees goods and services are provided; and for the lower-skilled and lowerincome groups both commodities and jobs are provided (Sassen, 1999). Viewed collectively, these three approaches differ considerably in terms of their underlying assumptions and the institutional mechanisms offered to understand better informal economic activity in developed nations. With these differences in mind, we turn now to consider employment in Germany.

Specific features of informal employment in Germany The share and development of informal employment Given the “hidden” nature of informal employment, reliable data (particularly comparative data) are difficult to obtain and reliable only to a limited degree. This is because they are, in part, based on different definitions and also are usually estimated using indirect methods outlined in Chapter 3 of this book. Such methods usually provide only vague results, which do not distinguish between kinds of illegal activities and informal employment. Recent survey-based data from the Rockwool Foundation study provide relatively reliable information on informal work in Germany (Pedersen, 2003). It should be noted, however, that the size of informal employment is underestimated here, particularly because private households and migrants were not included in the sample. Table 5.1, nevertheless, reports estimates of the size of informal employment in Germany in comparison with other countries in Western Europe. As shown in Table 5.1, the share of informal employment in Germany is generally higher than in European countries (e.g., excluding those in southern Europe). At the same time, the estimates on the share of informal employment in Germany vary substantially—between 6 percent (on the basis of survey-based

Informal employment in the work-welfare arrangement of Germany  69 Table 5.1  Incidence of informal employment Country

Year

Size (% GDP)

Source

Austria

1995

1, 5

National Statistical Bureau

Belgium

1995

3–4

National Statistical Bureau

Denmark

2001

5, 5

Rockwool Foundation Study #10

Finland

1992

4, 2

National Statistical Bureau

France

1998

4–6, 5

National Statistical Bureau

Germany

2001

6

Rockwool Foundation Study #10

16

Schneider; IAB

Greece

1998

Over 20

National Statistical Bureau

Italy

1998/2002

16–17

National Statistical Bureau

Netherlands

1995

2

National Statistical Bureau

Portugal

1996

5

National Statistical Bureau

Sweden

2001

3

Rockwool Foundation Study #10

UK

2000

2

Rockwool Foundation Study #10

data) and 16 percent (based on indirect estimation methods). The estimate that was introduced by Schneider and Enste (2000) employs an indirect currencyflow method of estimating the size of the “shadow economy.” According to these estimates, the share of informal employment has increased from 2.7 percent of gross domestic product (GDP) in 1970, to 10.3 percent in 1980, to 15 percent in 1997 (Schneider and Enste: 34). Employing a similar estimation method, Cyprian (2003) came to the conclusion that, by 2002, the amount of informal employment had increased to 16.3 percent of GDP. Furthermore, according to estimates by the Institut für Arbeitsmarktforschung der Bundesanstalt für Arbeit, informal employment has increased by 38 percent between 1990 and 2002 (Cyprian). However, information on the share of informal employment compared with other types of activities within the “shadow economy” is missing. Besides informal employment, these include, according to Schneider and Ernste, non-monetary transactions of services like tax evasion for property or capital and non-monetary transactions of goods. Thus, these estimates are at best questionable. Pedersen (2003) employs survey data and generates quite different conclusions. On the basis of a questionnaire fielded in 2001, he found that 10.4 percent of those interviewed in Germany had carried out so-called “black” activities. This corresponds to a share of 4.1 percent of GDP, which is much lower than the estimate by Schneider but slightly higher than in the other countries that were included in the survey. In principle, survey-based estimates can deliver more reliable data compared with indirect approaches and are more appropriate for understanding the nature and sources of informal work. One of the limitations of the Rockwool Foundation survey data, however, is that they include “black

70  Birgit Pfau-Effinger and Slađana Sakač Magdalenić transactions of goods” but do not provide information regarding the contribution of informal employment (Pedersen). Moreover, migrants were not interviewed, and private households are to a high degree underrepresented in the data. Pedersen (2003) also offers different conclusions than Enste in terms of the development of informal employment in Germany, for the former assumes that it has decreased during the 1990s. However, we agree with his argument that a retrospective comparison over a longer period of time is not feasible or at least very problematic. In contrast to Denmark, longitudinal research on informal employment based on the same methodology does not exist for Germany. In cross-national research on informal employment, legal and cultural differences are often neglected when defining what constitutes “informal” or “black market” employment. What is particularly important in the case of Germany is that there is a relatively high tolerance in the population and in legislation toward informal employment as far as it is used by private households and takes place in the context of friendship networks (Pfau-Effinger 2009). Williams and Windebank (2001) find that such informal employment is also common in U.K. lower-income urban neighborhoods, where its purpose is often “to help out others, or to cement or forge social networks” (Williams, 2001). Such paid informal work, which is defined as “being done out of sheer kindness,” is not defined as “black market work” and not prosecuted even if a considerable amount of money is exchanged in Germany. This is different in Denmark, for instance, where the definition of informal employment is much more comprehensive and includes all kinds of paid work that is not declared (Jensen and Rathlev, 2009). The main forms of informal employment in Germany In Germany, there are two main forms of informal employment. The first is well characterized as an effort to escape poverty, and although this has a long history in the economic development literature as discussed in Chapter 2, a considerable amount is underreported in the quantitative surveys mentioned earlier. This is sometimes referred to as subsistence work because such informal workers have few, if any, alternative employment opportunities in formal labor markets (PfauEffinger, 2009). The second main form is moonlighting—defined as informal work that is done to earn extra income above that earned from one’s formal job (Pfau-Effinger, 2009). Next we outline the ways in which each type is differently connected with socioeconomic structures. Importance and patterns of the “poverty escape” type of informal employment The principal economic sectors in which this type of informal employment takes place (e.g., construction, transport, and restaurants) are relatively unregulated, have relatively high elasticities of demand, are decentralized (Baumeister et al., 1990; Castells and Portes, 1989; European Commission, 2007: 29; Renooy et al., 2004), and more often include smaller firms (Blair and Endres, 1994; Castells and Portes,

Informal employment in the work-welfare arrangement of Germany  71 1989). Furthermore, one of the primary groups of consumers of what is produced by subsistence informal workers in these sectors includes private households, and this is more common in welfare states in which parts of the population (e.g., immigrants) are excluded from better-paying formal employment. It appears that a relatively large share of informal employment in Germany is for subsistence. Representative survey data from the Rockwool Foundation for Denmark, Germany, and the United Kingdom, for instance, suggest that among informal workers aged 18 to 66 years, those residing in Germany work the longest hours on average. Whereas informal workers in Great Britain work almost four hours per week and those in Denmark report working about five hours weekly, those in Germany report working slightly more than eight hours each week (Pedersen, 2003: 105). Moreover, the share of those who work in informal employment is particularly high among the unemployed in Germany. It is 20.7 percent in Germany compared with 9.9 percent in Denmark and 9.2 percent in the United Kingdom (Pedersen, 2003: 66).1 In addition, participation in informal employment is more common in the lowest income group compared with the other two countries (Pedersen: 83). Income from informal employment in Germany, nevertheless, is only twothirds of what it is in Great Britain and Denmark. In 2001, for example, German informal workers earned about 10.3 Euros per hour, informal workers employed in Great Britain earned an estimated 14.4 Euros, and those in Denmark earned 15.7 Euros (Pedersen: 85). The problem with the Rockwool Foundation survey data is that immigrant workers in informal employment seem to be underrepresented to a substantial degree, as mentioned. This is particularly a problem in Germany where it has been well established in previous empirical studies that informal employment relies disproportionately on immigrant labor (Lutz, 2008). Moreover, “public and personal services” are of relatively little importance according to the Rockwool Foundation data, even though national surveys suggest that house cleaning and childcare in private households are some of the major spheres of informal employment in Germany. Next, we interpret these findings in the context of what the Formal and Informal Work in Europe research project in the Fifth EU Framework Programme is showing from national survey data and secondary analysis of qualitative empirical research for Germany (Pfau-Effinger, Flaquer, and Jensen, 2009). Although we suggested earlier that subsistence informal work is best characterized as concentrated in jobs that require relatively few skills within several specific decentralized and relatively unproductive industries like construction work, transportation, and the restaurant sector, there is some evidence that the largest sphere is actually located in private households. According to data from the “Socio-Economic Panel” of 2002 at least 11 percent (or about 3.4 million) of households in Germany employ at least one domestic worker (Schupp, 2002). However, only 38 percent of these households are thought to have declared their domestic workers in 2000, intimating that the large majority of these work relationships are informal (Schupp).

72  Birgit Pfau-Effinger and Slađana Sakač Magdalenić The typical employer is an employed upper-middle-class couple, and the typical domestic worker is a formally unemployed working-class housewife or female migrant (Geissler, 2002; Pfau-Effinger, 2009). The skills that are required to undertake such domestic service are generally low. And according to Gather and Meissner (2002), there are similarities with household servants in the early stages of capitalism. Specifically, qualifications are not based on skills that are acquired through formal education but on the demographic attribute of gender. According to the authors, this is particularly detrimental for the working conditions and the level of pay of women in informal employment. Undeclared household work is often precarious and poorly paid, and workers do not have any rights or negotiating power in relation to labor law and social security. The SocioEconomic Panel data also suggest that for a majority (88 percent) of informal domestic workers, household service is their only source of income (Schupp, 2002). Nonetheless, among foreign-born migrant domestic workers, there is evidence that some actually have university degrees from their home countries (Geissler; Hillmann, 2005; Lutz, 2008). Even if the status of these immigrant women as undeclared employees in private households is unprotected and often precarious, empirical work has revealed that they are sometimes “agents of change.” They not only act as breadwinners for their families but contribute to the trans-nationalization of lifestyles, communication, and consumption and therefore have created a “new global migration space” (Faist, 2000; Morokvasi, 1993). Importance and patterns of moonlighting Informal moonlighting is connected with socioeconomic structures differently than is informal subsistence work. Moonlighting is a strategy to earn income in addition to that earned through formal employment, and empirical evidence from a study in the northwest of Germany (called “Ostfriesland” in the early 1990s) shows moonlighting is mainly used by craftsmen and professionals in this way, primarily in the fields of construction, repair, and services. The main aim is to increase disposable household income to purchase desired goods and services (Siebel et al., 1988). The relative importance of moonlighting in this direct survey corresponds with indirect estimates concerning its prevalence in construction, renovation, and repair in the late 1990s by Schneider and Enste (2000). According to their findings, 44 percent of informal employment is observable in this sector and mainly based on “second shift” work that is not tied to their primary occupation. Moonlighting is also connected with a long tradition of highly professionalized craftsmanship in Germany associated mostly with male citizens of German origin. Their contract with the users, usually based on undeclared selfemployment, differs from that linked with their primary job. Specifically, self-employment moonlighting craftsmen are able to achieve a high degree of autonomy and negotiating power that is not possible in their main jobs (Siebel et al., 1988).

Informal employment in the work-welfare arrangement of Germany  73 Segregated informal employment The two main forms of informal employment are quite different in terms of their earnings potential and degree of autonomy. They are, in other words, segregated socioeconomically. However, it is important to highlight the gendered nature of this segregation (see Windebank and Williams in Chapter 5 of this volume). In the case of Germany, the segregation often observed in families and formal labor markets is replicated in informal employment arrangements. Women’s activities mainly include domestic work such as cleaning, domestic help, childcare and cooking. Men, on the other hand, are typically employed on an informal basis in construction, repair work, and gardening (Geissler, 2002). The jobs for women— and immigrants—that are concentrated in the “poverty escape” type of informal employment reflect the low societal valuation that female household labor receives. Domestic workers, whether formal or informal, are often treated as lower-skilled, more likely to be exploited, and unorganized. Moonlighting jobs for German male citizens, alternatively, are often viewed and treated as relatively highly skilled, rewarding, and autonomous (Geissler, 2002; Prugl, 1996; Pfau-Effinger, 2009). Table 5.2 provides evidence that gender differences in wages in informal employment are higher in Germany than in other Northern European countries except Norway. This is indicated by the relatively high gender (women-to-men) hourly wage ratio in informal employment in Germany.

Explaining the development and structure of informal employment in Germany through work and welfare As described earlier, informal employment in Germany may be characterized as a relatively dependent situation in which workers (many of whom are women and/or immigrants) attempt to earn subsistence-level earnings or as a relatively autonomous situation in which workers choose to work informally to earn extra income. Following, we discuss how the segmentation between these two modes of informal production may be understood in the context of the German work and welfare arrangement. Elsewhere this context has been defined as the complex— and often also contradictory—profile of the interrelations of culture, institutions, social structures, and social actors in a specific region, society, or group of societies (Pfau-Effinger, 2001, 2005a). Table 5.2  Time spent in informal employment by informal employees, 18–66 years old, per week Denmark (DKR)

Norway (NKR)

Sweden (SEK)

Germany (DEM)

Great Britain (GBP)

Men

121

144

118

22

9

Women

104

98

99

16

8

68.1%

83.9%

72.7%

88.9%

Gender wage 86.0% ratio

74  Birgit Pfau-Effinger and Slađana Sakač Magdalenić Factors that help explain the importance of the “poverty escape” type of informal employment Supply of informal subsistence workers Since the 1970s, and increasingly since the beginning of the 1990s, Germany has become an important immigrant host nation, and the main countries of origin have shifted from Southern Europe to Central and Eastern Europe. Not all immigrants are treated similarly, however. German immigration policy is based on the idea that German citizenship requires one to have had German ancestors (e.g., “blood relations”) and to be able to prove it (Silver, 1995). These are mainly the socalled “Auswanderer” from Eastern European countries, but migrants from other ancestry groups face great hurdles to gaining citizenship. Citizens of the “old” European Union (EU) countries may also claim EU citizenship and therefore the status of legal worker in Germany. However, for immigrants from countries outside the EU, and from the new Central European member states, there are considerable restrictions to becoming German citizens and, accordingly, legal barriers to participation in formal employment. As a consequence, there is a relatively high proportion of “tolerated” or illegal immigrants who do not have the legal right to take employment. Since German reunification, moreover, new forms of migration from Central and Eastern European countries have developed, and many newcomers have had the opportunity to find work while residing legally on the basis of a tourist visa (Lutz, 2002). A second source of informal workers emanates not from international migration but from formal unemployment and low unemployment benefits. Mass unemployment (as high as 8 percent) existed in the 1980s in West Germany (OECD, 1997: 163), but this decreased considerably by the end of the decade to just less than 5 percent (OECD 2002: 303) because of the temporary boom resulting from the fall of the Berlin Wall. Following reunification, however, the economy entered a crisis that mostly affected East Germany. Accordingly, the unemployment rate increased from almost 5 percent in the early 1990s to doubledigit levels (9–11 percent) during the first years of the new century (OECD 2008). Unemployment benefits have helped little, and are 62 percent of former income for married people and 52 percent for unmarried people. Furthermore, entitlement to unemployment benefits requires at least one year of employment. They decrease after one year of unemployment to a means-tested flat-rate benefit below subsistence-level income. Such meager social assistance provides a strong incentive to enter informal employment. Household and enterprise demand for subsistence informal workers The “housewife model” of the male breadwinner family played a strong role in West German society after World War II—culturally, within families, and in welfare state policy formation. Despite considerable change in the last three decades of the twentieth century, Germany is still a “home caring” society. This means that the care of children younger than three years in general, and of

Informal employment in the work-welfare arrangement of Germany  75 older children at least in the afternoon, is mainly seen as a matter of the private household and not of the welfare state. This orientation is culturally deep-rooted in West Germany and to a considerable degree reflected in family policies (PfauEffinger, 2005b; Geissler, 2002). However, this may cause substantial ambiguities and dilemma for those women who feel responsible for providing care in the home and for contributing to household income by working outside the home at least part-time. Informal employment of house cleaners and childcare providers in the home is used as a means to reduce such cultural ambiguities, particularly by upper-middle-class families in West Germany. Because of high unemployment and considerable immigration, there also exists a group of relatively inexpensive workers excluded by formal employment opportunities and available to work informally. These processes have jointly contributed to an increase in informal employment of the “poverty escape type” in private households in West Germany (Schupp, 2002). Augmenting the impact of the changing housewife model of family structure on informal employment is the cultural acceptance of employing household servants. As Esping-Andersen (1990) has pointed out in his welfare regime approach, in which he defined the German welfare state as a “conservative” welfare regime, there is a tradition of a rather hierarchical structuring of social inequality—at least in West Germany. On the basis of this historical tradition, hiring servants is a part of the “habitus” of the upper class and the upper middle class—in contrast, for example, with the more egalitarian Swedish society wherein employing servants in private households is culturally not encouraged (Pfau-Effinger et al., 2009). Economic crisis in the construction industry represents yet a third main contributor to informal employment of the “poverty escape type.” Specifically, the collapse of construction in East Germany since the 1990s combined with strong competition partly made possible by low wages in Central and East Europe has generated jobs that are located in “external” segments of the labor market of firms (Sengenberger, 1987). It is here that workers are employed in low-skilled jobs with low pay and a relatively low degree of integration into the firm. Such work relationships are otherwise fairly uncommon in German labor markets, wherein the “internal” labor market segment, with skilled work, a long enduring relationship between worker and employer, and relatively high protection by labor law, is dominant—even in the East German labor market, which has been fundamentally restructured in the last decade (Koehler et al., 2006). Factors that help explain the importance of moonlighting Distrust of the state The first of three main factors that are useful for understanding moonlighting in Germany is the low degree of trust in public institutions and a relatively high acceptance of informality. A remarkable cultural feature in Germany is the strong tradition of distrust in state institutions. This is reflected in the 1998 International Social Survey Programme attitude data (Figure 5.1).

76  Birgit Pfau-Effinger and Slađana Sakač Magdalenić It is clear from Figure 5.1 that in the German population there is a comparably high degree of distrust in institutions like the national parliament, the courts and the legal system, and the educational system. Such distrust in Germany is consistent with the high value placed on civil society and its self-organization vis-à-vis the state emanating from the conflicting relationship that the urban bourgeoisie had in part in its historical development with the state and with its feudal class basis (Kocka, 1995). Alternatively, this stands in stark contrast to Denmark and with other Nordic countries that have had more homogeneous class foundations, where the state was much less contested historically (Strath, 2006). The high level of distrust in Germany is connected with a dominant attitude in the population against paying taxes (Pedersen, 2003) and is contradictory with surveys in other nations showing that people support a strong welfare state (Dallinger, 2008). Supply of informal moonlighting workers Thus, the German welfare state may arguably be classified as “conservative” compared to other European nations (Esping-Andersen, 1990). The social insurance system offers a good example. Obtaining health, social security, and unemployment benefits is strongly tied to formal labor market integration as characterized by the male worker who is continuously employed full-time over several decades. Standard pensions, to take just one example, are paid only after 40 years of officially documented employment. There are some exceptions, however. Additional contributions from a second formal job do not augment available health benefits and only marginally increase available unemployment and retirement benefits. This may provide an incentive to work informally—especially of the 70 60

National parliament Courts and the legal system

50

Percent

Schools and the educational system 40 30 20 10 0 Denmark

Germany

Figure 5.1  How much confidence do you have in …? (Source: ISSP (1998) Question Q7 (v12–v13))

Informal employment in the work-welfare arrangement of Germany  77 moonlighting sort if such an arrangement offers greater autonomy and at least moderately raises income. However, although there has long been the possibility of obtaining a second formal employment contract outside the social insurance system that requires only a marginal tax increase (e.g., “Sozialversicherungsfreie Beschäftigung;” Baumeister et al., 1990), this has recently been replaced by the so-called “minijobs” that have been introduced by the Red-Green government. One important change is that the employer now also has to pay a small marginal contribution to the pension system, and workers are entitled to a marginal pension.2 Consequently, mini-jobs have likely begun to replace informal moonlighting work. We noted earlier that additional income is one motivating factor influencing the probability that a craftsman will seek work that is separate from his main source of employment. However, it may be that the professional autonomy obtained from moonlighting is equally or more important (Siebel et al., 1988). The requirement to have a “Handwerksmeister” (craft director) license (and its demanding additional three years of education) to be self-employed in one’s craft provides a good example of state regulations that could be bypassed by moonlighting (Schneider and Enste, 2000). Demand for informal moonlighting workers Although there are multiple socioeconomic circumstances that may contribute to the level of informal moonlighting, home ownership is one of them and was substantially promoted by the German government after reunification. Subsequently, home ownership rates, particularly in East Germany, increased considerably (Voigtlaender 2006). According to one study at least (Siebel et al., 1988), home ownership is a main factor that contributes to the demand for moonlighting production and services.

Conclusion Theoretical treatments of the development of informal work often assume that only one specific set of factors is analytically necessary. Here, however, it has been shown in the context of Germany that such uni-dimensional approaches are not very convincing. We have argued instead that the explanatory power of the modernization approach in relation to the development of informal employment in Germany is weak; there is no evidence that informal employment will vanish with further modernization. Second, the argument offered by neoclassical economics is no more convincing; strong state regulations and relatively high social security contributions and taxes have had a rather ambiguous effect on informal employment in Germany. On one hand, these factors influence labor market segmentation through their effects on employment located in core-industry “internal” labor markets. On the other hand, although these regulations may affect moonlighting activities and some decentralized sectors with low productivity, these effects are mitigated or

78  Birgit Pfau-Effinger and Slađana Sakač Magdalenić enhanced by cultural factors such as trust in public institutions and a relatively high cultural acceptance of informality. Nonetheless, extensive labor market segregation resulted from forces that resemble those attributed by Sassen (1999) to globalization (e.g., immigration). However, most of these processes seem to be endogenous rather than emanating strictly from exogenous forces of globalization. In short, cultural factors play a key yet neglected role in the character and level of informal employment regardless of whether it is undertaken for subsistence or moonlighting purposes. We have shown that the relatively low level of trust in public institutions and the relatively high acceptance of informality contribute to our understanding of relatively high (yet likely to be underestimated) shares of informal employment in Germany compared with other northwestern European nations. Furthermore, two types of informal employment—“escape from poverty” and “moonlighting”— differ with respect to the ways they are related to the socioeconomic or structural context of Germany. Subsistence-level informal work is intimately tied to a homecaring cultural orientation, the existence of a relatively affluent middle class, and the availability of cheap labor (which varies according to unemployment rates, benefit regulations, and restrictions on immigrant opportunities for formal employment). How firm behavior influences the amount of subsistence-level informal employment is more ambiguous. On one hand, particularly in economic crises, decentralized firms with relatively low levels of productivity may opt to begin searching informal labor markets. It should be kept in mind, however, that this behavior is often limited to certain sectors as outlined earlier. On the other hand, as Siebel et al. (1988) have shown in Ostfriesland toward the end of the 1980s, economic crisis can also have an opposite effect—reducing the number of informal jobs. The existence of an affluent middle class also contributes to our understanding of how large the “moonlighting” sector is. However, private households in this case provide consumers rather than workers. As far as informal workers are concerned, opportunities for moonlighting seem to emerge somewhat independently of the labor market conditions and instead result from required social insurance and tax regulations. An increase in state control can contribute to a substantial rise in informal work, as indicated by the examples of Denmark (Jensen and Rathlev, 2009) and Sweden (Renooy et al., 2004). Our findings indicate that there is not a unique singular developmental logic by which informal employment rises and falls. Instead, there are different types of informal employment that develop on the basis of a specific set of factors in the context of the arrangement of work and welfare in a specific society.

Informal employment in the work-welfare arrangement of Germany  79

Notes 1 However, it should be noted that the figures for Denmark and the United Kingdom are based on less than 20 observations and therefore are only partly reliable (Pedersen, 2003: 66). 2 The problem is, however, that this led to a considerable loss of revenues for the social insurance system, for the workers do not have to pay contributions.

Bibliography Baumeister, H., D. Bollinger, W. Cornetz, and B. Pfau-Effinger. 1990. Atypische Beschäftigung: Die typische Beschäftigung der Zukunft? Bremen: Bremen University. Blair, J. P, and C. Endres. 1994. Hidden economic development assets. Economic Development Quarterly 8(3):286–291. Burroni, L., and C. Crouch. 2007. The territorial governance of the shadow economy, Environment and Planning C: Government and Policy, 26(2): 455–70. Castells, M., and A. Portes. 1989. World underneath: The origins, dynamics, and effects of the informal economy. In The Informal Economy: Studies in Advanced and Less Developed Countries, edited by A. Portes, M. Castells, and L. A. Benton. Baltimore: Johns Hopkins University Press. Cyprian, R. 2003. Im Mini aus der Schwarzarbeit. IAB Materialien 1:7–8. Dallinger, U. 2008. Sozialstaatliche Umverteilung und ihre Akzeptanz im internationalen Vergleich. Eine Mehrebenenanalyse. Zeitschrift für Soziologie 37(2): 137–57. Esping-Andersen, G. 1990. Three Worlds of Welfare Capitalism. Oxford: Polity Press. European Commission. 2007. Undeclared Work in the European Union. Report: Special Eurobarometer 284, edited by A. Riedmann and G. Fischer. Brussels: European Commission. Faist, T. 2000. The Volume and Dynamics of International Migration and Transnational Spaces. Oxford: Oxford University Press. Gather, C., and H. Meissner. 2002. Informelle Hausarbeit in Privaten Haushalten. In Weltmarkt Privathaushalt: Bezahlte Haushaltsarbeit im Globalen Wandel, edited by C. Gather, B. Geissler, and M. S. Rerrich. Munster: Wesfalisches Dampfboot. Geertz, C. 1963. Peddlers and Princes: Social Change and Economic Modernization in Two Indonesian Towns, Comparative Studies of New Nations. Chicago: University of Chicago Press. Geissler, B. 2002. Die Dienstleistungslücke im Haushalt. Der neue Bedarf nach Dienstleistungen und die Handlungslogik der privaten Arbeit. In Weltmarkt Privathaushalt. Bezahlte Haushaltsarbeit im globalen Wandel, edited by C. Gather, B. Geissler, and M. S. Rerrich. Munster: Westfalisches Dampfboot. Hart, K. 1973. Informal economic opportunities and urban employment in Ghana. Journal of Modern African Studies 11(1): 61–89. Hillmann, F. 2005. Migrants’ care work in private households: The strength of bilocal and transnational ties as a last(ing) resource in global migration. In Care and Social Integration in European Societies, edited by B. Pfau-Effinger and B. Geissler. Bristol: Policy Press. Jensen, P., and Rathlev, J. 2009. Formal and informal work in the Danish Social Democratic welfare state. In Formal and Informal Work in Europe. The Hidden Work Regime, edited by B. Pfau-Effinger, L. Flaquer, and P. H. Jensen. London, New York: Routledge. Kocka, J. 1995. Burgertum im 19. Jarhundert. Munich: Vendenhoeck and Ruprecht.

80  Birgit Pfau-Effinger and Slađana Sakač Magdalenić Koehler, C., K. Junge, T. Schroeder, and O. Struck. 2006. Trends in employment stability and labour market segmentation. Current debates and findings in eastern and western Europe. In SFB 580. Jena: University of Jena. Lutz, H. 2002. Transnationalität im Haushalt, in C. Gather, B. Geißler, M. S. Rerrich (ed.), “Weltmarkt Privathaushalt – bezahlte Haushaltsarbeit im globalen Wandel”; Forum Frauenforschung – Schriftenreihe der Sektion Frauenforschung in der Deutschen Gesellschaft für Soziologie, 15, Münster: Verlag Westfälisches Dampfboot. Lutz, H. 2008. When home becomes a workplace: domestic work as an ordinary job in Germany? In Migration and Domestic Work. A European Perspective on a Global Theme, edited by H. Lutz. Aldershot: Ashgate. Morokvasi, M. 1993. “In and out” of the labour market: Immigrant and minority women in Europe. New Community 19(3):459–484. OECD. 1997. Employment Outlook. Paris: OECD. ———. 2002. Employment Outlook. Paris: OECD. ———. (2008) Employment Outlook. Paris: OECD. Pedersen, S. 2003. The shadow economy in Germany, Great Britain, and Scandinavia: A measurement based on questionnaire surveys. In Rockwool Foundation Study. Copenhagen: Rockwool Foundation Research Unit. Pfau-Effinger, B. 2001. Kontextualisierung der International Vergleichenden Analyse von Arbeitsmarktwandel. In Neue Ungleichheiten der Erwerbsgesellschaft, edited by P. A. Berger and D. Konietzka. Opladen: Leske und Budrich. ———. 2004. Socio-historical paths of the male breadwinner model: An explanation of cross-national differences. The British Journal of Sociology 53(3):377–400. ———. 2005a. Culture and welfare state policies: Reflections on a complex interaction. Journal of Social Policy 1: 1–18. ———. 2005b. Welfare state policies and care arrangements. European Societies 7(2):321– 347. ———. 2009. Varieties of undeclared work in European societies, British Journal of Industrial Relations, 47(1): 79–99. Pfau-Effinger, B., L. Flaquer, and P. Jensen. 2009. Formal and Informal Work: The Hidden Work Regime in Europe. London: Routledge. Prugl, E. 1996. Home-based producers in development discourse. In Homeworkers in Global Perspective: Invisible No More, edited by E. Boris and E. Prugl. London: Routledge. Renooy, P., S. Ivarsson, O. van der Wusten-Gritsai, and R. Meijer. 2004. Undeclared Work in an Enlarged Union. An Analysis of Undeclared Work: An In-depth Study of Specific Items. Amsterdam: Inregia and Regioplan. Sassen, S. 1994. Cities in a World Economy. Thousand Oaks, CA: Sage. ———. 1997. Informalization in advanced market economies. In Issues in Development Discussion Paper. Geneva: ILO. ———. 1999. Guests and Aliens. New York: New Press. Schneider, F., and D. Enste, eds. 2000. Schattenwirtschaft und Schwarzarbeit: Umfang, Ursachen, Wirkungen und Wirtschaftliche Empfehlungen Forum Wirtschaft und Soziales. Munchen: Oldenbourg Wissenschftverlag. Schupp, J. 2002. Quantitative Verbreitung von Erwerbstatigkeit in privaten Haushalten Deutschlands. In Weltmarkt Privathaushalt. Bezahlte Haushaltsarbeit im globalen Wandel, edited by C. Gather, B. Geissler, and M. S. Rerrich. Munster: Westfalisches Dampfboot. Sengenberger, W. 1987. Struktur und Funktionsweise von Arbeitsmarkten: Die Bundesrepublik Deutschland im Internationalen Vergleich. Frankfurt: Campus.

Informal employment in the work-welfare arrangement of Germany  81 Siebel, W., J. Jessen, C. Siebel-Rebell, U. J. Walther, and I. Weyrather. 1988. Arbeit nach der Arbeit. Schattenwirtschaft, Wertewandel und Industriearbeit. Opladen: Westdeutscher Verlag. Silver, H. 1995. Social exclusion and social solidarity. International Labour Review 133(5– 6):531–578. Strath, Bo. 2006. The normative foundations of the Scandinavian welfare states in historical perspective. In Normative Foundations of the Welfare State: The Nordic Experience, edited by N. Kildal and S. Kuhn. New York: Routledge. Thomas, J. J. 1992. Informal Economic Activity. Hemel Hempstead: Harvester Wheatsheaf. Voigtlaender, M. 2006. Der oeffentliche Wohnungsmarkt in Deutschland – Eine Untersuchung aus ordnungspolitischer Sicht. IW-Positionen 27, Koeln: Institut der deutschen Wirtschaft. Williams, C. C. 2001. Tackling the participation of the unemployed in paid informal work: A critical evaluation of the deterrence approach. Environment and Planning C: Government and Policy 19:729–749. Williams, C. C., and J. Windebank. 1998. Informal Employment in Advanced Economies. London: Routledge. ———. 2001. Beyond profit-motivated exchange: Some lessons from the study of paid informal work. European Urban and Regional Studies 8(1):49–61.

6 Gender and informal work Jan Windebank and Colin C. Williams

Introduction Although the study of informal work has not been entirely “gender-blind,” it is fair to state that the gender dimension has been until now far less prominent than the socioeconomic and geographical disparities in the literature. Here, in consequence, a review is conducted of what is known about the gendering of informal work and following this, recent survey data from England are used to make some significant advances in how the gender variations in informal work are conceptualized. Reviewing the existing literature on informal work that has drawn a distinction between men’s and women’s endeavor in this realm, it will be here shown that most studies do little more than identify the amount of informal work undertaken by men and women, whether one gender participates in such work to a greater extent than the other and/or whether there are gender inequalities in informal wages (e.g., Fortin et al., 1996; Hellberger and Schwarz, 1986; Lemieux et al., 1994; Leonard, 1994; McInnis-Dittrich, 1995; Van Eck and Kazemeier, 1989). On the whole, the work relations and motives underpinning the informal work undertaken by men and women have not been investigated. Instead, it is more often the case that such relations and rationales are simply read off from other findings such as their wage levels. Take, for example, women’s informal employment. Based on the finding that women receive relatively low wages for their informal work, such endeavor has been generally portrayed as low-paid exploitative market-like work and argued to be conducted by women for the purpose of making additional money “on the side” so as to help the household get by (e.g., Howe, 1990; Jordan et al., 1992; Leonard, 1994; MacDonald, 1994; Morris, 1987, 1995; Rowlingson et al., 1997). Indeed, such assumptions have been strongly reinforced by a raft of studies analyzing domestic service work (e.g., Anderson, 2001a,b; Boris and Prugl, 1996; Dagg, 1996; Hondagneu-Sotelo, 2001; Salmi, 1996). Here, in consequence, and rather than simply accept prima facie these assumptions about the nature of women’s informal work, research is reported that seeks to uncover the work relations and motives of women and men informal workers and their employers. These data derive from the English Localities Survey of informal work, the methodology of which is reported in detail in Chapter 7.

Gender and informal work  83 This will reveal that in these English localities, although men are usually slightly more likely than women to engage in informal work, the nature of the work that they conduct is significantly different. When men participate in such work, this endeavor is much more likely to be of the market-orientated variety. Women’s informal work, in contrast, is significantly more likely to be undertaken for friends, neighbors, and kin under relations more akin to unpaid mutual aid and for rationales other than financial gain. The resultant conclusion is that just because the informal work of women is low-paid does not mean that it is an exploitative organized form of informal employment. Instead, their low pay is more reflective of the fact that they are engaged in community-orientated informal work where wage rates diverge significantly from market rates. The outcome will be a call for a less totalizing and more gender-differentiated reading of informal work. Even if some informal work conducted by women is low-paid market-orientated work carried out for unadulterated economic reasons, the vast bulk at least in contemporary England is undertaken for friends, kin, and neighbors for reasons associated with redistribution and sociality. Men, meanwhile, engage in informal work that on the whole conforms to the standard reading of informal work as market-like and undertaken primarily for the objective of financial gain, intimating that the conventional reading of informal work reflects the experiences of men rather than women.

Gender variations in the level of engagement in informal work Are women more likely to engage in informal work than men? Read through the lens of the “marginality thesis,” it might be assumed that this is the case (e.g., Priest, 1994). Analyzing the vast majority of studies undertaken on informal work, nevertheless, the common finding is that women participate less than men, and men are found to constitute the majority of the informal labor force. This is found to be the case in the Netherlands (Van Eck and Kazemeier, 1989; Renooy, 1990); in the United Kingdom (MacDonald, 1994; Pahl, 1984); in Italy (Mingione, 1991; Vinay, 1987), in Denmark (Mogensen, 1985); in the United States (McInnisDittrich, 1995); and in Canada (Lemieux et al., 1994; Fortin et al., 1996). Most of the studies, however, identify only a relatively small gap in the rates of participation of men and women. For example, Fortin et al. (1996) find in their study of three Canadian regions that men represent only just more than half of all informal workers (51.3–52.6 percent), and merely 1 percent more men than women participate in informal work (Table 6.1). Similarly sized gaps in participation rates are also identified in Denmark (Mogensen, 1985), the Netherlands (Van Eck and Kazemeier, 1989), and Italy (Mingione, 1991). This intimates, therefore, that the gap between men and women in their participation rates in informal work is narrower than the gender gap in formal employment participation rates, revealing that women do indeed find it easier to work on an informal basis relative to men than formally. It also reveals that even if women are over-represented in all other types of low-paid employment, this is not the case when it comes to the informal realm.

84  Jan Windebank and Colin C. Williams Table 6.1  Informal wage rates in three regions of Canada: by gender, 1993 Quebec (1985 in parentheses)

Montreal

Bas-duFleuve

Percent engaging in informal work: Men

5.4 (6.4)

6.6

4.1

Women

4.2 (5.6)

5.5

3.2

Men

52.6 (51.8)

52.1

51.3

Women

47.4 (48.2)

47.9

48.7

Men

403 (275)

581

309

Women

417 (450)

614

317

Men

3,093 (2,744)

5,136

2,850

Women

3,994 (2,444)

3,949

1,652

Men

7.67 (9.98)

8.83

9.22

Women

9.57 (5.43)

6.43

5.21

Percent of all informal workers:

Average hours p.a. (C$):

Average salary p.a. (C$):

Average wage/hour:

Source: derived from Fortin et al. (1996: Tables 3.1–3.3)

Even if the common finding is that men rather than women constitute the majority of the informal labor force, it is important to highlight that this is not always the case. In Spain and Portugal, for example, Lobo (1990a, b) finds that women rather than men are more likely to conduct informal work. Similarly, the English Localities Survey also finds that women conducted a slightly higher proportion of tasks on an informal basis. Although 52 percent of the sampled population, women conducted 55.5 percent of all the informal work. More particularly, it is women living in lower-income households (i.e., with an income of less than £275 gross per week) and unemployed women who most heavily engage in such work. It thus appears that the gender configuration of the informal labor force varies in different places. Rather than propose universal hues about its gendered characteristics, it is necessary to unpack how this varies across space and the reasons why this might be the case. To achieve this, and as will be now shown, it will be necessary to more fully understand the gender variations in the character of informal work in different populations.

Gender and informal work  85

Gender variations in the nature of informal work Until now, there has been a largely unchallenged assumption that both men and women conduct informal work under market-like relations for the purpose of financial gain. Here, this is evaluated critically. This will reveal that although the informal work conducted by men generally tends to be market-like in terms of the work relations it is embedded within, this is not so in the case of women. Commencing with the types of informal work that men and women undertake, it is striking that women carry out a very different set of tasks than men. Just as there is gender segmentation by sector in the formal labor market with women heavily concentrated in service sector jobs (e.g., Townsend, 1997), the same is the case in the informal sphere. As Hellberger and Schwarze (1986) identify in Germany, though 12.3 percent of informal workers are in the primary sector, 35.8 percent in manufacturing, and 51.9 percent in services, these figures are 6.2 percent, 11.8 percent, and 82.0 percent, respectively, for women (and 15.7 percent, 49.3 percent, and 35.0 percent, respectively, for men). Similar findings are identified elsewhere. Women tend to engage in service activities such as commercial cleaning, domestic help, child care, and cooking when they conduct informal work. Men, on the other hand, largely conduct what are conventionally seen as “masculine tasks” such as building and repair work (Fortin et al., 1996; Jensen et al., 1995; Leonard, 1994; Mingione, 1991; Pahl, 1984). However, rather than read the types of informal work that men and women conduct solely through the lens of the gender segmentation of the formal sphere, it is perhaps just as salient to view such work through the lens of the unpaid domestic sphere and the gender allocation of responsibilities in this unpaid realm. When this is done, the finding is that gender divisions in the informal sphere also mirror the gender divisions of domestic labor. In other words, the informal sphere reflects and reinforces the gender divisions in activities prevalent in not only the formal labor market but in unpaid work. To show this, the English Localities Survey can be analyzed in terms of the types of informal work that men and women undertake. As Table 6.2 reveals, women carry out tasks on an informal basis for which they are largely responsible as far as the gender division of domestic work is concerned. This has been intimated before elsewhere (e.g., Fortin et al., 1996; Hellberger and Schwarze, 1986; Jensen et al., 1995; Leonard, 1994; Mingione, 1991; Pahl, 1984). What is so interesting about these results, however, is that they display how the gender segregation of tasks in the realm of informal work is stronger than the gender segregation of unpaid domestic work. For example, women alone undertake 63 percent of all routine housework tasks when unpaid domestic work is used but 84 percent when carried out as informal work. In contrast, women conduct 37 percent of house maintenance tasks when domestic work is used but only 19 percent when carried out as informal work. The inequalities prevalent in the gender divisions of domestic work, therefore, are extenuated in the informal sphere. Take, for instance, the task of doing the housework. The last time that this was undertaken on an unpaid basis, it was a woman alone in 65 percent of instances.

86  Jan Windebank and Colin C. Williams Table 6.2  Relationship between gender divisions of informal work and unpaid domestic work in England: by task % of work conducted using informal exchange

% of all informal work

% of informal work conducted by women

Unpaid domestic work % conducted by: Man alone

Woman alone

Shared

House maintenance All house maintenance (last 5 years)

8

24

19

49

37

14

Outdoor painting

10

4

23

65

22

13

Indoor painting

7

4

19

36

43

21

Wallpapering

6

4

18

39

45

16

12

4

11

74

20

6

Mending broken window

7

2

17

93

7

0

Maintenance of appliances

11

6

33

75

23

2

10

19

3

74

25

1

Plastering

Home improvement All home improvement (last 5 years) Double glazing

7

2

0

67

33

0

Plumbing

13

6

0

76

24

0

Electrical work

12

4

0

68

29

3

House insulation

1

0

0

100

0

0

Put in bathroom

24

2

0

100

0

0

Build a garage

0

0

50

100

0

0

Build an extension

0

0

0

100

0

0

25

0

0

100

0

0

Put in central heating

9

1

0

100

0

0

Carpentry

9

4

0

72

27

1

All routine housework (last week)

3

28

84

17

63

21

Do housework

2

2

93

13

65

22

Clean the house

2

2

86

25

65

11

Clean windows

10

9

83

29

64

7

Spring cleaning

2

2

89

13

72

15

Do the shopping

1

1

80

14

50

36

Wash clothes/sheets

1

1

88

11

73

17

Ironing

1

1

80

11

71

18

Cook the meals

1

1

87

12

54

34

Wash dishes

1

1

83

17

53

30

Hairdressing

8

8

80

22

75

3

Administration

1

1

50

28

59

13

Convert attic

Routine housework

Making and repairing goods All making and repairing goods

2

3

94

10

89

1

Make clothes

0

0

100

9

91

0

Knitting

0

0

100

2

98

0

Repair clothes

0

0

100

7

91

2

Make furniture

6

1

50

61

39

0

continued…

Gender and informal work  87 Table 6.2 continued… % of work conducted using informal exchange Make garden equipment Make curtains

% of all informal work

% of informal work conducted by women

Unpaid domestic work % conducted by: Man alone

Woman alone

Shared

33

0

0

50

50

0

8

2

100

3

97

0

9

12

11

78

15

8

6

3

50

68

20

13

19

8

13

100

0

0

4

2

0

84

12

4

Car maintenance All car maintenance (last year) Wash car Repair the car Car maintenance Gardening All gardening (last year)

2

3

58

32

59

9

Indoor plants

0

0

86

18

76

6

Outdoor borders

3

2

40

34

53

12

Outdoor vegetables

0

0

100

41

47

13

Lawn mowing

4

2

50

52

38

10

Caring All caring (last month)

8

11

92

11

63

26

Baby-sitting (day)

11

5

100

5

74

21

Baby-sitting (night)

12

5

92

11

68

21

Courses (e.g. piano lessons)

0

0

100

22

67

11

Pet care

2

1

50

15

50

35

Source: English Localities Survey

When carried out on an informal basis, however, in 93 percent of cases, it was a woman who had conducted this work. Payment for such work thus appears to reinforce the gender segmentation of tasks, not reduce it. This applies to nearly every task surveyed in Table 6.2. It seems, in consequence, that women are employed on an informal basis to do tasks “traditionally” associated with women’s work and men to do tasks conventionally associated with men’s work. Monetization, therefore, does not reduce, but consolidates, gender divisions of labor at least as far as paying on an informal basis is concerned. It is not just the sectors in which men and women work that differentiate their informal endeavor. There is also a difference in their work practices. Men’s participation is more infrequent but full-time whereas women work on a more regular but part-time basis (Leonard, 1994; McInnis-Dittrich, 1995). As Leonard (162) discovers in Belfast, “While the women were usually in constant informal employment compared to the men, whose employment was more casual, nonetheless ... the women tended to work part-time while the men tended to work full time.” In Appalachia, meanwhile, McInnis-Dittrich arrives at the same conclusion. Women engage in regular small part-time informal jobs such as housework, consignment quilting, gardening, child or elder care, yard sales, aluminium recycling, or work in the tobacco fields, whereas men undertake more irregular full-time jobs, such as in the local sawmill, the sanitary landfill, or on the

88  Jan Windebank and Colin C. Williams farm. So, informal work is characterized not only by the same sector divisions as formal employment but by the part-time/full-time dichotomy that is so prevalent in the gendering of formal employment replicated in the informal sphere. A further difference concerning men and women who conduct informal work concerns their formal employment status. Men engaging in informal work are more likely to be formally employed. Women, however, are more likely to be unemployed. Take, for example, the study by Pahl (1984) on the Isle of Sheppey. When the 27 informal workers identified in the study were analyzed, some salient gender contrasts emerged. Of the 11 men, 10 were in full-time employment. Only one was unemployed. By contrast, of the 16 women, 8 were full-time housewives. This difference is largely related to the type of work conducted. Men, in general, are more likely to do home improvements, which if unemployed is conspicuous to observers, whereas women overwhelmingly provide routine domestic services, which are not so noticeable and are often perceived rightly or wrongly as unpaid activities. In addition, “full-time housewives” are one step removed from the authorities in the sense that they do not claim benefit themselves, sign on, get called for interviews, or even register as unemployed. This unequal evaluation of various tasks is to the advantage of men when they are in formal employment but is held against them if unemployed and working informally (Pahl, 1984). Furthermore, most informal work conducted by men involves skills that unemployed men are perceived as unlikely to possess whereas most informal work undertaken by women uses skills that most women are perceived to possess (Renooy, 1990), since these emanate from the family and household, not the employment-place. Indeed, these women are often acting as substitute “housewives” for other women with more lucrative employment. Gender variations in wage rates Most studies of informal work, to repeat, find that women generally earn lower informal wages than men (Fortin et al., 1996; Hellberger and Schwarze, 1986; International Labour Office, 2002; Lemieux et al., 1985; McInnis-Dittrich, 1995). Take, for example, the studies by Fortin et al. (1996). As Table 6.1 displays, men undertaking informal work do fewer hours than women but have higher average total incomes from such work in both Montreal and Bas-du-Fleuve, meaning that the average hourly wage of men is higher than for women. Although this was also the finding in Quebec in 1985, it was not the same in 1993. The average number of hours worked by men informal laborers considerably increased between 1985 and 1993 whereas the average hours worked by women declined, yet the average hourly informal wage of men drastically reduced whereas for women it underwent a considerable increase. Indeed, by 1993, the average hourly wage of women was higher than that of men. Put another way, the increase in hours worked informally by men and their declining wages can be interpreted as a rightward shift of the labor supply curve in a demand-supply framework. Similarly, the decrease in hours worked informally by women and their rising wages can be seen to reflect a leftward labor supply shift.

Gender and informal work  89 Fortin et al. (1996), however, neither identify nor explain this shift in their original analysis. Personal correspondence with the authors, however, reveals that these trends are considered to be due to the recession in Quebec in the early 1990s, which particularly hit men’s activities in construction and repair, whereas the ongoing feminization of the formal labor force is felt to have led to a shortage of informal labor in what are traditionally perceived as feminine tasks, such as child care and domestic cleaning, leading to a rise in informal wage rates. This important exception displays that there are particular economic and social circumstances in which women can and do receive higher informal wage rates than men. Nevertheless, it should not detract from the fact that women generally earn less than men in informal work in developed nations. Moreover, and as Table 6.3 reveals in Germany, although women dominate the lower-paid echelons and men the higher-paid spheres of informal work, there are men in particular places and circumstances who tend to earn a very poor wage from their informal work and women who earn a relatively high hourly wage. For example, in areas where child care is scarce, one would expect relatively high informal incomes from it. Indeed, rates of pay for child minding vary enormously from one suburb to another, let alone one city to another. This caution in allocating poorly and well-paid informal employment exclusively to women and men, respectively, is reinforced by findings in Italy. Here, some women do fare relatively well from their informal work, especially in the Red regions (Cappechi, 1989; Vinay, 1987), such as women in Umbria, who fabricate mini-motors for teleprinters in their basements (Mattera, 1985). Consequently, it would be erroneous to represent the segmented nature of informal work in too rigidly gendered terms. Nevertheless, and similar to the formal labor market, the existence of women in higher-paid positions does not undermine the general trend of women being ghettoized at the lower end of the segmented informal labor market. As the International Labour Office (2002: 31) concludes with regard to informal work, ‘women are concentrated in the lower-income segments.” Is it thus possible to conclude that this is low-paid market-like work? Although most of the current literature takes low wage rates as indicative that this is the Table 6.3  Average hourly wage rates in second jobs, Germany DM per hour

Percent of second jobs in this income bracket

Percent of men in second jobs

Percent of women in second jobs

15

38.1

42.0

31.0

Source: Hellberger and Schwarze (1986, Table 2)

90  Jan Windebank and Colin C. Williams case, a deeper investigation of the work relations and motives underlying this work reveals the need for a richer and more complex portrait of informal work to be painted than has so far been the case. Gender variations in the work relations For whom do men and women conduct informal work? Do they work for organized businesses, or do they work for private households? Analyzing data from the English Localities Survey, the finding is that just 5 percent of women’s informal work was conducted for wholly or partially underground businesses (12 percent of men’s informal work) and only 10 percent (37 percent among men) on a self-employed basis for people previously unknown to them. The vast majority (85 percent) of women’s informal work (compared with 51 percent of men’s) is conducted either for kin, friends, or neighbors. When women conducted work on an informal basis for kin, friends, and neighbors, furthermore, it was in 95 percent of cases other women who had employed them. Breaking down this informal work conducted for close social relations, 45 percent of all informal work is undertaken for kin (mostly sisters, aunts, grandmothers, cousins) and 40 percent for friends and neighbors (nearly always other women). Hence, even if women, especially unemployed women, disproportionately participate in informal work and it is low-paid, these data on the work relations involved intimates the need to question whether they are engaged in market-like profit-motivated work. Previous studies are entirely correct that a lot of informal work conducted by women is carried out on a short-term part-time basis, is lowpaid, and revolves around tasks associated with women’s domestic responsibilities. The data from the English Localities Survey entirely reinforces this conclusion. However, it also reveals that to read this through the lens of formal employment is perhaps a misnomer. Much of this informal work is undertaken for kin, friends, and neighbors. One thus has to question whether classifying this work as akin to formal employment and perceiving it as part of a hierarchy of types of employment is an appropriate interpretation of the work relations involved. Motives for supplying informal work: gender variations Examining traditional discourses on the motives of men and women supplying informal work, the overwhelming view is that women conduct informal work mainly when the household needs to generate extra cash and when it is the only work available that fits in with their domestic caring responsibilities, such as for children or elderly relatives (Howe, 1990; Jordan et al., 1992; Leonard, 1994; MacDonald, 1994; Morris, 1987, 1995; Rowlingson et al., 1997). When men undertake informal work, meanwhile, it is seen to be much more about generating spare cash or pocket money to finance social activities and to differentiate themselves from the domestic realm and women (Leonard; MacDonald; Morris). Analyzing the studies by Morris (1987, 1995) in South Wales and Hartlepool, for example, the argument is that for men, informal work fulfils two social

Gender and informal work  91 functions: It provides a means of disassociation and differentiation from the domestic sphere and women and acts as a source of additional earnings to finance social activity, notably drinking. Informal work for women, meanwhile, was argued to relate to the conventional gender division of labor and to established norms about gender roles and identities. “Thus female spending patterns are bound with their association with the domestic sphere, and to be contrasted with men’s perceived need for a ‘public’ identity achieved through social spending” (Morris, 1987: 100–101). Leonard (1994) argues in a similar vein with regard to what men and women did with their informal earnings in Belfast. Women were argued to regard their income as the family’s wage and use their earnings to provide for the everyday needs of the family. Men, on the other hand, use either part or all of the income derived from working on an informal basis to satisfy their personal needs. Some men felt that giving their informal income to satisfy family needs would mean that they were working for nothing. In this sense, women use such income for primarily economic reasons whereas men use it more for social reasons. However, such a gendered division of the motivations for conducting informal work is perhaps not so starkly gender-differentiated as intimated earlier. As Leonard (1994) highlights, women also use such work as a tool to reconstitute continually their social networks. For example, catalogue buying and selling gave women an opportunity to forge networks and cement personal and social ties. Transactions were highly socialized, giving women the opportunity to network with other housewives on the estate. However, and as Leonard asserts, these personal social relationships between women on the estate were often also manipulated for entrepreneurial advantage. Building up friendships and relationships with others on the estate was frequently a cultural device, strategically used to make money. Similarly, for men, although such work might be undertaken to fund socializing, this can also be seen as a mixture of economic and social reasons as social interaction is seen by many of these men as a basic need and a source of further work. In the English Localities Survey, however, a rather different understanding of the primary motives underpinning such work emerged. Its finding is that only 20 percent of tasks that women conduct on an informal basis are undertaken for primarily economic rationales compared with 82 percent of the informal tasks carried out by men (Table 6.4). These rationales predominate when women and men work for firms or engage in self-employed activity for people they do not know well. They do not prevail, however, when they work for friends, kin, and neighbors, namely 85 percent of all women’s informal work and 47 percent of men’s informal endeavor. First, and given that many women mostly knew the people for whom they worked, 36 percent of the tasks undertaken on an informal basis were chiefly carried out for redistributive reasons (compared with just 8 percent of the tasks undertaken on an informal basis by men). The supplier knew the recipient needed to do the task and that they would be unable to get the work completed unless they were helped. This was either because they could not afford to get it done or because they were unable to do it owing to age, illness, and so forth. These

92  Jan Windebank and Colin C. Williams Table 6.4  Motives of suppliers of informal work in English localities: by gender Percent of informal work supplied primarily to:

Men

Women

All

Make money

82

20

50

8

36

22

10

44

28

100

100

100

Help out the customer Build community networks Total Source: English Localities Survey

primarily redistributive rationales are to the fore among unemployed or earlyretired women. The price charged was often well under the market price. Indeed, the closer the social relations, the more likely the price diverged from market norms. Given that these rationales prevailed for more than one-third of all women’s informal work, it is not difficult to see one of the principal reasons why women are poorly paid for their informal work, and it has little to do with the presence of unscrupulous employers seeking to exploit them on low wages. Beside redistributive rationales, another reason women engage in informal work revolves around community building. Some 44 percent of the informal work conducted by women (compared with 10 percent of the informal work undertaken by men) is carried out primarily for this reason. Conducting a job informally for a small payment was a way of mixing with and helping people one knew and, at the same time, making a little money on the side. When the work was conducted for somebody fairly well known to them to develop social networks, payment diverged from market norms to a greater extent than for all other forms of informal work. However, when women conduct work for somebody less well known to them to develop fledgling relationships, the price is often set just below the market price so as not to insult the person either by charging too much or too little. Instead, the aim is to charge an amount that leaves the way open to reciprocity but does not oblige it. Unpacking such motives thus enables the gendered nature of informal work to be more fully understood. For example, when it is asserted that women are more likely to engage in part-time and lower paid informal work, this is not simply because women are engaged in precarious types of exploitative employment. Although they do indeed engage in such informal work, it is only a minor segment of all of the informal work that they undertake. Rather, the reason that it is parttime, continuous, and low-paid is because it is paid mutual aid, or what has been elsewhere termed a hidden economy of favors (Williams, 2004). Employers’ motivations Are “employers” (i.e., firms and individuals) simply seeing women and men informal workers as cheap labor and/or a means of saving money? Or are their rationales more diverse? Economic rationales, such as the desire to save money, were cited as the primary reasons in only 15 percent of instances wherein women

Gender and informal work  93 were employed to conduct a task on an informal basis, and this near enough always involved women working for firms or for people previously unknown to them (Table 6.5) When friends, neighbors, or kin employed them, in contrast, it was explicitly asserted that the reason was not, could not, and should not be to save money. Indeed, when they were asked how much a friend, neighbor, or relative had been paid, interviewees nearly always prefaced their response with phrases such as “we weren’t ripping them off but they would only take…” or “it wasn’t really about money but we gave them…” If not about financial gain, then what are the rationales underpinning these exchanges? Examining the heterogeneous motives stated by those employing women and men informal workers, two overarching themes again prevail within which most of the detailed reasons can be embedded. These are, on the one hand, the desire to develop social networks and, on the other hand, the wish to help others out. First, employers often viewed tasks in need of completion as an opportunity to engage in exchange with relatives, friends, or neighbors. Here, informal exchange was being used both as a medium to forge closer ties with those whom they already knew and as an opportunity to initiate links with people whom they did not know very well. Why, however, was payment involved in such bids to develop their social networks? On the one hand, payment was used because these employers did not want to feel that if they asked somebody to do a task for them, they would owe them a favor. Particularly for those struggling to get by, the last thing they wanted was to owe people favors. Using money to pay for favors avoided such obligations “hanging over them.” On the other hand, payment was used owing to a perception that you could no longer rely on people to return favors, indicating the demise of trust, especially in deprived neighborhoods. As one woman asserted, You cannot trust people to return a favor these days. I don’t want the hassle of waiting and seeing if they return it. Me paying stops any ruckus when we fall out. I wouldn’t be able to go round to theirs if they owed me. They’d think I was pestering them. Cash was thus viewed as a necessary medium when maintaining or building community networks, especially when neighbors or friends were involved. Rather than provide the opportunity for relations to be ruined if they failed to return Table 6.5  Motives of purchasers of informal work: by gender Percent of informal work purchased primarily to:

Men

Women

All areas

Save money

45

15

31

Financially help the supplier

13

30

22

Build community networks Total Source: English Localities Survey

42

55

47

100

100

100

94  Jan Windebank and Colin C. Williams a favor, the use of cash in exchanges prevented such a potential situation from arising. Monetary exchange was, therefore, oiling the wheels for reciprocal exchange in situations where trust was lacking and where acts of mutual aid might not otherwise occur. In other words, cash acted as a substitute for trust. The outcome was that it had become the norm in some circumstances to give money in return for favors, particularly in deprived neighborhoods (see Chapter 7). A second reason for paying was to give money to suppliers in a manner that avoided all connotations that this was an act of charity. This redistributive rationale was especially notable when kin were involved, such as a sister, cousin, niece, or aunt, particularly when they were unemployed. Employing people informally is, therefore, far from being about simply financial gain. Even if some used informal work to save money, this normally occurred when previously unknown people were employed, accounting for only some 31 percent of all informal work. The vast majority of the time, women were being paid on an informal basis either to help them out (e.g., by providing some cash while avoiding any notion of charity) or to develop closer ties with them. In asserting this, one does not negate the fact that there are unscrupulous employers who exploit vulnerable women in dire need of extra money. The point here is simply that other rationales also exist when women are employed by kin, friends, and neighbors and these have little to do with an employer seeking to save or make money.

Conclusions Until now, relatively little thought has been given to the gender disparities in informal work compared with the geographical and socioeconomic inequalities. This chapter has thus started to unpack these gender variations. Whenever this issue has been so far discussed, it has been read off from the finding that women are relatively lowpaid compared with men for their informal work, that their work must be of a more exploitative variety, and that they occupy the lowest rung of jobs in this sphere. Although this chapter has not sought to deny that some women do indeed engage in highly exploitative informal employment for very low pay, the argument has been that much greater care needs to be taken over deciphering the character of the informal work undertaken by men and women than has so far been the case. Rather than simply read off the existence of exploitative informal work from women’s low pay, for instance, this chapter has sought to explore the work relations and motives involved when men and women engage in informal work. In doing so, it has revealed some significant differences in the nature of the informal work that men and woman conduct that do not resonate with what has been argued before. It has been here found that when men engage in informal work, it is much more likely to be of the market-orientated variety. Women’s informal work, in contrast, is significantly more likely to be conducted for friends, neighbors, and kin for rationales other than financial gain or, put another way, embedded in a moral economy of favors. The implication, therefore, is that just because women are lower paid does not mean that they are more likely to be found engaged in exploitative low-paid organized forms of informal employment.

Gender and informal work  95 Instead, their low pay is much more a reflection of the fact that it is largely women who provide the social glue that holds together community in the form of the provision of mutual aid. Future research on the gender dimension of informal work, in consequence, should stop adopting an employment-centric approach when reading the gender configuration of this sphere and instead also read such work through the lens of the unpaid sphere so as to advance a fuller understanding of this form of work. Indeed, unless it is recognized that there are significant differences in the work relations and motives underpinning the informal work of women and men, it seems very unlikely that progress will be made in more fully understanding the gender disparities in the informal realm. In this chapter, empirical evidence from England has been used to start to unravel such gender differences. Further studies from elsewhere in the developed economies are now required to evaluate whether there are similar configurations in other countries. Until such research is undertaken, it cannot be known whether this situation is the general rule or the exception.

Bibliography Anderson, B. 2001a. Why madam has so many bathrobes: Demand for migrant domestic workers in the EU. Tijdschrift voor Economische en Sociale Geografie, 92(1):18–26. Anderson, B. 2001b. Different roots in common ground: Trans-nationalism and migrant domestic workers in London. Journal of Ethnic and Migration Studies 27(4):673–683. Boris, E., and E. Prugl. 1996. Introduction. In Homeworkers in Global Perspective: Invisible No More, edited by E. Boris and E. Prugl. London: Routledge. Cappechi, V. 1989. The informal economy and the development of flexible specialisation in Emilia Romagna. In The Informal Economy: Studies in Advanced and Less Developing Countries, edited by A. Portes, M. Castells, and L.A. Benton. Baltimore: Johns Hopkins University Press. Dagg, A. 1996. Organizing homeworkers into unions: The Homeworkers Association of Toronto, Canada. In Homeworkers in Global Perspective: Invisible No More, edited by E. Boris and E. Prugl. London: Routledge. Fortin, B., G. Garneau, G. Lacroix, T. Lemieux, and C. Montmarquette. 1996. L’Economie Souterraine au Quebec: Mythes et Realites Laval: Presses de l’Universite Laval. Hellberger, C., and J. Schwarze. 1986. Umfang und struktur der nebenerwerbstatigkeit in der Bundesrepublik Deutschland. Berlin: Mitteilungen aus der Arbeitsmarket und Berufsforschung. Hondagneu-Sotelo, P. 2001. Domestica: Immigrant Workers Cleaning and Caring in the Shadows of Affluence. Berkeley and Los Angeles: University of California Press. Howe, L. 1990. Being Unemployed in Northern Ireland: An Ethnographic Study. Cambridge: Cambridge University Press. International Labour Office. 2002. Decent Work and the Informal Economy. Geneva: International Labour Office. Jensen, L., G. T. Cornwell, and J. L. Findeis. 1995. Informal work in nonmetropolitan Pennsylvania. Rural Sociology 60(1):91–107. Jordan, B., S. James, H. Kay, and M. Redley. 1992. Trapped in Poverty? Labour-Market Decision in Low-Income Households. London: Routledge.

96  Jan Windebank and Colin C. Williams Lemieux, T., B. Fortin, and P. Frechette. 1994. The effect of taxes on labor supply in the underground economy. American Economic Review, 84(1):231–254. Leonard, M. 1994. Informal Economic Activity in Belfast. Aldershot: Avebury. Lobo, F. M. 1990a. Irregular work in Spain. In Underground Economy and Irregular Forms of Employment. Final Synthesis Report. Brussels: Office for Official Publications of the European Communities. Lobo, F. M. 1990b. Irregular work in Portugal. In Underground Economy and Irregular Forms of Employment. Final Synthesis Report. Brussels: Office for Official Publications of the European Communities. MacDonald, R. 1994. Fiddly jobs, undeclared working and the something for nothing society. Work, Employment and Society 8(4):507–530. Mattera, P. 1985. Off the Books: The Rise of the Underground Economy. New York: St Martin’s Press. McInnis-Dittrich, K. 1995. Women of the shadows: Appalachian women’s participation in the informal economy. Affilia: Journal of Women and Social Work 10(4):398–412. Mingione, E. 1991. Fragmented Societies: A Sociology of Economic Life Beyond the Market Paradigm. Oxford: Basil Blackwell. Mogensen, G. V. 1985. Sort Arbejde i Danmark. Copenhagen: Institut for Nationalokonomi. Morris, L. 1987. Constraints on gender: The family wage, social security and the labour market; reflections on research in Hartlepool. Work, Employment and Society 1(1):85– 106. Morris, L. 1995. Social Divisions: Economic Decline and Social Structural Change. London: UCL Press. Pahl, R. E. 1984. Divisions of Labour. Oxford: Blackwell. Priest, G. L. 1994. The ambiguous moral foundations of the underground economy. The Yale Law Journal, 103(8):2259–2288. Renooy, P. H. 1990. The Informal Economy: Meaning, Measurement and Social Significance. Amsterdam: Netherlands Geographical Studies. Rowlingson, K., C. Whyley, T. Newburn, and R. Berthoud. 1997. Social Security Fraud. DSS Research Report no. 64. London: HMSO. Salmi, A-M. 1996. Finland is another world: The gendered time of homework. In Homeworkers in Global Perspective: Invisible No More, edited by E. Boris and E. Prugl. London: Routledge. Townsend, A. R. 1997. Making a Living in Europe: Human Geographies of Economic Change. London: Routledge. Van Eck, R., and B. Kazemeier. 1985. Swarte Inkomsten uit Arbeid: Resultaten van in 1983 gehouden experimentele. Den Haag: CBS‑Statistische Katernen nr 3, Central Bureau of Statistics. Vinay, P. 1987. Women, family and work: Symptoms of crisis in the informal economy of Central Italy. Sames 3rd International Seminar Proceedings. Thessaloniki: University of Thessaloniki. Williams, C. C. (2004) Cash-in-Hand Work: The Underground Sector and the Hidden Economy of Favours, Palgrave Macmillan, Basingstoke.

7 Geographical variations in informal work in contemporary England Colin C. Williams

Introduction In Chapter  2, it was highlighted that akin to the social sciences in general, the study of informal work is undergoing its own “cultural turn.” There is a shift away from reading this type of exchange as being always and everywhere market-like profit-motivated monetary exchange, and in its place is emerging more embedded accounts of this endeavor that unpack the heterogeneous work relations and motives involved in these monetary transactions, reflecting the broader re-reading of exchange by cultural theorists (e.g., Crang, 1996; Crewe, 2000; Crewe and Gregson, 1998; Gibson-Graham, 1996; Lee, 1996, 2000; Leyshon, Lee, and Williams, 2003). To show how and why it is important to embed understandings about the extent and nature of informal work in their specific geographical contexts, the aim of this chapter is to explore how both the magnitude and character of informal work vary spatially. To do this, primary data collected through 861 face-to-face interviews in 11 deprived and affluent urban and rural English localities are reported. The intention, in so doing, is to display that the meanings of informal work show some significant variations in different geographical contexts and that adopting abstract universal hues about its extent and character fails to get to grips with its spatially variable meanings.

The survey methodology To understand these geographical variations in the extent and nature of informal work, evidence is here reported of a study conducted between 1998 and 2001 in 11 English localities. The overarching aim of this survey was to understand “household work practices” (see Nelson and Smith, 1999; Pahl, 1984; Smith, 2002; Wallace, 2002; Warde, 1990; Williams and Windebank, 2002) and these findings on the geographies of household work practices have been already reported elsewhere (e.g., Williams, 2002a; Williams and Windebank, 2003). Here, however, the data set is analyzed in relation to its specific findings on the extent and nature of informal work and how this varies geographically.

98  Colin C. Williams To unravel the geographical diversity of informal work, a maximum variation sampling method was used to select localities for investigation. This employed the urban/rural and level of affluence variables that have been previously shown to be important influences on both household coping capabilities and practices in general and informal work more particularly (e.g., Jensen et al., 1996; Kesteloot and Meert, 1999; Pahl, 1984; Renooy, 1990). The result was that a variety of affluent and deprived rural and urban localities in different regions of England were selected (Table 7.1) using the U.K. government’s Index of Multiple Deprivation that ranks all wards in England and Wales according to the level of their multiple deprivation (DLTR, 2000). To select households for interview in each area, meanwhile, a spatially stratified sampling procedure was used (Kitchin and Tate, 2001). The researcher called at Table 7.1  Areas studied in the English Localities Survey Area-Type

Locality

Description of area

Number of interviews

Affluent rural

Fulbourn, Cambridgeshire

“Picture postcard” rural village in high-tech subregion

70

Affluent rural

Chalford, Gloucestershire

Rural village in Cotswolds

70

Deprived rural

Grimethorpe, South Yorkshire

Ex-pit village with very high unemployment

70

Deprived rural

Wigston, Cumbria

Village with one factory dominating the local labor market.

70

Deprived rural

St Blazey, Cornwall

Village in a tourist region

70

Affluent suburb

Fulwood, Sheffield

Suburb in south-west Sheffield

50

Affluent suburb

Basset/Chilworth Southampton

Sole affluent suburb within the city of Southampton

61

Deprived urban

Manor, Sheffield

Social housing estate with high unemployment

100

Deprived urban

Pitsmoor, Sheffield

Inner city area in deindustrialising city with high levels of private sector rented accommodation and high unemployment

100

Deprived urban

St Mary’s, Southampton

Inner city locality in affluent southern city with high levels of private sector rented accommodation and high unemployment

100

Deprived urban

Hightown, Southampton

Social housing estate with high unemployment

100

Geographical variations in informal work  99 every nth dwelling in each street, depending on the number of households in each neighborhood and the number of interviews sought. For example, if there were 1,000 households in the neighborhood and 100 interviews were sought, then every tenth household was visited. If there was no response, the researcher called back once. If there was still no response and/or they were refused an interview, the eleventh house was surveyed (again with one call back), then the ninth dwelling, twelfth, and so on. This provided a spatially stratified sample of each locality. Analyzing the overall response rate, some 25 percent of all responses were from the nth household in each street, a further 48 percent of the total from the nth–1 or nth+1 (i.e., their neighbors on either side) and an additional 23 percent from the nth–2 or nth+2 households. This response rate, however, did vary by the locality under investigation. In the affluent urban suburbs, for example, only 89 percent of responses came from either the household targeted or a household within two doors of it, whereas in the deprived urban neighborhoods, this figure was 98 percent. Nevertheless, and despite these variations, a spatially stratified sample of all wards was achieved and respondents were not clustered in particular streets or vicinities in each locality. Table 7.2 displays some of the characteristics of the sampled population in each of the eleven localities. To collect evidence on household work practices in general and informal work in particular, face-to-face household interviews were used. An initial pilot study using a relatively unstructured interview schedule found that interviewees did not recall instances of informal work and that comparative data was not being collected. A relatively structured interview schedule was thus designed. This centered on a list of common services (Table 7.3). To generate this list, the tasks used by Pahl (1984) in his seminal study of household work practices on the Isle of Sheppey were slightly modified to reflect contemporary circumstances. Unlike this earlier study, however, it was decided that the interviews should also explore the motivations of suppliers and consumers and the nature of the relationship between them (e.g., whether they were kin, friends, neighbors). To identify households using informal labor to get tasks completed, for each task, the primary source of labor used by the household the last time that it was conducted was investigated. The interviewee was asked whether each task had been undertaken in the household during the previous five years/year/month/ week (depending on the activity). If not, they were asked why not. If it had been undertaken, however, they were asked who had conducted the task (e.g., a household member, kin living outside the household, a friend, neighbor, firm, landlord, etc); whether the person had been unpaid or paid; and if paid, whether it was “cash-in-hand” or not and how much they had been given. For each task completed, moreover, the respondent was asked in an open-ended manner why they had decided to get the work done using that source of labor (so as to enable their motives to be understood) and how they would have gotten the task completed if they had not employed this labor. Following this, the supply of both paid informal work and unpaid community exchange by household members was examined. The interviewee was asked whether a household member had conducted each of the tasks for another household and if so, who had done it, for whom, whether

1.4

70.0

17.7

27.3

2.0

In education

Other

0

19.7

Full-time homemaker

Retired

3.4

11.3

Unemployed >1yr

4.0

1.7

25.1

1.1

1.1

3.4

4.9

Self-employed

9.4

Unemployed= £275

61.4

30.0

40.0

Household income (gross/week)%

No earners

17.1

25.7

34.3

Multiple earner

52.9

2.9

7.1

0

20.0

Single earner

Household job status (%)

28.6

Rented–private unfurnished

0

Rented–Housing Assoc

Rented–private furnished

54.3

15.7

Owner-occupied

Rented–council

Tenure of housing stock (%)

Affluent Chalford

0

28.3

4.8

19.3

3.7

1.6

3.2

13.4

25.7

0

38.6

61.4

30.0

31.4

38.6

18.6

4.3

0

8.8

68.6

0.0

17.0

1.8

12.9

1.2

2.3

3.5

11.7

49.1

4.3

85.7

10.0

14.3

28.6

57.1

0

0

1.4

7.1

91.4

0.6

27.3

4.7

13.4

0

0

10.5

17.4

26.2

1.4

72.9

25.7

21.4

34.3

44.3

0

7.1

0

1.4

91.4

28.0

6.1

35.2

11.9

7.6

8.3

6.4

1.8

6.5

16.2

2.0

28.0

70.0

61.0

21.0

18.0

2.0

6.0

28.0

36.0

6.9

4.3

18.7

10.7

6.9

5.3

1.1

12.8

33.1

5.0

26.0

69.0

41.0

32.0

27.0

0.0

0.0

0.0

88.0

12.0

Deprived Hightown

Urban localities Affluent Fulbourn

Deprived St Marys

Deprived Wigston

Deprived Grimethorpe

Deprived St Blazey

Rural localities

Table 7.2  Characteristics of the sampled population: by area studied

1.3

5.0

8.0

10.9

2.6

1.3

10.9

19.8

40.4

0.0

78.0

22.0

32.0

22.0

46.0

1.0

2.0

4.0

0.0

94.0

Affluent Bassett

11.5

4.5

22.1

14.5

13.6

3.5

2.0

9.5

18.6

2.0

22.0

76.0

67.0

14.0

19.0

11.0

4.0

4.0

25.0

56.0

Deprived Pitsmoor

3.9

12.6

11.6

10.7

10.7

7.8

3.4

10.7

28.6

5.0

32.0

63.0

45.0

25.0

30.0

44.0

1.0

0.0

48.0

6.0

Deprived Manor

1.3

5.2

9.8

9.8

2.6

1.3

13.0

16.8

40.1

0.0

78.2

21.8

39.3

36.1

24.6

0.0

0.0

4.9

0.0

95.1

Affluent Fulwood

Geographical variations in informal work  101 Table 7.3  List of tasks investigated in the English Localities Survey House maintenance Outdoor painting Indoor painting Wallpapering Plastering Mending a broken widow Maintenance of appliances Home improvement Putting in double glazing Plumbing Electrical work House insulation Putting in a bathroom suite Building a garage Building an extension Putting in central heating Carpentry Housework Routine housework Cleaning windows outdoors Spring cleaning Cleaning windows indoors Doing the shopping Washing clothes and sheets Ironing Cooking meals Washing dishes Hairdressing Household administration

Making and repairing goods Making clothes Repairing clothes Knitting Making or repairing furniture Making or repairing garden equipment Making curtains Car maintenance Washing car Repairing car Car maintenance Gardening Care of indoor plants Outdoor borders Outdoor vegetables Lawn mowing Caring activities Daytime babysitting Night-time baby sitting Educational activities Pet care

they had received money, how much they had received, and why they had decided to do the task. To collect data on other types of informal work conducted and received, meanwhile, a series of open-ended questions with probes were used to elicit additional information, focusing particularly on informal work conducted for and by businesses. To collate the data and analyze the responses, the Statistical Package for Social Scientists software was used. To process the interview material, especially regarding their motives for supplying and purchasing informal work, the qualitative comments explaining why tasks had been undertaken using informal work were coded according to the primary motive stated by respondents. From this, the frequency tables reported later were constructed. Before analyzing the results, it is important to briefly explore the validity of the resultant data using this direct survey method. Similar to previous studies (e.g., Leonard, 1994; MacDonald, 1994; Pahl, 1984), the finding was that the interviewees had little reticence in openly talking about this work. Just because it is hidden from government authorities for tax and benefit purposes does not mean that people hide it from one another or even academic researchers. This perception

102  Colin C. Williams of a lack of reticence by interviewees, moreover, was confirmed by the data set produced. The total amount households reported spending on informal work in deprived urban neighborhoods, for example, was £23,354 per annum, and this was near enough exactly the same amount that suppliers of informal work asserted that they had received (£22,986). So, too, was the mean price paid by households for a job on an informal basis (£90.24) broadly equitable with the mean price suppliers asserted that they received (£84.48). It was similarly the case when affluent suburbs and rural areas were analyzed. As such, there is little evidence either that suppliers greatly under-report their participation in this work or their income or that customers falsely allocate economic activity to informal work. Given that the order of magnitude of customer and supplier responses is approximately the same, few grounds exist for believing that these results under-report participation in this work or the income from such activity. The direct survey reported in this chapter, therefore, reinforces many of the points made in Chapter 3 about the validity and reliability of direct survey methods. Next, the findings are reported. First, the spatial variations in the extent of informal work will be analyzed followed by, second, the geographical variations in the character of such work in terms of both the work relations involved and the motives of the suppliers and employers.

Spatial variations in the extent of participation in informal work This English Localities Survey reinforces the finding of many previous studies that informal work is not concentrated in deprived populations (see Chapter 2); it refutes the marginality thesis. Commencing with the consumption side of the equation, the finding is that informal work is more likely to be used by those who Table 7.4  Percentage of everyday tasks undertaken using informal work in England: by locality-type Area

Percent of the 44 tasks last conducted using informal work

No. of households surveyed

All areas

5.5

861

Rural areas

5.0

350

Urban areas

5.8

511

Lower-income rural areas

5.6

210

Lower-income areas – Southampton

4.4

200

Lower-income areas – Sheffield

5.4

200

Higher-income rural areas

4.1

140

Higher-income suburb – Southampton

6.5

50

11.2

61

Higher-income suburb – Sheffield Source: English Localities Survey

Geographical variations in informal work  103 live in affluent areas. As Table 7.4 reveals, this is the case in both urban and rural areas and whether one evaluates the share of all work that is conducted using informal work or the absolute number of tasks received on an informal basis. Analyzing where the consumption of informal work is rife, therefore, the finding is that such work is more prevalent in affluent than deprived areas. This is perhaps no surprise. Is it the case, however, as is sometimes assumed, that even if the consumption of informal work is greater in affluent areas, the suppliers are concentrated in deprived neighborhoods? There is, after all, a perception that even if the populations of affluent areas consume more informal work in the form of gardening services, domestic cleaners, and home maintenance services, the workers performing such tasks are likely to come from more deprived areas. Perhaps surprisingly, Table 7.5 displays that this assertion about the supply of informal work is incorrect. Households in affluent areas conduct a disproportionate share of all informal work and also receive much greater monetary rewards than those living in lower-income areas. This applies in both the urban and rural environments. Comparing lowerand higher-income urban areas, for example, despite being only 11 percent of the sample, households in affluent areas conduct 37 percent of all informal work. The average amount received by a household in a deprived urban neighborhood compared with a household in an affluent suburb for conducting a task on an informal basis was £90 compared with £1,665; the average hourly wage rate for informal work was £3.40 compared with £7.50; and the mean annual household income from informal work was £58 compared with £899. This significant geographical disparity in the rewards gained from informal work, moreover, also pertains when only those who engage in such work are analyzed. For the 40 percent of households in lower-income neighborhoods who supply informal labor, the mean annual household income from such work was £115 compared Table 7.5  Participation in informal work in England: by area Area-Type

Sample size

% of total % of all sample informal work identified

Average pay/ informal task (£)

Average household income p.a. from informal work (£)

All

861

100

100

Urban lower income

400

47

22

1,665

435

Rural lower income

210

24

16

25

47

Urban higher income

111

13

37

90

46

Rural higherincome

140

16

25

564

921

Source: English Localities Survey

104  Colin C. Williams with £2,420 in the 18 percent of households who supplied such work in affluent suburbs. The monetary rewards from informal work, therefore, are heavily skewed toward the populations of affluent suburbs. However, just because demand and supply are concentrated in affluent localities does not mean that the residents of these areas are exchanging work with one another. Examining the tasks demanded and supplied reveals a mismatch. Although some might be supplied to other local residents (e.g., architectural services, music lessons, home improvement, landscape design services, arboriculture), the vast majority is being conducted for commercial businesses, usually on a consultancy basis for money that is not being declared to the tax authorities. Meanwhile, tasks supplied by households in lower-income areas (especially for people that they did not previously know) broadly match those being consumed in the affluent suburbs (e.g., house cleaning, window cleaning, gardening services). Therefore, although this study did not ask consumers where the person doing the work lived or suppliers where they had conducted the work, the finding is that residents of affluent areas are supplying others in their neighborhood and commercial enterprises with informal labor. Concomitantly, those in lower-income neighborhoods are supplying activities that those in the affluent areas consume. Whether they are directly supplying these affluent areas, nevertheless, is not known. What type of household, however, supplies informal work? The finding in both the deprived and affluent localities is that it is relatively higher-income households (here defined as earning more than £250 gross per week) and those with members in employment who conduct a disproportionate share of this work. As Table 7.6 displays, in lower-income areas, households with a gross income of more than Table 7.6  Suppliers of informal labor in lower- and higher-income English neighborhoods: by socio-economic status No. of households % of all % of all informal households tasks conducted Lower-income areas By number of earners in household: Multiple-earners 94 23.5 35.3 Single-earner 92 23.0 34.6 No-earners 214 53.5 30.1 By household income: < £250/ week 278 72.2 50.1 > £250/ week 108 27.8 49.9 Higher-income areas By number of earners in household: Multiple-earners 47 42.3 51.0 Single-earner 33 29.7 31.8 No-earners 31 27.9 17.2 By household income: < £250/ week 24 21.7 9.8 > £250/ week 87 78.3 90.2 Source: English Localities Survey

Geographical variations in informal work  105 £250 per week (17.8 percent of the sample) supply the labor for 49.9 percent of all the work conducted on an informal basis. In the affluent areas, similarly, relatively higher-income households conduct a disproportionate share of all informal work. In sum, this study reinforces the context of contemporary England previous studies conducted elsewhere that challenge the marginality thesis (e.g., Fortin et al., 1996; Jensen et al., 1996; Marcelli, Pastor, and Joassart, 1999; Pahl, 1984). Higher-income populations not only use and supply such work to a greater extent than lower-income populations but receive a disproportionate share of the income from such work. Here, however, attention turns to some key issues that have been so far less considered in the literature on the geographical variability of informal work: how the work relations and motives within which informal work is conducted differ across space.

Geographical variations in the nature of informal work in England To analyze the geographical variations in the nature of informal work in contemporary England, this section reports the results on, first, how the economic relations within which informal work is conducted vary spatially; second, the geographical variations in the motives of purchasers; and third, how the motives of suppliers differ across space. The spatially variable character of informal work Until now, and reiterating the point made in Chapter  2, the near-universal assumption has been that informal work is conducted under relations akin to formal employment for profit-motivated purposes. In this survey, however, evidence has been gathered that suggests not only that informal work is conducted Table 7.7  Character of suppliers of informal work in England: by area-type Firm/unknown Friend/ person neighbor Rural areas Higher income Lower income Southhampton Higher income Lower income Sheffield Higher income Lower income Both cities Higher income Lower income All areas

Kin

Household member

5 8

56 52

38 35

1 5

92 30

1 30

7 29

0 11

76 33

20 29

1 30

3 0

84 32 30

11 29 33

4 24 30

1 15 7

106  Colin C. Williams under a wider set of work relations than has so far been considered but how these work relations are geographically variable. The first clue that this is the case is seen in the data presented in Table 7.7. In a bid to start to evaluate critically the assumption that informal exchange is market-like work, this unravels the work relations involved in these exchanges in different area-types. Analyzing the nature of the relationship between the supplier and customer, it reveals that in lowerincome neighborhoods over two-thirds of informal tasks are provided by kin, neighbors, and friends and, even in affluent suburbs, some 16 percent of informal tasks are conducted under these social relations. For some, therefore, this might be interpreted to mean that self-interest and profit motivation has penetrated so deeply into every crevice of contemporary society that we now exploit our friends, neighbors. and kin by paying them low wages to do work for us. However, is this really the case? Or are different motives prevalent when such work is conducted. meaning that the low wages cannot be taken as an indicator of exploitative market-like work relations? To answer this, the motives of both consumers and suppliers of informal work need to be investigated. Reasons for employing informal labor: geographical variations Do purchasers everywhere employ informal labor to save money? Interrogating the rationales of those employing such labor, the finding is that the profit motive is not always to the fore. As Table 7.8 reveals, less than a third (31 percent) of all informal purchases are primarily profit-motivated. However, the degree to which informal work is embedded in the profit motive is geographically variable. Such a motive, that is to say, is much more prevalent in higher- than in lower-income areas and urban rather than rural areas. This significant geographical variation in purchasers’ motives occurs for two principal reasons. First, as detailed in Table 7.7, inhabitants of the affluent and urban areas make far greater use of firms and/or self-employed people not known by the household, and in nearly every case where this labor is used, the rationale is to use informal work as a cheaper alternative to formal employment. The result is the greater prevalence of profit-oriented motivations in affluent and urban areas. Second, people in affluent and urban areas would have used formal Table 7.8  Motives for employing informal labor in England: by type of area Reason:

Urban Lowerincome

Rural Higherincome

All Areas

Lowerincome

HigherIncome

To save money

18

80

6

20

31

To financially help the supplier

11

6

34

32

22

Community-building

71

14

60

48

47

Geographical variations in informal work  107 firms if informal labor had not been available, so consequently cite cheapness or saving money more frequently as their rationale. In lower-income and rural areas, meanwhile, where the alternative is either self-provisioning or more usually not conducting the task at all if informal labor had not been used, saving money is less commonly cited as the chief reason for using informal work. Economic rationales, therefore, are not the only reason for using informal work, especially in lower-income and rural areas. Examining the diverse alternative primary motives cited by purchasers, two overarching themes prevail. These can be grouped under the desire to, first, develop social capital (see Blau, 1994; Coleman, 1988; Gittell and Vidal, 1998; Portes, 1998; Putnam, 2000), by which is meant “social networks and the norms of reciprocity and trust worthiness that arise from them” (Putnam: 19) and, second, to help others out or what is here referred to as “redistribution.” Building social network capital When a task needs completing, purchasers often offer people the opportunity to do some informal work for them as a means of either forging closer ties (i.e., developing “bonding” social capital) or instigating fledgling relationships (i.e., developing “bridging” social capital). This usage of informal work to develop social capital tends to prevail most when consumers pay friends or neighbors (rather than kin) and is much more common in lower- than higher-income areas and urban rather than rural areas. An employed male on a deprived urban council estate, for example, explained his use of a friend to do some work by stating, “Why give the money to someone I’ll never see again. If I pay someone I know, then they’ll do me a favor later.” This forging of closer ties with friends and neighbors through paid informal exchange is thus economically orientated but is grounded in longer-term mutual cooperation. The outcome is that constructions of value do not always adhere to the market price. Indeed, when developing bonding social capital is the motive, the most marked variations from the market price prevail. In lower-income areas, when bonding social capital prevails, the average price paid tends to be far lower than when informal work is purchased for other reasons. For example, one customer paid just £20 for his neighbor to dismantle a garage and take it away, a task that took two days to complete. However, it was not seen as low-paid work as it was conducted neither under market-like conditions nor for profit. In affluent suburbs in contrast, exchanges conducted under the auspices of bonding social capital are frequently paid at rates far higher than the market rate, usually in the form of gifts rather than money. One customer in an affluent urban area, for example, had given a work colleague who lived nearby a bottle of whisky and some Belgian chocolates merely for delivering their work mail to their home ready for when they returned from their holiday, a task that had taken five minutes. When the primary motive is to initiate links with people one does not know very well (i.e., to build bridging social capital), however, such divergence in wage rates from the market norm is not found. In lower-income and rural areas, rates

108  Colin C. Williams generally conform to the market price so that the informal worker, with whom one is trying to develop greater reciprocity and trust, is not insulted. As one woman in a deprived neighborhood put it, “I paid them the going rate so as to show them I wasn‘t trying to exploit them.” In affluent and urban areas, it is much more so that the person who one sees as less equal in socioeconomic terms (e.g., a gardener, decorator, builder) will return in the future to do further work if a market wage is paid. As a man in an affluent suburb stated in relation to employing a household cleaner, “We decided to pay a proper market rate hour because we wanted to get off on the right foot with her.” Investigating why payment is involved, the finding was that although unpaid exchange occurred between kin, it seldom took place between friends and neighbors. When asked about providing unpaid help to non-kinship relations, for example, the common response, especially in deprived urban communities, was that “they can f---ing look after themselves.” Indeed, the only reason such unpaid non-kinship exchange occurred was because payment in those particular situations was seen as unacceptable, inappropriate or impossible. This applied either when the task was too small to warrant a payment (e.g., lending a hammer) or when the social relations mitigate against payment (e.g., when the customer may not be able to afford to pay and has no choice but to offer a favor in return). Whenever possible, therefore, people avoided unpaid exchange relations when friends and neighbors were involved and used monetary payment. Paying avoided any obligation to reciprocate favors but, at the same time, it oiled the wheels for the maintenance or creation of closer relations through exchange. In major part, payments were thus indicative of the demise of trust, especially in deprived areas. Monetary payment was acting as a substitute for trust. Consequently, there was a sense that the exchange of cash was a necessary medium when maintaining or building community networks, especially when neighbors or friends were involved. Rather than provide any opportunity for such relations to turn sour if and when they reneged on their commitments, the exchange of cash in lower-income areas and gifts in affluent suburbs were seen to prevent such a situation arising. Where such primary social capital building rationales predominate, nevertheless, users did not see this informal work as substituting for formal employment. On the whole, they would have done the work themselves or not done it at all had they not employed somebody on a paid informal basis in deprived neighborhoods. In affluent areas, meanwhile, in those few instances where bridging social capital was the rationale for using paid informal labor, the work would have been otherwise conducted by formal labor. Where bonding social capital was the rationale in such areas, meanwhile, the work would not have been conducted at all or done by the household if they had not used paid informal labor. Redistributive motives Besides developing social capital, purchasers also reported rationales involving redistribution by which I here mean that they were seeking to help others out such

Geographical variations in informal work  109 as by giving them money. This usually applied when kin were conducting the work. Indeed, using kin to do tasks to give them money was much more prevalent as a rationale for informal work in deprived than in affluent localities. Again, little of this work was substituting for formal employment. In the vast majority of cases, the users would have done the work themselves if the person had not been paid on an informal basis. They were paying solely to give money to kin to help them out. In affluent suburbs, this mostly involved paying one’s pre-adult children to “teach them the value of money.” In lower-income areas, however, a wider variety of kin was involved, and the intention was much more explicitly to help them out. As one interviewee in a deprived urban neighborhood put it, I would have done the job [decorating] myself, but she [her sister] was on the dole so I asked her to do it instead. After all, she needed the money so it was the natural thing to do. In sum, customers were primarily motivated to use paid informal exchange in affluent areas by a desire to save money, with some limited work conducted by friends and neighbors to develop closer social bonds for which gifts were given and some undertaken by children to redistribute cash and teach them the value of money. In lower-income areas, however, only a minor amount of informal work was conducted primarily to save money. Most was undertaken by friends, neighbors, and kin either to cement or consolidate social bonds with the supplier or to help them out for redistributive reasons. Therefore, to envisage all purchasers as profit-motivated is far from the reality, especially in lower-income areas. Motives of suppliers: geographical variations Analyzing the primary rationales of those who supply informal work, significant variations between those living in higher- and lower-income areas are again identified. In both urban and rural areas, nearly twice the proportion of informal work is conducted for profit-motivated purposes in higher- compared with lowerincome areas. In the urban environment, for example, some 51 percent is conducted for the purpose of economic gain in lower-income urban neighborhoods but 90 percent in the affluent suburbs (Table 7.9). Caution is needed, however, with regard to these findings. Even though interviewees asserted that they carry out this work to make money, especially in Table 7.9  Motives of suppliers of informal work in England: by locality-type Reason:

Urban Lowerincome

Rural Higherincome

All areas

Lowerincome

HigherIncome

To make money

51

90

26

48

50

To help the customer

13

5

30

32

22

Community-building

36

5

44

20

28

110  Colin C. Williams the interviews in the urban areas, in more than half (52 percent) of all instances wherein money was given as the chief reason, caveats were again given. In the urban areas, this type of qualification was voiced much more frequently in the deprived urban neighborhoods. It was seldom heard, however, among residents of affluent suburbs supplying informal work, doubtless because a much larger proportion of such work is conducted either for businesses or on a self-employed basis for people previously unknown to them, in stark contrast to deprived urban neighborhoods wherein most is conducted for friends, kin, and neighbors. When conducted under these latter social relations, few suppliers cite money as the chief motivating factor. This tends to apply only when conducting work for businesses or for people previously unknown to them. Indeed, this is perhaps the reason why the profit motive is much less prevalent in rural areas, whereby a smaller proportion of informal work is conducted for business or on a self-employed basis for people previously unknown to the supplier. In rural areas, furthermore, respondents were more forthcoming from the outset about their reasons for engaging in such work. Perhaps bolstered by the stereotype that rural areas possess strong social bonds and community spirit, respondents seemed to be more forthright that such work was not conducted for purely profit-motivated reasons and that other rationales were prominent in explaining their informal work. In major part, however, this is also perhaps because a higher proportion of the suppliers claimed to have some prior acquaintance with the customer so for them, such work was on the whole embedded in closer social relations than in urban areas. Whatever the reason for the lesser emphasis on profit in rural areas compared with urban areas, nevertheless, the key point is that profit was mentioned as the primary motive in only half of all instances where people provided informal work. Indeed, when those who made qualifying statements are extracted, just 25 percent of all informal work was conducted purely for the purpose of economic gain (19 percent and 79 percent in deprived and affluent urban areas, and 12 percent and 29 percent in affluent and deprived rural areas, respectively). Beyond making money, suppliers of informal work, similar to customers, undertook such work primarily either to help out somebody else or to cement, maintain or build social networks. Here, the ways in which the preponderance to assert these motives vary spatially are explored. First, and as Table 7.9 displays, community-building motives associated with developing social capital are more prevalent in lower- than higher-income areas and in rural compared with urban areas. Engaging in cash for favors to build social capital, whether of the bonding or bridging variety, is therefore more characteristic of poorer and rural areas. To some extent, to repeat, the greater prevalence of such a rationale in deprived areas is because of the lack of trust. In these areas, money appears to act as a substitute for trust. Besides community-building rationales, suppliers also display “redistributive” motivations when conducting informal work. Again, this was more commonly cited in both lower-income and rural areas than in affluent and urban areas. In sum, although the vast majority of informal work in affluent urban areas is primarily undertaken to save/make money and is mostly acting as a substitute for

Geographical variations in informal work  111 formal employment, this is not the case in lower-income areas. Here, informal work is more likely to be conducted by friends, neighbors, and kin for the purpose of developing social capital and/or redistribution.

Conclusions Most of the literature on the geography of informal work has concentrated on how its magnitude varies spatially. Here, however, the focus has been upon the nature (rather than magnitude) of informal work and its spatialities. Until now, and based on the finding that such work is lower-paid in deprived areas, the tendency has been to read off from this that low-paid exploitative forms of “organized” informal work prevail in deprived areas, whereas affluent areas are seen to possess more better-paid “autonomous” self-employed forms of informal work. However, drawing upon evidence collected in 11 English localities, it has been shown that such a view of informal work as being always embedded in market-like work relations akin to formal employment misrepresents not only the nature of informal work but the spatial heterogeneity of such work. Although informal work in affluent areas is more likely to be conducted under market-like work relations akin to employment and motivated by financial gain, in deprived areas the majority is undertaken for and by close social relations for reasons associated with building social capital and redistribution. In consequence, there is a need to recognize the different meanings of informal work in different geographical contexts. Given these findings, one cannot read off from any purported deepening of the realms where money changes hands that a universal encroachment of either market relations or the profit motive is taking place. Money is not always a disembedding force. Although this might be the case in affluent suburbs wherein market relations and the profit motive are relatively pervasive in the realm of informal work, the intrusion is shallower among people in deprived and rural areas. Indeed, in the latter area types, there seems to have been much more an encroachment of non-market relations and not-for-profit rationales into monetary relations. This research thus not only reinforces the view of Zelizer (1994: 215) that “Money has not become the free, neutral and dangerous destroyer of social relations” but identifies some specific spaces in which money is being used precisely for the purpose of developing, rather than destroying, social relations. In sum, these findings concerning the heterogeneous and variable nature of informal work display the need for a fundamental rethinking of the nature of informal work and its geographies. They also present some fascinating issues for future studies of monetary exchange. If even informal work, a supposed exemplar of unbridled profit-motivated capitalism, is imbued with non-market relations and not-for-profit rationales, the likelihood of finding further instances of the demonstrable construction and practice of monetized exchange beyond marketlike relations and the profit motive elsewhere in economic life appears much greater than many perhaps previously considered.

112  Colin C. Williams

Bibliography Blau, P. M. 1994. Structural Contexts of Opportunities, Chicago: University of Chicago Press. Coleman, J. 1988. Social capital in the creation of human capital. American Journal of Sociology (Suppl) 94:S95–S120. Crang, P. 1996. Displacement, consumption and identity. Environment and Planning A 28:47–67. Crewe, L. 2000. Geographies of retailing and consumption. Progress in Human Geography 24(2):275–290. Crewe, L., and N. Gregson. 1998. Tales of the unexpected: exploring car boot sales as marginal spaces of contemporary consumption. Transactions 23(1):39–54. Department of Local Government, Transport and the Regions. 2000. Index of Multiple Deprivation. London: Department of Local Government, Transport and the Regions. Fortin, B., G. Garneau, G. Lacroix, T. Lemieux, and C. Montmarquette. 1996. L’Economie Souterraine au Quebec: mythes et realites. Laval: Presses de l’Universite Laval. Gibson-Graham, J. K. 1996. The End of Capitalism As We Knew It?: A Feminist Critique Of Political Economy. Oxford: Blackwell. Gittell, R. and A. Vidal. 1998. Community Organizing: Building Social Capital As a Development Strategy. London: Sage. Jensen, L., G. T. Cornwell, and J. L. Findeis. 1995. Informal work in nonmetropolitan Pennsylvania. Rural Sociology 60(1):91–107. Kesteloot, C., and H. Meert. 1999. Informal spaces: The geography of informal economic activities in Brussels. International Journal of Urban and Regional Research 23:232– 251. Kitchen, R. and N. Tate. 2001. Conducting Research in Human Geography: Theory, Practice and Methodology. London: Prentice Hall. Lee, R. 1996. Moral money? LETS and the social construction of local economic geographies in Southeast England. Environment and Planning A 28:1377–1394. Lee, R. 2000a. Informal sector. In The Dictionary of Human Geography, edited by R. J. Johnston, D. Gregory, G. Pratt, and M. Watts. Oxford: Blackwell. Lee, R. 2000b. Shelter from the storm? Geographies of regard in the worlds of horticultural consumption and production. Geoforum 31:137–57. Leonard, M. 1994. Informal Economic Activity in Belfast. Aldershot: Avebury. Leyshon, A., R. Lee, and C. C. Williams, eds. 2003. Alternative Economic Spaces. London: Sage. MacDonald, R. 1994. Fiddly jobs, undeclared working and the something for nothing society. Work, Employment and Society 8(4):507–530. Marcelli, E. A., M. Pastor, and P. M. Joassart. 1999. Estimating the effects of informal economic activity: Evidence from Los Angeles County. Journal of Economic Issues 33:579–607. Nelson, M. K., and J. Smith. 1999. Working Hard and Making Do: Surviving in Small Town America. Los Angeles: University of California Press. Pahl, R. E. 1984. Divisions of Labour. Oxford: Blackwell. Portes, A. 1998. Social capital: Its origins and applications in modern sociology. Annual Review of Sociology 24(1):1–24. Putnam, R. 2000. Bowling Alone: The Collapse and Revival of American Community. London: Simon and Schuster.

Geographical variations in informal work  113 Renooy, P. H. 1990. The Informal Economy: Meaning, Measurement and Social Significance. Amsterdam: Netherlands Geographical Studies. Smith, A. 2002. Culture/economy and spaces of economic practice: Positioning households in post-communism. Transactions of the Institute of British Geographers 27:232–250. Wallace, C. 2002. Household strategies: Their conceptual relevance and analytical scope in social research. Sociology 36:275–292. Warde, A. 1990. Household work strategies and forms of labour: Conceptual and empirical issues. Work, Employment and Society 4(4):495–515. Williams, C. C. 2002. Beyond the commodity economy: The persistence of informal economic activity in rural England. Geografiska Annaler B 83(4):221–233. Williams, C. C., and J. Windebank. 2002. The uneven geographies of informal economic activities: A case study of two British cities. Work, Employment and Society 16(2):231– 250. Williams, C. C., and J. Windebank. 2003. Poverty and the Third Way. London: Routledge. Zelizer, V. A. 1994. The Social Meaning of Money. New York: Basic Books.

8 The fallacy of the formal and informal divide Lessons from a post-Fordist regional economy Simone Ghezzi Introduction In this chapter I argue through the use of both quantitative and qualitative data that the theoretical meaning of “informality” is per se insufficient to explain the process of change that the informal economy in Italy is undergoing. For a more comprehensive understanding of current trends, an analysis should look at the articulation between formal and informal arrangements of employment that actors continuously reshape to escape forms of regulation. The Italian case is of particular interest because it encompasses differently characterized regional economies—the networked firms (or industrial districts) in small urban centers, the urban economy of large cities, and the unevenly (un)developed south. It shows how in these different regional economies, old and newly established forms of informal and formal activities are intertwined and operate at different levels of relationship networks. Individuals, households, firms, and public institutions are all involved to a different degree in the expansion of the informal economy. Manufacturing companies, for example, subcontract production to suppliers operating within a vast network of specialized firms and small workshops. These suppliers, too, may outsource part of their production to small production units which, in turn, often contract out some of their work orders to smaller family-run workshops or individual workers. In the course of these transactions, the imperative of costcutting may induce firms to use informal employment, causing the erosion of formal employment relations. Such erosion is often reinforced by regional governments offering incentive packages to increase business competitiveness. The involvement of public institutions is also apparent when we consider the consequences on employment caused by the lack of public welfare services, a condition that contributes to keep Italian households an essential source of welfare, particularly by engaging women in child and family care. When reconciling professional work and family care becomes unfeasible, households may opt to hire immigrant women as care givers, often doing so off-the-books in highly exploitative labor conditions. These processes are increasingly evident as we witness the transition from the regulative systems of Fordist society to flexible production, post-Fordist

The fallacy of the formal and informal divide  115 arrangements, and increased immigration, which are all transforming the informal capitalist economy in the spheres of both commodity production and service production. In a government-sponsored congress on the informal economy in Italy which took place a few years ago1, empirical research brought to light an apparently “unexpected” phenomenon: that is, in spite of rationalization, modernization, and bureaucratic restructuring, informal activities were becoming more widespread than ever, both in highly regulated institutions and deregulated organizations. If all this is occurring, then the deregulation of the labor market, de-standardized production, and flexibility do not seem to hinder informalization processes but in fact contribute to their augmentation and ubiquity. The point I want to make is that the concern expressed for the contraction or expansion of informal activities may be a reflection of the limits of our conceptual categories. The cultural roots of informal reciprocity are deeply embedded in the history of this heterogeneous country, as would be the case in any other place. If we begin to more closely consider the economy of exchange, self-provisioning, and informal help within social networks, households, and firms, the informal economy will appear as an encompassing phenomenon: less “economic” and more “social.” For this very reason it is also difficult to measure the informal economy as such. In the industrial district where most of my ethnographic research was carried out, the traditional division between formal and informal would lead us to conclude that informal arrangements are remarkably widespread even within highly formalized firms as well as in the regular labor market. Some forms of informal activities may depend on trust and social consent present in social networks, and on the specific cultural setting that go beyond utilitarian considerations and cost of labor. In this context, what becomes more meaningful and empirically useful is the analysis of the articulation that makes possible the fact that informal regulation is continuously present in the formal sector. My analysis will begin by illustrating the extent to which the informal economy is widespread throughout the Italian context and will argue that regional variations must be considered to interpret the phenomenon of an informal economy. As I will demonstrate, the apparently vast presence of informal employment in the south detected by sophisticated macro data, which has been widely interpreted as an unambiguous marker of the economic divide between north and south, may actually obscure more interesting dynamics that emerge at the local level, and particularly in the north, the main focus of my attention. In the next section, the ethnographic research carried out in an industrial district of northern Italy will reveal how in a regime of flexible production, informal arrangements of work are still an important element for the functioning of a system threatened by increased competition from within the region and from outside (i.e. the global economy). However, such arrangements cannot be explained accurately simply by resorting to economic discourses but by arguing that such practices are culturally embedded in relations that are social prior to being economic.

116  Simone Ghezzi

Informal employment in Italy: a brief overview In Italy, after the stimulating debate of the late 1970s and 1980s, research on the informal economy went through a long period of decline. It is possible that after almost two decades of intensive study this area became less attractive than other research topics. There was ultimately a sense of achievement, that is, the impression of having finally arrived at the core of the phenomenon: in general in the industrial north, the informal economy was mainly viewed as a phenomenon emerging from an overregulated economic system, whereas in the less developed south it was better understood as a survival strategy in a market dependent on public resources that offered few alternatives to informal employment within specific economic sectors. However, by the time the importance of the informal economy was brought to political attention, a potent process of transformation had begun to take place. The long-term trends of the Fordist system had halted, the welfare-state regimes faced a visibly growing crisis, and neoliberal ideologies inspired new policies that have progressively dismantled the welfare-state consensus and carried out a severe restructuring of the labor market. Therefore, it appears that the characterization of the informal economy as it emerged from the studies of two or three decades ago may not fully describe the current situation. For example, earlier research showed that full-time employees used to engage in informal activities to balance the erosion of income due to high inflation and periods of partially paid work suspension thanks to Cassa Integrazione Guadagni, the Government Temporary Lay-off Indemnity; multiple jobs were especially sought during specific phases of the family life cycle, when the pressure for cash was higher. Currently it is exactly in this kind of informal employment that we can observe significant transformations as flexible forms of job agreement are introduced and implemented. In other words, what was at one time an informal kind of employment, in many instances has become formal but in a way that escapes and challenges the “traditional” notion of work. In the last decade or so the activity rate in Italy has increased as a result of more jobs being created; however, from 1995 to 2000 some 45 percent of these new jobs were short term, and 28 percent part-time. Since 2005 about 50 percent of young people entering the labor market have been hired by means of various forms of flexible labor (Gallino, 2007). For lack of a better name, they have been called “atypical jobs” (lavori atipici); included in this category are both various forms of self-employment, located at the frontier between jobholding and entrepreneurship, and forms of wage labor relationships that have emerged from new sectors of production and from the extensive privatization of public services. This somewhat vague term purports to capture the emergence of heterogeneous forms of work that were considered informal in regulatory systems prior to postFordism, but are nowadays becoming perfectly legal and formal in a deregulated labor market. Common wisdom would suggest that with the deregulation of the labor market we should expect a decrease of informal employment (Table 8.1). While some data seem to validate this reasoning, others seem to suggest quite the opposite.

The fallacy of the formal and informal divide  117 Table 8.1  The size of informal economy, expressed as a percentage of GDP (1992–2006) Downward estimate (A)

Upward estimate (B)

Year

Per million euro

% on GDP

Per million euro

% on GDP

1992

100,956

12.9

123,533

15.8

1993

112,372

13.9

135,448

16.8

1994

123,454

14.5

140,912

16.5

1995

145,920

15.8

157,774

17.1

1996

155,741

15.9

167,276

17

1997

163,175

15.9

181,484

17.7

1998

169,482

15.8

179,796

16.8

1999

165,449

14.9

187,813

17

2000*

176,777

15.2

196.804

16.9

2001

231,479

18.5

245,950

19.7

2002

223,721

17.3

241,030

18.6

2003

223,897

16.8

247,566

18.5

2004

224,203

16.1

252,064

18.1

2005

229,706

16.1

254,096

17.8

2006

226,564

15.3

249,974

16.9

Source: ISTAT 2003 (up to 1999); ISTAT 2008b (from 2000) * Beginning in 2000, ISTAT implemented changes in their estimates of national income and product accounts

ISTAT, the Italian national statistical bureau, has been monitoring the dimension of informal employment in this country since the early 1980s, and in its most recent yearly report (2008b) has revealed that in 2006—the latest data available—the estimate of the informal economy, expressed as a percentage of GDP, ranged from 15.3 to 16.9 percent, depending on the method of calculation adopted, whereas in 1992 the figure ranged from 12.9 to 15.8 percent2. After peaking in 2001, this percentage has been decreasing ever since (see Table 8.1). Yet, the amount of irregular work has continued to rise even after the “big” amnesty of 2002 and 2003 (see Tables 8.2 and 8.3). According to ISTAT data, informal employment is most common in agriculture, various services, and construction, whereas it does not seem to play a relevant role in other industrial sectors. In the next section, I challenge this position, by presenting some findings drawn from my ethnographic research (Ghezzi, 2007) and describing the complex formal/informal linkages in an area of flexible specialization in the Lombardy region (in the north-west of Italy). Here I want to focus for a moment on the other figures of these tables. The strong presence of irregular employment in agriculture and in the building sector is a largely known and well-documented phenomenon in the literature (Mingione

118  Simone Ghezzi Table 8.2  Informal unemployment rate by economic sector (1992–2006, percentages) Economic sector

1992

2002

2004

2006

Agriculture

25.5

21

19.9

22.7

5.7

4.2

3.8

3.7

Construction

14.2

13.3

10.9

11.0

Commerce, communicaton, food service, freight, hotel industry

15.6

19.5

18.4

18.9

Real estate, financing, banking

13.9

10

9.4

8.9

Other services (entertainment, household services)

13.7

11.8

10.9

11.3

Total

13.4

12.7

11.7

12.0

Industry (without construction)

Source: ISTAT 2004, ISTAT 2008b

Table 8.3  Informal labor by type (2000–2006) Years

Resident informal workers

Multiple jobholders

Immigrants w/o work permit

Total

Absolute values (× 1000) 2000

1,540.4

914.7

655.6*

3,110.7

2001

1,625.5

933.6

721.1*

3,280.2

2002

1,643.6

948.1

464.1*

3,055.8

2003

1,686.3

1,011.9

113.5*

2,811.7

2004

1,627.7

1,022.0

213.3*

2,863.0

2005

1,609.7

1,048.7

274.3*

2,932.7

2006

1,614.3

1,001.9

352.4*

2,968.6

2000

49.5

29.4

21.1*

100

2001

49.6

28.5

22.0*

100

2002

53.8

31.0

15.2*

100

Percentages

2003

60.0

36.0

4.0*

100

2004

56.9

35.7

7.4*

100

2005

54.9

35.7

9.4*

100

2006

54.4

33.7

11.9*

100

Source: ISTAT 2008b * This is the effect of the amnesty law (no.189, 2002) which regularized some 635,000 illegal immigrant workers between 2002 and 2003

The fallacy of the formal and informal divide  119 1991; 1995). What has changed, however, is the social profile of the employees, with many of the workers in these sectors being illegal immigrants (Reyneri, 2001; 2003; Lucifora, 2003; Magatti and Quassoli, 2003). Employed as seasonal laborers, these immigrants have become a significant component of the total labor force in Italy (see Table 8.4). As irregular day laborers in agriculture they are competing with, and gradually replacing, the low skilled workers of the local labor force, such as uneducated women, the elderly, and occasionally youth. They do piecework—being paid per crate (of tomatoes, grapes etc.)—and often receive wages as low as half of that of local laborers (Reyneri, 1998)3. Although the new immigration law has set up more restrictive normative barriers to better control the immigration flow, it is still relatively easy for illegal immigrants to live and to find jobs without a residence permit (making it worth the hardships, expenses and risks of getting around border checks) because of the numerous job opportunities available in the informal economy, especially in agriculture and in the building sector for men, and in household services for women. Those who do not hold a residence permit may realistically hope to obtain one, given the recurrent amnesty laws introduced by the Italian governments in order to regularize the position of hundreds of thousands of immigrants working off-the-books4. In the most recent amnesty (2002) that involved some 703,000 illegal immigrants, 48.6 percent pertained to women irregularly employed as domestic workers and caregivers (colf and badanti, respectively) especially for the not self-sufficient elderly. Currently there is probably the same number of illegal domestic workers employed off-thebooks in Italian households, but not much can be said as there is very little research on this phenomenon (Colombo and Sciortino, 2005). The rapid increase of domestic workers and caregivers is mainly related to the transformation of the labor market in northern Italy and the particular structure of welfare services in this country. In the last two decades or so, a few regions have boasted full-time female employment rates, despite the fact that public and private services (nursery schools, kindergartens, in-home care services for the elderly and so forth) are not very widespread. This situation makes it more difficult to reconcile work commitments and family duties. In particular, households appear incapable Table 8.4  Informal employment rate by geographic area and economic sector (2005, percentages) Area

Agriculture Industry (without construction)

Construction

Commerce, services

Total

8.8

North-west

19.0

1.5

6.4

11.3

North-east

18.1

1.7

3.5

11.4

8.6

Center

21.8

3.0

9.6

12.0

10.7

South

25.3

12.9

22.3

19.8

19.6

ITALY

22.2

3.9

11.3

13.9

12.1

Source: ISTAT 2008a

120  Simone Ghezzi of coping with the long term needs of their dependent elderly members, hence the increasing number of households seeking cheap domestic labor. It is estimated that in 2007 some 400,000 badanti (i.e., caregivers) were formally requested by Italian households, whereas the government quota for the same year only allowed the in-flow of 65,000 immigrants as domestic workers and caregivers. As shown in Table 8.3, all forms of irregular employment are on the rise again after the 2002 amnesty. What comes as a novel and an interesting phenomenon is the steady increase of the informalization of activities in advanced services. This is surprising because it takes place precisely in sectors which also register the highest presence of the atypical and more flexible jobs mentioned earlier. It is possible, as Sassen (1998) has maintained, that some companies in this sector may choose to operate informally in some respects even in the event of a stable or increasing demand for goods and services, in order to survive in a competitive market, “in a context of growing inequality in earnings and profit-capabilities” (Sassen, 1998:169). Yet, the main reason may lie elsewhere, and may well have to do with the individual capabilities of profit-maximizing strategies in a sector that allows for the most flexible work arrangements, and for this reason tolerates or even favors the presence of irregular multiple job-holders. A brief mention of regional variations is also worth exploring. Even if in the less developed south we are beginning to see signs of new emerging enclaves of regional economies (Viesti, 2001) with job-generating potential in small factories, there is still a remarkable gap in resource endowments in various sectors between northern and southern Italy. As a result, in the south it is still impossible to absorb a larger segment of the labor force in the labor market. The state engages in two different strategies. Firstly, it continues to play a patronage role by subsidizing families and by sustaining unproductive jobs (the so-called lavori socialmente utili, namely local make-work projects, serving as a kind of social aid). Secondly, it continues to tolerate informal practices of work and employment as a way of promoting competitiveness typically in peripheral regions (Meldolesi, 1998), and, therefore, as a way of coping more easily with the inability of these areas to spur rapid expansion in non-agricultural economic sectors. Therefore, it appears that the regions where irregular employment is estimated to be more widespread are also the same regions reporting a thriving underground economy. The difference between north and south as far as the construction sector is concerned is quite remarkable. For example, in the northern regions of Emilia-Romagna and Piedmont, the presence of irregular employment does not exceed 3 percent, while in the southern region of Calabria, it comes close to 44.5 percent (ISTAT 2008a). However, these figures do not give us a complete picture of the situation. In fact, research carried out at the local level has shown that there are huge differences even within regions. Lombardy for example, a region that according to ISTAT shows the lowest rate of irregular labor (7.8 percent) is a case in point. In Milan— the regional capital of Lombardy—there is a strong presence of irregular workers in the building sector. Here it is not so much the typically Italian phenomenon of illegal constructions (encouraged by recurrent building amnesties) that feeds the presence of irregular workers—a practice widely known and still widespread in

The fallacy of the formal and informal divide  121 the south—rather it is the recent implementation of projects to redevelop several urban areas of the city that is favoring the upsurge of informal employment, especially among legal immigrants (those with a residence permit). According to Milan’s Chamber of Commerce (to which all the business companies must register), there are about 100,000 construction workers in the Milanese area, of which only 46,000 are regularly employed. The rest are employed in illegal forms of labor in small (but legally operating) companies to whom the main building contractors normally contract out part of the work. In 2004, to crack down on informal employment, Italian social security institutes INPS and INAIL and the employers’ and workers’ organizations of the building sector signed an agreement providing for the certification of companies’ regular payment of social security contributions. This document alone, which by law is mandatory for all companies willing to take part in public and private contracts, is hardly sufficient to curb the diffusion of irregular labor, especially because it cannot prevent the systematic resort to fuori busta, an irregular payment of undocumented overtime work (see next section). Nor does it have an impact on the intricacy of relationships involving building contractors, subcontractors and informal labor recruiters—the so-called caporali. These are often individuals regularly hired as skilled workers who also happen to be inserted in informal circuits of illegal job seekers or of multiple job holders, and for this reason are able to provide firms with workers to meet immediate needs at a very low cost. The caporale either receives from the illegal workers a portion of their wage or retains a portion of the money that he is charged to distribute to the workers. In addition, on-going budget cuts in the public sector have resulted in reduced construction site inspections, which are carried out periodically to ensure that working conditions meet legal and security criteria. In 2003, only 10 percent of the sites (123) were inspected by urban police and in this monitoring operation it was discovered that out of 1,275 workers, 383 were employed illegally. The case of the building sector introduces opportunely a topic that will be discussed in the next section: how formal and informal activities may easily meet and transact, and how, therefore, the informalization of work commonly takes place in the formal economy.

The embeddedness of informality: the case of flexible production in an industrial district Although irregular work in the industrial sector (excluding the building sector) is quantitatively less relevant according to ISTAT, I believe that it is worth exploring because it is in this sector that formal and informal arrangements of work are more visible and more widespread than data can detect. The ethnographic method I have adopted has generated a different set of information, complementary to the quantitative estimates periodically released by ISTAT. More specifically, this method has proved its capacity to identify and illustrate the articulation between innovative forms of work, Fordist arrangements, and informal employment that general quantitative data cannot provide. There is one system in particular that

122  Simone Ghezzi lends itself to study this complex articulation: the notion of industrial district. The study was carried out in one specific regional economy, the Brianza—an area in Lombardy with a remarkable presence of small industrial and artisan firms, most of which are family-run businesses, in the sense that the co-owners (and sometimes employees) are closely related by blood and marriage. These micro firms are concentrated in small towns where a flourishing entrepreneurial activity in various sectors, especially in those of furniture, metalworking (e.g., mold making, nuts and bolts), and plastic (compression/injection molding), have made this area one of the most prosperous regional economies in Europe (Ghezzi, 2003). Most of these enterprises started as unregistered firms between the late 1960s and the 1980s to avoid taxation and labor regulations and were embedded in a local culture where the structure of work arrangements was mainly based on kinship and other informal social networks. It was not uncommon for these local entrepreneurs—mainly former workers—to start up their business in the basement of their own houses or in old barns. Then the high level of capital and profit accumulation and the growth of the firms between the 1970s and 1980s induced a process of formalization, gradual for some and fast for others. In order to protect themselves from the consequences of tax evasion, and at the same time, to have complete access to public financing tools (such as the Artisan Fund, a public national program of loans that provides long- and medium-term loans at a very low interest rates for investment [Weiss, 1987:58–65]), and finally to become members of the local artisan/entrepreneurial associations, such firms eventually had to completely formalize their production costs. Throughout the 1990s, the most dynamic small and medium size firms were involved in further reorganization that caused a significant transformation in the way in which they were operating. Firstly, by taking part in global financial circuits, some had become small corporations with international branches, while others were taken over by multinationals. Even some family-run firms began to look beyond the regional economy to establish new workshops abroad, especially in Eastern Europe. As in other districts of the country, in the Brianza several small factories have enjoyed a remarkable growth not only in terms of productivity and profits but also in terms of employment and size, so that the term “small” attributed to these firms now describes a picture quite different from that of when they started ten or twenty years earlier. Secondly, to cope with the scarcity of labor force due to the constant decline in the regional birth rate, several workshops have started to hire foreign workers. As a result, firms in the industrial districts are nowadays the most important employers of non-EU legal immigrants. Even though the impact of foreign immigration is still contained in this region compared to other areas, the presence of foreign immigrants is progressively becoming more noticeable. At any rate, in just one generation the image of a homogeneous local context promoting local forms of informal activities has been subverted (Ghezzi and Mingione, 2003). Despite all of these changes, there is evidence that informal activities are still embedded in this social system of production organization. As a matter of fact, in the manufacturing industry, irregular employment continues to exist, whereas

The fallacy of the formal and informal divide  123 flexible but regular forms of work are much less common.5 By contrast, in the service sector, including companies providing a wide range of services for the manufacturing firms of the district, such as payroll firms, law firms, accounting firms, financial companies etc., the so-called atypical jobs seem to be the most prevalent form of hiring youth in search of an occupation. In this discussion I use the words “small firm,” “small enterprise,” “artisan workshop,” and “small workshop” interchangeably. However, a clarification of these terms is needed in order to better explain the paradox of informal employment and atypical jobs. In Italy, “artisan firm” is a legal classification (as stated by Law no. 443/1985) that encompasses a wide range of activities, including most self-employed professionals such as bakers, barbers, truck drivers, electricians, and masons. Artisans have to register at the Chamber of Commerce, Industry, Artisanry and Agriculture (CCIAA). In the case of manufacturing enterprises, Law 443/1985—an updated version of the Artisan Statute introduced in 1956 (no. 860/56)—may apply to plants with a maximum of 10 employees, when the work involves mass assembly, namely standardized production, provided that this is not completely automated; a maximum of 18 employees in firms not involving mass assembly; and a maximum of 32 employees in workshops of traditional productions such as tailoring, artistic productions and so forth. The recruitment of apprentices may raise the number of employees up to 12, 22 and 40, respectively, but if an apprentice is hired the firm cannot be regulated under the Artisan Statute any longer, hence, opportunities producing informal employment are continuously exploited. The companies that exceed the dimensional limits as stated by the law are to be treated fiscally and legally as industrial firms. Remaining small is critical as it allows firms to get several fiscal advantages, keep labor cost lower, undergo minimal inspections by public agencies, and avoid hassles with trade unions. On the other hand, though, for the artisan employees, there are disadvantages, especially when compared to the workers in industrial firms. In general, the former are paid lower average wages, experience less safe work conditions, and have no job security. For example, if an artisan workshop faced a decline in production, some of its workers could be made redundant without receiving unemployment benefits. This happens in theory, though, for in practice mutual obligation based on reciprocity within the firm, as explained above, makes such a measure the very last resort. On the contrary, should an industrial firm face similar difficulties, employees” wages would be paid by the state (the Government Temporary Layoff Indemnity) while they remain on the company payroll until the economic situation improves. Unionization is allowed, but trade unions cannot operate directly within the workshop: factory union committees are not permitted in the workplace and the union representatives not working in the factory do not have access to it, a situation that makes union struggle virtually impossible. These rules regulating union activity apply not only in the artisan firms but also in all of the industrial firms with 15 or less employees. Why is it the case that the firms of the district are actually engaged in informal work and less so in flexible but legal forms of employment even as the latter would not make them change their statute? We have to consider that subcontracting

124  Simone Ghezzi several phases of the production process is a common practice associated with the formation of smaller, more specialized production units that are already sufficiently flexible in terms of internal organization. One of the main factors contributing to such flexibility is the fact that the family network, replicating the family metaphor in the firm, continues to act as a management resource and labor recruiter, capable of resorting to personal instrumental friendships and relationships based on reciprocity. In general, instead of relying entirely on impersonal relations with total strangers, or on the local employment bureau, the labor force is preferably selected and recruited on the basis of existing social networks, including kinship, friendship and acquaintance. This modus operandi of the workshop owner in the labor market is of great importance for the management of personnel, because it creates bonds of mutual obligation between the employer, the employee and his/ her family. The former has to take care of the employee’s training, while the latter has to show his/her gratitude, for having been hired, and commitment to the firm. Generally, those most desirable are loyal, trustworthy, and committed workers; characteristics that are hard to find among casual workers being hired only when needed in periods of intensive work. Reciprocity in social relations may also help understand a peculiar form of “ghost” employment whereby a kin member is hired without being actually present in the workshop. In one small firm the entrepreneur confided to the writer that he had a secretary who had been hired since 1985 who had never been in the office. This secretary was his sister who used to work in Milan until the birth of her second child. Then she had to resign, but in so doing she also lost her social security payments (i.e. her pension contributions). In order to help her, the brother devised a sort of fictitious engagement. She was formally hired in the workshop, so that she would continue to have her monthly pension contributions paid. Meanwhile, he pockets her wages, and she fills out her tax form as if she was the actual income owner. In flexible production where subcontracting is widespread there are periods in which people working in small firms toil to meet deadlines, and periods in which they may keep a slower pace as the workload is more manageable. Several strategies may be adopted to deal with workload at its peak. Family-run workshops may, for example, resort to family “self-exploitation,” a condition that comes into being when household members and close kin constitute a convenient occasional workforce when the job is labor intensive and skill requirements are not needed. Family “self-exploitation” sometimes means the presence of children on the shop floor. This is also affirmed statistically. Two concomitant surveys on child labor (less than 15 years old) in Italy carried out by IRES-CGIL (the Italian left-wing trade union) (Paone, and Teselli 2000), and ISTAT (2003) in collaboration with ILO6 have also detected this phenomenon, bringing to light a practice believed to be insignificant from an economic point of view and present solely in poor households and economically marginal areas of southern Italy. In industrial districts child labor does not always have a negative connotation in cultural terms. An analysis that would only stress the conditions of exploitation—

The fallacy of the formal and informal divide  125 which are inevitably present—falls short of dealing with the cultural and historical context out of which the labor of teenagers is used. A son or a daughter wanting to help out in the workshop is often encouraged by the household rather than being sanctioned, because this decision gives the boy or the girl the opportunity to start thinking about their future role and career in the workshop, and begin the process of skill formation, an element of paramount importance for building a career as an artisan. It constitutes the basis of his/her reputation, an asset that can only be acquired after several years of work on shop floors through a process of learning by producing. For a male artisan dealing with labor intensive work on a regular basis, skill and dexterity are highly praised, much less so are all the tasks that take time away from production, such as accounting and bookkeeping, usually a female competence, which are also learned or practiced in the workshop while studying (Ghezzi 2003; 2007). Another pervasive practice is the resorting to “cooperatives of porterage” (cooperative di facchinaggio). Formally these are legally registered cooperatives whose main purpose should only be to help out in tasks that are not important in the production process of a specific item inside the workshop, such as cleaning or repairing, packaging, loading, and moving the commodity outside the workshop, etc. The members of such cooperatives are not allowed to carry out activities that may constitute any phase of the cycle of production, and therefore they cannot perform tasks that are normally fulfilled by the employees in the workshops in competition with internal workers. However, these cooperatives are in the practice of hiring skilled workers who are able to perform highly qualified tasks, and offer their labor to workshops that momentarily need it to cover an emergency, for example a temporary vacancy or for urgent work that must be completed before a delivery to the client firm. These individuals are available for working in other workshops for a few hours virtually on a daily basis, including weekends, because of the spare time they get as their work schedule is organized in night/ day shifts. In practice they are moonlighters, for they already hold a formal and steady occupation, but they differ from the “traditional” moonlighters because they are hired through cooperatives and not directly by the workshop’s owner. These informal practices of short-term employment are quite a common means to deal with high workloads, and they also allow the workshop to lower labor costs, through the evasion of taxes and social security payments. Fuori busta (literally outside the envelope, that is, the envelope containing the worker’s pay slip) is still today as in the past another widespread practice, and perhaps the most common, whereby a portion of the wage paid to an employee is not documented for tax and pension contribution purposes. We have to distinguish between two kinds of fuori busta payment: one given to the employee that is regularly employed in the firm and another to a worker—i.e. the “traditional” moonlighter—that is regularly employed in a firm but also works irregularly a few hours in another. In both situations personal relations with the workshop’s owner and mutual trust are deemed fundamental to create the collusive relationship necessary to “work fuori busta.” As I will show below, both the worker and the employer want to avoid regulation, but only the latter takes the best pick. The

126  Simone Ghezzi effects of fuori busta are twofold: first, this practice lowers labor costs; second, it could also lower workers’ retirement allowances and, in the long term, the monthly pension rate. The fact that this latter consequence is only a possibility, and not inevitable, requires further explanation. Working time in each industrial sector is regulated at the national and regional level by a collective agreement between the entrepreneurial associations and the trade unions. For example, at the time of this research the agreement in force in the artisan metalworking sector stipulated 40 hours work per week with an overtime threshold of 10 hours per week, or of 230 hours throughout the whole year. By contract, workers cannot exceed this fixed number of hours, but the reality is that they very often do, especially in periods of high work demand, an event that generates a greater amount of subcontracting work. Therefore, in order to get around the encumbrances of the collective agreement, the exceeding hours are paid fuori busta—usually in cash at the end of the month—and this sum becomes tax-free income for the worker. In this case, the monthly pension rate is not affected whatsoever, which makes this practice so common and well accepted by workers, so much so that sometimes they may refuse to work overtime unless these hours are paid fuori busta. The long-term effect on the pension rate occurs when the regular overtime work, that is, the number of hours allowed by the collective agreement, is entirely or partially paid to an employee fuori busta. This hardly occurs as no worker would accept such a condition for a long period of time, unless he/she is temporarily out of work or on the Government Temporary Lay-off Indemnity. The illegality of fuori busta lies in the fact that medical benefits and pension contributions are not paid to the state. Given that these contributions amount to roughly 50 percent of the hourly gross salary, it is evident to what extent this practice may reduce the labor cost. Let us consider again the aforementioned collective agreement of metalworkers. By contract, overtime work was paid 25 percent more than a normal working hour during the work-week; this percentage would go up to 45 on the week-end, and 55 during a night shift (10pm–6am). In monetary terms, if an “average” worker normally received, say, €5.20 an hour during normal working hours, or €6.50 an hour for overtime work on week-days, the employer would pay about €10.40 an hour or €13.00 an hour respectively, half to the state (as compulsory contributions for social security and health care) and half to the employee. The illegal arrangement to which both employer and employee agree to refers not only to the number of hours of overtime work to pay fuori busta, but also to how much of the unpaid social security costs each party would pocket. When the research was carried out, fuori busta payments for overtime work were normally paid about €7.50 to €8.00 an hour to a qualified worker. The arrangement did not seem to be of mutual convenience, though, because in monetary terms, the employer would save about €5.00 an hour, while the worker would only gain an additional income of €1.50 an hour or a little more. However, the employer cannot obviously claim the fuori busta as a cost on the company tax form and it will have to hide the income generated with this illegal practice.

The fallacy of the formal and informal divide  127 The fuori busta plays a fundamental role in the small firms of the industrial district on assuring the carrying out of the labor process within the production chain. The workshop-owner is fully aware that if he were to accept more outsourced work, he would need the collaboration of his employees, but never manages to have all of them to come back to work on the week-ends or to prolong the work day. He knows, or at least he has to accept—albeit reluctantly—that his workers may have diverging interests. In accordance with his paternalistic vision of labor, he expects that adult married men would come back to the workshop on the week-ends, whereas he does not nourish the same hope with reference to women and the young: the former because they are supposed to be busy at home with domestic chores, the latter busy “having fun.” The persuasive attempts to get his employees to work on week-ends or week-days are not based on arrogant or despotic behavior—which could compromise the overall productivity of the workshop—but on a system of informal rewards and incentives, among which the fuori busta payments seem to be the most effective and persuasive practice. In this example, as in others illustrated above, I have tried to stress the notion that informal arrangements between employer and worker are embedded in a perfectly legal form of employment (the only exception being the fuori busta arrangement of the traditional moonlighter). They represent colluding practices between agents that are incorporated into the formal and the modern sector of the economy. Social networks, personal ties and word of mouth play an important role in the economy of the industrial district. It is by means of these informal channels that employers and irregular workers can meet and at the same time collude to dodge tax. As shown above, there is a mechanism of calculated reciprocity— unbalanced, indeed—at work that prevents the weaker party of the dyad (the worker) to report the illegal aspects of the employment to labor inspectors. This makes the industrial district quite different from other urban areas in which those who are involved in informal activities are described as marginal or living in poverty (Lomnitz, 2000). In general the Italian case shows a situation in which those who are at the margins of the labor market are also often marginalized in the informal economy.

Conclusions In this discussion I have tried to present an overview of the informal economy in Italy, drawing upon different kinds of data. ISTAT estimates have the strength of providing the macro-dimension of trends and variations across regions and economic sectors, but are inadequate when it comes to considering the inherent complexity of the linkages between formal and informal economy. Ethnographic research is instrumental to documenting such inadequacy because it has the advantage of observing the phenomenon close-up and allows for a betterinformed reading of informal practices (see also Mollona, 2005). But in order for this to occur, I narrowed down the scope of my research to the local level. The informal practices observed in workshops of an industrial district in the region of Lombardy, have provided enough evidence to move away from simplistic

128  Simone Ghezzi economic explanations to consider alternative cultural readings of the informal economy, and irregular employment in particular. Going back to the macro-dimension, the data currently available show that atypical and flexible jobs are spreading as a consequence of the processes of industrial restructuring and expansion of the service sectors that are taking place within post-Fordism. However, I find it interesting that the widespread diffusion of occupations such as atypical and flexible jobs, including self-employment, immigrant work, and subcontracting arrangements, which are favored by antiunion and deregulatory policies, are not hindering the growth of informal employment. If anything, they are causing a chronic instability of formal jobs. As already pointed out by others (Williams and Windebank, 1998:30) it may be “misleading to view deformalization as an indication of informalization in the advanced economies,” although it may be true in some cases. Indeed, increased global competition is an important factor to consider which can be associated with the concomitant growth of irregular employment and atypical jobs. The failure of recent government policies favoring the emersion of underground business through incentive packages is a case in point. With the highly publicized Law 383/2001, for example, the government hoped to encourage the “emergence” of irregular work, by providing irregular enterprises with tax and social security contribution incentives. Yet, three years after its promulgation, less than 2,800 firms had elicited applications for regularization. For some individuals, informality is still the preferred choice to increase business competitiveness, or sustain profit by lowering costs. This is valid for both firms and households, as the recent amnesty involving hundreds of thousands of foreign women informally employed as domestic workers and care givers has shown. Those who are not planning to stay in Italy for long do not have any interest in having their position legalized, and many low-income households would rather employ these women as cheap domestic labor. As a result, a huge number of women are still working underground due to a convergence of interests with their household-employees. The lack of data and research on this topic as well as on the informal economy produced by the third sector in general, prevent further elaboration. The situation in the building sectors in northern Italy is as interesting as it is sketchy—not unlike the case of foreign domestic workers—and calls for further scholarly investigations to thoroughly understand this recent phenomenon which unfortunately only gets public attention when serious accidents are reported in the news. By describing informal practices in workshops of the manufacturing industry in an industrial district, I have tried to illustrate not just the informal practices per se, but firstly how labor is used informally in a more flexible way, without resorting to more flexible (and formal) labor contracts, that is atypical jobs; and secondly how informal practices are embedded in the culture of the local social context. Job recruitment, “ghost” employment, the fuori busta, the labor supplied by the cooperatives of porterage, self-exploitation, and child labor are the outcomes of informal regulation and collusive interests that are deeply embedded in the formal sphere of the economy. Informality is the key to flexibility, a means for generating profit, power as well as social polarization, often a strong necessity in an ever

The fallacy of the formal and informal divide  129 more competitive global market, and for all these reasons it is firmly entrenched in contemporary capitalism. Yet, informality per se cannot be understood without being socially contextualized, as in the case of the industrial district, where kinship and informal networks are still important arenas in which informality is produced and reproduced. The formal/informal divide may be feasible analytically, but as I have described above, it cannot stand on its own without considering the extent to which the informal economy is integrated in the economy as a whole.

Acknowledgments I am deeply indebted to Enzo Mingione for his practical support and valuable comments on this chapter. Responsibility for any shortcomings in the argument rests with me alone.

Notes 1 “Politiche per favorire l’occupazione regolare e l’emersione” (i.e., Policies promoting formal employment and the emersion of the underground economy), conference organized by ISFOL and the Ministry of Labor and Social Security, Rome, 5 December 2003. 2 Such an estimate diverges significantly from the values proposed by Schneider and Enste (2000) who estimate the size of the informal economy as 24 to 30 percent of GDP in the 1990s. Their calculations have been highly criticized by the ISTAT and the IMF on methodological grounds (see ISTAT 2003 and 2004). On the controversy of the reliability of these estimates see Tanzi (1999) in an article that casts doubt on the usefulness of empirical estimates of the informal economy. As for the other tables included in this chapter, a clarification is required. Informal employment is expressed in units of labor—that is the number of people that can be estimated if they were working full-time irregularly. Since a significant number of people work seasonally or part-time, there is an obvious numeric difference between the units of irregular employment and the actual number of people irregularly employed: the latter must necessarily be always higher than the former. 3 As for the Italian day laborers, we may distinguish two different kinds of informal arrangements. The first is the informal day laborer who in agreement with his/her employer falsely declares at least 51 days of work in the calendar year in order to receive unemployment compensation (while working informally for the rest of the year). The second kind is the fictitious (i.e. absent) day laborer who is formally employed in a farm but is actually engaged in other informal wage employment. The economic incentives introduced by the government in 2007 to discourage such collusive agreements between laborers and farmers are yet to be assessed. 4 The amnesties took place in 1986, 1990, 1995, 1998, 2002 and involved immigrants who entered Italy illegally and those who initially had a residence permit that expired. See Morris (2001) for an interesting analysis of the link between the amnesty (sanatoria in Italian) of illegal immigrants and informal employment. 5 According to a survey carried out in 1999 by the Centro Studi Luigi Gatti, an institute of research funded by entrepreneurial associations, less than 8 percent of jobs are somehow “flexible” or “atypical” in the manufactures situated in the northern area of the Milanese province (unpublished research report). 6 The results from both surveys are quite dissimilar due to the different methodologies used. IRES-CGIL estimated 360,000–430,000 working children aged 10–14, drawing

130  Simone Ghezzi upon a quantitative research complemented by several other indicators and labor market data. Two years earlier, in 1998, another survey on the household by ISTAT estimated roughly a half-million children irregularly working. The survey by ISTATILO in 2000 calculated a much lower figure, 144,285 children less than 15 years old, data resulting from the retrospective analysis of the labor force aged 15–18 at the time of the survey (the age categories for which it is legal to hire youth as apprentices). In this survey, which entirely excludes immigrant children, 14.7 percent (18.8 percent boys and 10.4 percent girls) of the people interviewed stated they had worked either occasionally or regularly before the age of 15. In both year - 2000 surveys, what emerges is that the highest presence of working children is detected in the industrialized areas of the north-east and north-west of the country. The remarkable and somewhat surprising presence of child labor in the north may also be connected with the lower rate of secondary and post-secondary education detected among children living in northern Italy and particularly in the industrial districts, areas in which youth (especially males) struggle to reconcile work with long term education.

Bibliography Colombo, A. and G. Sciortino 2005. Sistemi migratori e lavoro domestico in Lombardia. Milan: IRES Lombardia. Gallino, L. 2007. Il lavoro non è una merce. Contro la flessibilità. Bari: Laternza. Ghezzi, S. 2003. “Local discourses and global economy: production experiences of small family workshops in the Brianza.” International Journal of Urban and Regional Research 27(4): 781–92. ———. 2007. Etnografia storica dell’imprenditorialità in Brianza. Antropologia di un’economia regionale. Milan: Franco Angeli. Ghezzi, S. and E. Mingione 2003. “Beyond the informal economy: new trends in postFordist transition,” in J. Friedman (ed.), Globalization, the State, and Violence, Lanham, MD: AltaMira Press. ISTAT 2002. Sistema informativo sul lavoro minorile: Progetto Silm. Relazione finale. Rome: ISTAT and Ministero del lavoro e delle politiche sociali. ———. 2003. “La misura dell’economia sommersa secondo le statistiche ufficiali. Anno 2000,” Statistiche in breve, 23 September 2003. Rome: ISTAT. ———. 2004. “La misura dell’econ omia sommersa secondo le statistiche ufficiali. Anno 2002,” Statistiche in breve, 5 October 2004. Rome: ISTAT. ———. 2006. “La misura dell’economia sommersa secondo le statistiche ufficiali. Anni 2000–2004,” Statistiche in breve, 14 December 2006. Rome: ISTAT. ———. 2008. “La misura dell’occupazione non regolare nelle stime di contabilità nazionale,” Statistiche in breve, 6 February 2008. Rome: ISTAT. ———. 2008b. “La misura del’economia sommersa secondo le statistiche ufficiali. Anni 2000-2006,” Statistiche in breve, 18 June 2008. Rome: ISTAT. Lomnitz, L.A. 2000. “Reciprocity and the informal economy in Latin America,” in K. McRobbie and K. Polanyi-Levitt (eds), Karl Polanyi in Vienna: The Contemporary Significance of the Great Transformation. New York: Black Rose Books. Lucifora, C. 2003. Economia sommersa e lavoro nero. Bologna: Il Mulino. Magatti, M. and F. Quassoli 2003. “Italy: Between legal barriers and informal arrangements,” in R. Kloosterman and J. Rath (eds). Immigrant Entrepreneurs: Venturing Abroad in the Age of Globalization, Oxford: Berg. Meldolesi, L. 1998. Dalla parte del sud. Bari: Laterza.

The fallacy of the formal and informal divide  131 Mingione, E. 1991. Fragmented Societies: A Sociology of Economic Life Beyond the Market Paradigm. Oxford: Basil Blackwell. ———. 1995. “Labour market segmentation and informal work in southern Europe.” European Urban and Regional Studies, 2(2): 121–43. Mollona, M. 2005. “Factory, family and neighbourhood: the political economy of informal labour in Sheffield.” Journal of the Royal Anthropological Institute (N.S.) 11: 527–48. Morris, L. 2001. “The ambiguous terrain of rights: civic stratifications in Italy’s emergent immigration regime.” International Journal of Urban and Regional Research, 25(3): 497–516. Paone, G. and A. Teselli, eds. 2000. Lavoro e lavori minorili. L’inchiesta della CGIL in Italia. Rome: Ediesse. Reyneri, E. 1998. “Immigrazione ed economia sommersa.” Stato e Mercato 53:287–317. ———. 2001. Migrants’ Involvement in Irregular Employment in the Mediterranean Countries of the European Union. IMP Working Papers. Geneva: International Labour Organization. ———. 2003. “Underground economy and the new immigration. The case of Southern Europe,” paper presented at the EU workshop “Informal/Undeclared Work: Research on its changing nature and policy strategies in an enlarged Europe”, jointly organised by DG Research and DG Employment and Social Affairs, Brussels, 21 May 2003. Sassen, S. 1998. Globalization and its Discontents. New York: The New Press. Schneider, F. and D. H. Enste. 2000. “Shadow economies: size, causes, and consequences.” Journal of Economic Literature 38: 77–114. Tanzi, V. 1999. “Uses and Abuses of Estimates of the Underground Economy.” The Economic Journal 109: 338–47. Viesti, G. 2001. Come nascono i distretti industriali. Bari: Laterza. Weiss, L. 1987. “Explaining underground economy: state and social structure.” British Journal of Sociology 28: 216–34. Williams, C. and J. Windebank 1998. Informal Employment in the Advanced Economies. Implications for Work and Welfare. London: Routledge.

Part III

Informal work in North America

9 Day laborers in New York’s informal economy Edwin Meléndez, Nik Theodore, and Abel Valenzuela, Jr

Introduction: day labor in historical perspective An early morning commute through the boroughs of New York City usually provides a glimpse of at least one of the more than 50 curb-side, open-air labor markets where groups of men (and some women) congregate daily in their search for prospective employers. The jobseekers who gather at these sites along busy thoroughfares, at major intersections in port-of-entry immigrant neighborhoods, and in front of home improvement stores, are primarily immigrants from Mexico, Central America, and South America. They mainly are seeking jobs as general laborers or skilled trades workers in the local construction industry. Others will be hired by landscaping contractors, small manufacturers, moving companies, and homeowners. Most of these workers refer to themselves as jornaleros—“day laborer” in the vernacular Spanish of their countries of origin. For some of these workers, day labor offers an opportunity to gain a foothold in the U.S. economy. For others, it represents a chance to earn an income when temporarily laid off from another job. For still others, it is the employment of last resort. New York City has a long history of various informal employment arrangements that closely resemble contemporary day labor. Since at least the early 1800s, large numbers of dockworkers assembled at “shape-up” sites near the city’s waterfront, jostling with one another for the attention of the foreman responsible for selecting workers (Jensen, 1964). Shape-up sites provided a mechanism for hiring dockworkers for the day or half-day (a minimum of four hours), though the process of selection was often capricious and seemingly arbitrary (Larrowe, 1955). Under this casualized labor system, dockworkers were required to gather early in the morning to await the call to “shape up” from the hiring foreman, at which point the jobseekers would form a semicircle and present themselves to the labor recruiter who would be solely responsible for distributing work that day. As is the case with contemporary day labor hiring sites, the number of jobseekers at the waterfront greatly outnumbered the available jobs. Also during the early 1800s, public spaces in other sections of New York City (typically public markets and city streets) were designated as sanctioned sites of labor exchange (Cowgill, 1928, quoted in Martinez, 1976). In these markets, jobseekers and employers could meet to arrange the terms of employment for

136  Edwin Meléndez, Nik Theodore, and Abel Valenzuela, Jr construction work, odd jobs, and domestic labor. These open-air hiring sites were frequented by immigrants from Ireland, Italy, and elsewhere in Europe (Claghorn, 1901; Foner, 2000; Wilentz, 1984), and they operated as the entry point into the U.S. labor market for many recent immigrants. There are many similarities between the casualized employment relations of the nineteenth century and twenty-first-century day labor hiring sites in New York and elsewhere in the United States. Like the dockworkers of the 1800s, contemporary day laborers gather in public spaces during the early morning hours in the hope of securing work by vying with one another for the attention of prospective employers (see Malpica, 2002; Turnovsky, 2004; Valenzuela Jr., 2003). They also must contend with heightened forms of job insecurity; they lack formalized employment contracts, labor supply exceeds labor demand, and employers have the clear upper hand when negotiating wages. Given the lack of formal regulation or established mechanisms of worker collective action, it is not surprising that the modern day labor market is associated with significant levels of abuse by employers. Violations of wage and hour laws and health and safety regulations are common. The occupation is extremely dangerous, even relative to an industry such as construction, which has high levels of worker injury. These are striking features given that unlike the labor relations of the early nineteenth century, most present-day employment arrangements are governed by an extensive system of labor laws designed to eliminate rampant employer abuse. This chapter examines the reemergence and growth of day labor in New York City’s post-industrial economy. Reporting results from the first comprehensive New York Day Labor Survey, undertaken in 2002, we examine the characteristics of the supply of and demand for day labor in the city. The next section locates day labor within the wider informal economy and explores the relationship between casualized employment relations and the mainstream economy. This is followed by a presentation of survey findings on day laborer demographics and the terms of employment, wages, and health and safety conditions associated with day labor. The final section considers the most promising programs to restore the floor under the day labor market—worker centers, wherein day labor hiring is more formalized and labor standards are better protected.

Precarious employment and the informal economy Over the past three decades, the New York regional economy has undergone sweeping changes in industrial structure and occupational composition. A declining manufacturing base and booming services sector are just two of the most prominent changes that have occurred. However, the restructuring of the New York economy runs much deeper. In a range of economic sectors, the terms of competition are being refashioned as enterprises attempt to respond to severe cost pressures in their industry. In an effort to contend with falling profit margins, some firms are devising strategies to restore profitability by radically remaking employment relations. They are cutting labor costs and introducing new forms of labor flexibility through the adoption of various contingent work arrangements,

Day laborers in New York’s informal economy  137 including misclassifying independent contractors, entering into relationships with temp agencies, and employing casual laborers who are hired “off the books” and paid in cash on a daily basis. Such strategies have produced a vicious cycle of cost cutting and labor exploitation as increasingly large segments of firms in certain industries achieve short-run competitiveness by sweating labor and pursuing other low-road forms of competition (Theodore, 2003). As cost-cutting strategies based on the externalization and segmentation of the labor force take hold in an industry, the balance of competition shifts in the direction of low-road firms, leading to the further downgrading of employment conditions across the industry. When processes of labor sweating go unchecked and employers are allowed to reap the benefits of low-cost, flexible labor, the competitive dynamics of entire sectors can be transformed, as has been the case with parts of New York’s retail trade, urban transport, non-durable manufacturing, and construction industries (Gordon, 2005; Hum, 2003; Ness, 2005; Sassen, 2001). Day labor is the epitome of the type of casualized and individualized employment relationships that have been reemerging in the informal economies of New York and other major U.S. cities. Working-time instability and systemic underemployment are endemic features of this form of work organization, and these characteristics profoundly shape the conditions under which day laborers are employed (Theodore, 2006; Valenzuela Jr., 2002, 2003). Workers are usually hired for a day or two, employers take few precautions to ensure worker safety, and the labor force is regarded and treated as if it is entirely substitutable. These conditions prevail, in part, because day labor shares many characteristics with the wider informal economy of which it is a part: (1) It exists largely beyond the reach of government regulation; (2) its activities (e.g., residential construction, smallscale manufacturing, landscaping) are carried out in an interdependent relationship with the formal, mainstream economy, wherein competitive advantages can be gained by placing downward pressure on labor costs; (3) wage payments typically are made in cash so as to avoid detection by government regulatory enforcement agencies; and (4) systemic violations of labor and employment laws are the norm (Henken and Cordero-Guzmán, 2005; see also McGrath and Martin, 2005). In other words, just as the informal sector does not exist as an independent sub-economy that is entirely separate and distinct from the regulated, mainstream economy, the dynamics of day labor are conditioned by the restructuring strategies of the enterprises that employ these workers. And like the informal economy in general, the principal function of the day labor market is to absorb the most intense cost pressures of industries undergoing deep economic restructuring, particularly the construction industry.

Day labor and the construction industry The construction industry is the primary employer of day labor in New York and the rest of the United States. Similar to many industries, it also has changed and adapted to leaner and more cost-effective strategies. Cost pressures have led construction contractors to adopt alternative hiring practices, and many have

138  Edwin Meléndez, Nik Theodore, and Abel Valenzuela, Jr turned to workers from the informal economy as a way to hold down wages. Though attempts to contain labor costs have been made throughout the industry, they have had the greatest traction in the non-unionized segment that is primarily focused on residential construction. The unionized sector of the construction industry has for years primarily focused on large-scale infrastructure, commercial building, and housing development projects, leaving to the wayside robust but volatile new home construction and refurbishment opportunities to non-union contractors. Small construction contractors undertaking a home remodeling, room add-on, or a landscaping project have had to find ways to cut down on their construction costs to remain competitive. One available strategy is to hire day laborers, usually on their way out of a building supply store where they purchase lumber or other building materials. It is these contractors who also regularly pull off the road at the open-air labor markets in Farmingville, Queens, and Westchester to secure their eager, inexpensive, and flexible work crews.1 The growth of day labor is also related is the burgeoning “do-it-yourself  ” home improvement movement that has been spurred by popular cable television shows, glossy trade and home improvement magazines, and learn-as-you-go, connectthe-dots manuals on most home improvement idea. Of course, the massive growth of home improvement stores (e.g., there are 1,400 Home Depots across the United States) has made shopping for nails, power tools, garden hoses, electrical outlets, lumber, and cement fun and easy for the average homeowner. In addition, more ambitious homeowners can even learn how to install tiles, undertake simple floor installations, or solve typical household problems through trade classes offered free of charge. On most weekends, home improvement stores, such as Home Depot, offer two- to three-hour courses on various construction trades that, while relatively skilled, can be taught at a rudimentary level with the assistance of a guidebook. The objective is not so much to train a corps of homeowner trades workers but to keep customers coming back to the store for advice and, more important, building materials. This marketing concept is played out in hundreds of communities and home improvement stores throughout the United States in an effort to convince non-specialists that home refurbishment can be done by anyone. After taking a quick-and-dirty course, a consumer can purchase their goods, buy or rent their tools and a truck to transport them and, after making mistakes on their project, return to repurchase lumber, tiles, or other supplies. In addition, if the job becomes too complicated or cumbersome and the hiring of a contractor is deemed to be too expensive, the consumer can also turn to the local day laborers just outside the store to help them out. Finally, the robust housing market, in part driven by historically low interest rates, has resulted in not only new home building but home refurbishment projects as homeowners tap into equity, cash-out mortgage refinance packages, and take advantage of easy lending procedures. The enormous costs of these investments push typical new homeowners and those wishing to improve their homes to do so in the most cost-effective manner. As a result, many homeowners turn to day labor as an economical alternative to more expensive contractors.

Day laborers in New York’s informal economy  139

Day labor demand and immigration Immigrant workers in the United States have a long and storied history. Their demand has ebbed and flowed depending on macroeconomic swings, world economic crises, and industrial developments in the United States. The demand for cheap and pliable immigrant labor has been a part of every major U.S. economic expansion. Sometimes it has been formalized, as in the case of the Bracero Program, a contractual agreement between Mexico and the United States to provide temporary workers to the United States. Indeed, between 1942 and 1964, almost 4 million Mexican nationals participated in this program. At other times, the demand for immigrant labor has been less formalized and less widely acknowledged, as has been the case during the current immigration wave, which has included several million undocumented immigrants, mostly from Mexico. Though rarely articulated explicitly, there is enormous demand for cheap labor to work in almost every segment of the U.S. economy, particularly manufacturing, restaurants, domestic cleaning, gardening, agricultural production, construction, and child and elderly care. The current flow of immigration to the United States (both authorized and unauthorized) is unique. It is the largest in U.S. history, despite increased resources to the United States Immigration and Naturalization Service (now Immigration and Customs Enforcement), stricter visa requirements, sanctions against employers who knowingly hire undocumented immigrants, and tougher border enforcement. Yet, these measures have done little to staunch employer demand for immigrant workers, and unauthorized immigrants in particular.

Research methods: the New York day labor survey and empirical challenges As is the case with other segments of the informal economy, little systematic information has been collected regarding the employment experiences and working conditions of day laborers in the United States (U.S. General Accounting Office, 2002; for a review of the scholarly literature, see Valenzuela Jr., 2003). To understand the circumstances under which day laborers2 in the New York metropolitan area are employed, a survey3 was administered in June and July 2002 to 290 workers, across 29 hiring sites (of a total of 57 identified) throughout metropolitan New York, including all five New York City boroughs and the counties of Putnam, Rockland, Westchester, Long Island, and Bergen. A total of 290 faceto-face surveys were completed during a six-week period in June and July 2002. Interviews included more than 250 questions regarding worker demographics, occupational characteristics, wages, and working conditions. The surveys were administered in Spanish and English. Each survey took approximately one hour to complete. Respondents were paid $20 for their participation. A well-developed study of day laborers working in the informal economy must employ methods that can overcome at least three methodological challenges. First, day labor (looking for work daily in a public venue) is not an easily defined

140  Edwin Meléndez, Nik Theodore, and Abel Valenzuela, Jr occupational category that conforms to established occupational classification systems. Moreover, because day laborers may undertake tasks associated with a large number of construction trades and other manual labor jobs over the course of a work week, even the identification of a primary occupation is difficult. Second, day laborers usually are hired by many different employers for a variety of jobs ranging in length from a few hours to several weeks. As a result, the employment status of a given worker may fluctuate between jobseeker, informal day laborer, and employee in the formal labor market. This means that simple counts of workers congregating at day labor hiring sites, depending on the season, time of day, or current demand for day laborers, may not provide an accurate measure of the size of the market. Hiring sites, though often visible to a passerby, are nevertheless difficult to keep track of in their totality. New sites emerge, old sites disappear, and some sites are difficult to identify. All of this adds to the difficulty in generating an accurate count of the workers in this occupation. Third, for some workers, day labor might be a temporary occupation or a second job. For others, it might be their full-time occupation and primary source of income. Still others might be using day labor as a stepping stone to full-time work in the mainstream economy. Therefore, at any given time, who is and who is not a day laborer is fluid. As a result, it is difficult to track the transitory nature of day labor as workers move in and out of this market. Surveys of workers at hiring sites miss those workers who have moved on to permanent employment. The inability to assess the mobility of workers in this industry is an unfortunate shortcoming. To account for these methodological challenges in the New York Day Labor Survey, an attempt was made to identify as many day labor hiring sites as possible in the metropolitan area and to develop a random sampling frame for the selection of interviewees. Prior to implementing the survey, 25 hiring sites were identified. An additional 32 sites were subsequently identified during the course of surveying using worker referrals, key informant interviews, and chance discovery. Twenty-nine sites were selected for surveying. As a group, these sites were representative of the hiring sites in the greater New York City area. Sites included those that are located in close proximity to construction supply and home improvement stores (three sites); those that exist in public spaces, such as major thoroughfares (22 sites); and formal day labor worker centers operated by community-based organizations (four sites). At each of the selected hiring sites, workers were randomly selected to be interviewed. The New York Day Labor Survey adapted conventional sampling techniques based on selection counts for each site according to the number of jobseekers present. Profile of day laborers in the New York metro area The number of day laborers in the New York metropolitan area ranges between 4,349 and 8,283 workers.4 Day laborers gather at 57 hiring sites in the region, with particularly large concentrations of sites in Westchester and Long Island. Day labor hiring sites include “connected” sites (Valenzuela Jr.. 2003) near building supply stores (e.g., Dunn Edwards, Standard Brands); gardening stores and

Day laborers in New York’s informal economy  141 nurseries; moving equipment suppliers (e.g., U-Haul); and home improvement stores (e.g., Home Depot, Home Base). More common are sites that have formed along busy thoroughfares or in other public spaces. These “unconnected” sites exist in areas where day laborers can easily commute to the hiring point (either by foot or using public transportation) and where contractors and other employers can readily access workers. Finally, other workers assemble at “regulated” sites where there is a day labor worker center operated by a community organization or municipality. Overall, unconnected sites tended to be largest, followed by regulated sites. On average, there were 52 workers at each site, with small sites being visited by an average of 15 jobseekers at any point in time and large sites being visited by an average of 91 workers (Table 9.1). The vast majority (88 percent) of workers are immigrants from Mexico, Central America, and South America (Figure 9.1). A significant number (26 percent) have documents either to reside in the United State or to work. Just 16 percent of foreignborn day laborers in New York possessed legal immigration documents when they entered the United States. Approximately 71 percent have resided in the United States for five years or less, whereas 29 percent have lived in the United States for at least six years, and 15 percent have resided in the United States for more than 11 years. Slightly more than 3 percent of respondents were born in the United States. Other 9% U.S. 3% Peru 5%

Mexico 32%

El Salvador 8% Honduras 9%

Ecuador

Guatemala

17%

17%

Figure 9.1  Country of origin Table 9.1  Average number of day laborers at hiring sites Number of workers at site

Number of sites

Average workers at site

Small 5–29

15

15

Medium 30–69

19

47

Large 70–165

17

91

6

NA

57

52

Other identified Total Source: New York Day Labor Survey, 2002.

142  Edwin Meléndez, Nik Theodore, and Abel Valenzuela, Jr Table 9.2  Demographic characteristics, New York day laborers Percentage Gender   Male   Female

94.8 5.2

Nativity and legal status   Foreign-born

97.0

  No documents

74.0

Tenure in the U.S.   < 1 year

17.8

  1–5 years

53.3

  6–10 years

14.1

  11+ years

14.7

Age   18 – 27

38.6

  28 – 37

31.6

  38 – 47

20.3

  48 +

9.4

  Mean age

32

Marital status   Never married

45.5

  Married

40.6

  Living with partner

6.3

  Separated

5.6

  Divorced or widowed

2.0

Educational attainment   No education   1–6 years

4.5 45.1

  7–8 years

4.5

  9–12 years

39.5

  13 + years

6.3

Mean years of education

7.7

Source: New York Day Labor Survey, 2002

Day laborers in New York’s informal economy  143 Table 9.3  Top tasks performed as a day laborer (n = 288) Occupation

Percentage

Construction labor

87.2

Clean up

84.7

Painting

76.7

Moving/hauling

76.1

Digging

76

Gardening

72.7

Demolition

72.2

Landscaping

68.4

Roofing

63.9

Drywall installation

54.5

Plumbing

28.5

Mechanic work

11.1

Source: New York Day Labor Survey, 2002

As shown in Table 9.2, 95 percent of day laborers in New York are men, and more than two-thirds are under the age of 37 (n = 290). Approximately 5 percent report that they do not have any formal education (n = 286). An additional 45 percent have less than six years of education. The remaining 50 percent have more than seven years of education, with most of these workers reporting 10 or more years of schooling. Finally, slightly less than half of all day laborers are either married or living with a partner (46.3 percent). Occupations undertaken, wages, and earnings from day labor Day laborers perform a variety of manual-labor jobs, mainly related to the construction industry (Table 9.3). Most of these jobs involve difficult and tedious manual labor. Workers were asked about the types of jobs they have performed as a day laborer. Top occupations include construction laborer, clean-up worker, painter, and mover. The diversity of occupations reflects a wide range of generalist (and perhaps even specialist) skills possessed by day laborers. It also is an indication of the various tasks that employers turn to day laborers to complete. Day laborers reported having training and general competency in a range of occupations, primarily those related to construction and landscaping (Table 9.4). Most day laborers (82.6 percent) reported that they have training as a construction laborer, 70.8 percent have training as a painter, and 59.7 percent have training as a gardener. The hourly wages and annual incomes of day laborers tend to be extremely volatile and dependent on a range of both labor market factors and extra-labor market conditions. The overwhelming majority (82.8 percent) of the workers

144  Edwin Meléndez, Nik Theodore, and Abel Valenzuela, Jr Table 9.4  Jobs for which day laborers have training Occupation

Percentage

Construction labor

82.6

Painter

70.8

Gardener

59.7

Carpenter

41.3

Plumber

24.3

Electrician

17.0

Mechanic

13.5

Source: New York Day Labor Survey, 2002

Table 9.5  Typical number of days worked (percentage) (n = 207) Number of days worked

Good week

Bad week

0

0

2.4

1

0

30.9

2

1

37.7

3

4.8

22.7

4

17.9

4.8

5

27.1

1.4

6

36.7

0

7

12.6

0

Total

100

100

5.3 days

2.0 days

Mean days worked Source: New York Day Labor Survey, 2002

surveyed indicated that day labor is their sole source of employment (n = 198), and 75.4 percent indicated that they search for day labor work all year round. Three-fourths of day laborers search for employment seven days a week (n = 278). An additional 21 percent of day laborers seek work Monday through Friday, and less than 5 percent search just on weekends. Of those workers reporting that they seek work every day (n = 207), 76.4 percent indicated that during a “good week” they are able to secure employment at least five days that week (Table 9.5). However, during slow periods or “bad weeks,” day labors are employed, on average, just two days a week (despite seeking work every day). During bad weeks, one-third of workers are employed one day or less, and just 1.4 percent are employed five days during the week.

Day laborers in New York’s informal economy  145 Table 9.6  Hourly wages of day labor jobs (n = 740) Wage rate

Percentage

Below minimum wage ($5.15)

3.9

$5.15 –$7.00

10.7

$7.01–$9.99

22.6

$10.00–$11.99

48.2

$12.00 or more

14.6

Median wage rate

$10.00

Source: New York Day Labor Survey, 2002

Table 9.7  Monthly earnings of day laborers

Earnings

Median earnings May 2002 (n=281)

Median earnings good month (n=268)

Median earnings bad nonth (n=260)

Full-time (good month) earnings at $5.15

Part-time (bad month) earnings at $5.15

$800

$1,500

$400

$824

$412

Source: New York Day Labor Survey, 2002

The hourly wages of day laborers follow somewhat of a bimodal distribution, with wages clustering at the $10.00 level (the median wage) and, to a lesser extent, at $8.00. Survey respondents were asked to report their daily wages and earnings for each job worked during the previous week (n = 740). From these responses, it is possible to ascertain the wage patterns of day laborers in the New York area. At the low end of the hourly wage distribution, 3.9 percent of day-labor jobs paid less than the federal minimum wage of $5.15 per hour (Table 9.6). Approximately 10 percent of assignments paid between the minimum wage and $7.00 per hour. Just less than half of all jobs paid between $10.00 and $11.99 per hour, and nearly 15 percent paid $12.00 or more.5 So overall, the wages of day-labor jobs tend to be well above the minimum wage rate. In addition, because nearly 95 percent of day laborers are paid in cash (at least in part because many workers have been issued bad checks by employers and therefore have not been paid for work completed), a tax deduction has not been made, meaning that, in most cases, workers’ takehome pay on days that they are able to secure employment is well above the minimum wage. With that said, however, the annual earnings of most day laborers place them among the working poor. Typical earnings are low both because of the instability of the work and because workers are regularly subjected to violations of basic labor standards such as non- or underpayment for work completed. The erratic nature of day labor work combined with even modest variations in daily wages leads to dramatic swings in workers’ monthly earnings (Table 9.7).

146  Edwin Meléndez, Nik Theodore, and Abel Valenzuela, Jr Of the workers surveyed who search for day labor jobs on a full-time basis (i.e., five or more days a week), the median monthly earnings in the previous month was $800. However, approximately 18 percent of full-time day laborers earned $500 or less in that month. On the upper end of the earnings scale, 6.3 percent of respondents reported earnings of more than $1,500 that month. However, the volatility in monthly earnings can best be seen when comparing earnings during peak periods (i.e., good months) and slack periods (i.e., bad months). Although the median earnings level in the prior month was $800, in a good month, median earnings reach $1,500. However, during slack periods, median monthly earnings fall to just 27 percent of peak-period levels, or $400. Even in cases wherein New York day laborers experience more good months than bad months, it will be difficult for them to earn annual incomes of more than $15,000. Working conditions and violations of labor standards Employer violations of day laborers’ rights are a common occurrence in New York’s day labor market. More than 85 percent of respondents reported that they had suffered some type of abuse while working as a day laborer (Table 9.8). The violations that have been experienced by the largest share of day laborers include being denied food and water at the worksite (61.7 percent); being underpaid (60.3 percent); being denied breaks (52.6 percent); and the non-payment of wages (48.8 percent). The most frequent violations (i.e., those reported most often by respondents) are being denied breaks, being denied food and water at the worksite, being underpaid, and being abandoned at the worksite. In addition to violations of basic labor standards, day laborers also endure a high incidence of workplace injury and exposure to hazardous worksites (see Buchanan, 2004; Mehta and Theodore, 2006; Walter et al., 2002). Among fulltime day laborers who have resided in the United States for at least one year, exposure to unsafe conditions at the worksite is a common occurrence. Forty-one percent of respondents (n = 205) reported that, in the past 12 months, they had been asked to undertake work at a jobsite where they were exposed to chemicals Table 9.8  Frequency of employer abuses (percentage) Never

1–5 times

6–10 times

11+ times

Non-payment of wages

50.2

45.3

2.8

1.8

Pay less than agreed upon

39.7

49.1

6.7

4.6

Abandoned at work site

60.9

32

3.9

3.2

Bad checks

86.3

12.3

0.7

0.7

No food or water

38.3

42.8

7.0

11.9

No breaks

47.4

31.2

7.0

14.4

Threats

81.4

13.3

1.8

3.5

Source: New York Day Labor Survey, 2002

Day laborers in New York’s informal economy  147 or pesticides or were at serious risk of physical injury. Furthermore, 60.9 percent of workers who were exposed to hazardous or unsafe working conditions were not provided any form of protective clothing or safety equipment. In fact, only 7 percent of respondents reported that they have regularly received adequate protective clothing, safety equipment, or training when it was necessary to perform the job safely. Given that most day laborers are hired for a day’s work and they could not know of the potential hazards at a worksite where they had not previously worked, it is unreasonable to expect that these workers would themselves supply the necessary safety equipment and protective gear required for the range of hazardous conditions they encounter. Nevertheless, day laborers continue to endure the hazards of dangerous worksites, mainly because they fear that if they speak up, complain, or otherwise challenge being subjected to unsafe conditions, they either will be fired or not paid for work completed (Mehta and Theodore, 2006). One in five day laborers who seek work full-time and who have resided in the United States for at least one year have suffered one or more injuries at work (n = 206). For injured day laborers, the median number of days missed seeking work was seven. In the few cases where the injured worker received professional medical attention for the workplace injury, the day laborer paid for the costs of treatment half of the time, the employer paid the medical costs 46 percent of the time, and Medicaid covered the costs one time. In no instance were the medical costs covered by workers’ compensation insurance. By any measure, day labor is a difficult and dangerous occupation in the informal economy. The fact that most of its participants are unauthorized immigrants from Latin America suggests that day labor has developed into an exploitive niche occupation driven by the lack of legal immigration status of most of the workforce and the willingness of unscrupulous employers who are prepared to take advantage of this status. The one part of this market that is most promising— its wages and earnings—is cancelled by the infrequency of employment and the incidence of underpayment and nonpayment of wages. Other abuses, such as the lack of breaks, water, and food, and occupational safety hazards further render day labor a substandard job. Conversely, some characteristics of this market and the workers who participate in it suggest ample room for policy intervention. For example, the day labor market serves an important skills incubator for many of the participants by providing opportunities to learn various construction trades (e.g., drywall, masonry, roofing, carpentry, cementing), and other occupations in landscaping and moving while on the job. Making stronger connections between experienced day laborers and construction contractors and labor unions would assist in securing more frequent and permanent employment of these workers. Similarly, the vast majority of day laborers are not at the bottom of the educational strata, and almost a third of these workers have been in the United States for well over six years, providing a reasonable level of assimilation in a new country. Both these data points suggest that skills and educational enhancements could greatly aid in their transition out of day labor to more skilled and stable employment. Worker centers6 across the

148  Edwin Meléndez, Nik Theodore, and Abel Valenzuela, Jr United States are a novel and promising approach to improving the work and everyday life of day laborers.

Restoring the floor in day labor markets: the worker center approach Findings from the New York Day Labor Survey reveal that workers who seek employment in New York’s informal day labor market encounter a job market that is rife with violations of basic labor standards. In some cases, workers have devised systems of collective wage setting and other strategies for coping with employers who might be given to abusive behavior. For example, nearly half of the day laborers surveyed (49.1 percent; n = 287) reported that workers informally agree on a minimum hourly wage at the hiring site where they await prospective employers. In this way, workers are able to establish reservation wages (Valenzuela and Meléndez, 2003), which probably explains why reported hourly wages cluster around the $8.00 and $10.00 mark. In a small number of instances (12 percent of respondents; n = 290), day laborers have reached out beyond the small circle of coworkers and jobseekers and turned to community organizations, workers’ rights advocates, and social service agencies to assist them in meeting their basic needs or addressing workplace concerns. This apparent disconnect from civil society organizations is potentially problematic for day laborers, most of whom report that they do not know their rights as a worker (61.1 percent; n = 288) or as an immigrant residing in the United States (64.6 percent; n = 254). Furthermore, fully 80 percent of day laborers in the New York metropolitan area indicated that they do not know where to report workplace abuses (n = 290). However, this could be changing. A growing movement of day laborer worker centers (64 at last count) and immigrant rights organizations (15) that advocate on behalf of day laborers outside of the worker center model has emerged in cities across the United States, led by affiliates of the National Day Laborer Organizing Network (see: http://www.ndlon.org/). A number of worker centers have been founded in the New York area since the mid 1990s, including the Bay Parkway Day Laborer Job Center and the Women’s Day Laborer Committee of Williamsburg Job Center, both sponsored by the Latin American Workers Project, and the Centro de Jornaleros de Freeport operated by the Workplace Project. Worker centers are physical sites where day laborers are allowed to congregate and employers are encouraged to find workers. In some cases, these sites are no more than an enclosed, open-air venue with seats or benches. In their more developed form, these centers are full-service community organizations that operate a hiring hall, coordinate workers’ rights activities, and provide emergency services. Worker centers are now widely seen as the principal programmatic response to the challenges faced by day laborers. On the demand side of the labor market, they offer a way to monitor the practices of employers. On the supply side, they organize and normalize the hiring of day laborers, monitor worker quality, and provide opportunities for worker incorporation into the mainstream economy through employment assistance and, in some cases, job-skills training. Finally, in

Day laborers in New York’s informal economy  149 the wider community in which day laborers work and live, these centers participate as key stakeholders in the resolution of neighborhood conflicts around day labor, such as the regulation of seemingly disorderly hiring sites and assisting with local policing matters related to day labor. However, the worker center movement, like other innovative attempts to contend with the dark side of the informal economy in U.S. cities (Gordon, 2005; Ness, 2005), faces stiff challenges. Foremost among them is the need to confront pernicious problems of worker disorganization that arise from the systemic marginalization of unauthorized immigrants and other workers who are employed in the growing secondary labor markets of U.S. cities. However, important local efforts to hold employers accountable for worker abuses, to establish and maintain wage standards, and to assist day laborers in transitioning from the informal to the formal economy ultimately collide with a stated national policy that deems undocumented immigrants as “illegal immigrants”—thereby driving them and their employers underground, back into the informal economy where workplace abuses go largely unchecked (Theodore, 2006). It seems, therefore, absent a significant policy shift regarding the legal status of unauthorized immigrants, that the informal economy in the New York metropolitan area will continue to expand as growing numbers of enterprises pursue a low-road path to competitiveness, and increasing numbers of workers are drawn into the web of informal employment practices created by these employers.

Acknowledgements The research presented in this chapter draws upon projects funded by the Ford Foundation and the Rockefeller Foundation. Thanks to Ana Luz Gonzalez, Adriele Robles, Blanca Lopez, Elizabeth Diaz, Eduardo Valerio, Rene Francisco Poitivan, Peter Fuentes, Elida Fuentes, Christopher Scheirer, Kenia Fernandez, Kimann Johnson, Teresa Sanchez, Michael Aguiliera, and Janette Kawachi for assistance in carrying out this research.

Notes 1 The New York construction industry as a whole is a major employer of immigrant workers. Approximately 60 percent of the sector’s labor force is immigrant (Ness, 2005). 2 For the New York Day Labor Survey, a day laborer was defined as someone who waits at a street corner, empty lot, or parking lot of a home improvement store, an official hiring site (commonly known as a worker center), to offer their labor for the day, hour, or for a particular job on a daily basis. 3 The New York Day Labor Survey mostly replicates the Los Angeles Day Labor Survey undertaken in 1999 under the direction of Abel Valenzuela in 1999. The survey was administered through the Community Development Research Center of the New School University’s Milano Graduate School of Management and Urban Policy. Abel Valenzuela and Edwin Meléndez were the principal investigators for the survey (Valenzuela and Melendez, 2003). The survey focused on six broad areas: demographics, earnings, work, motivations, employers, and abuses.

150  Edwin Meléndez, Nik Theodore, and Abel Valenzuela, Jr 4 The number of day laborers included in the survey count is assumed to be less than the entire day laborer population that is accessing day labor hiring sites. The model used to estimate the size of the day laborer population is based on the following assumptions: (1) An individual worker does not use more than one site to access day labor jobs; (2) workers might secure multiple-day assignments and therefore might not be at the hiring site every day; (3) the number of jobseekers identified in the survey count likely underestimates the day laborer population because it includes only those day laborers who were seeking work at the time survey researchers visited each site; and (4) survey researchers likely missed a number of hiring sites in the New York metropolitan area because those sites were unknown to the day laborers interviewed and the key informants contacted during the site-identification phase of the project.   Jobseekers at each hiring site were counted the day prior to the survey and at various points during the day on which the survey was conducted. The average number of jobseekers at the hiring sites visited was 2,676. To estimate the total population of day laborers in the greater New York metropolitan area, the probability for any given worker to be counted at a site is equal to the inverse of the average days looking for work in a typical week minus the days employed in a typical week. Thus, each jobseeker at a site on any given day represents: Weight = 1/[(DLW – DWW)/(DLW)] 2.179 = 1/[(6.35 – 3.436)/(6.35)] Where: DLW = 6.35 = average days looking for work in a week; and DWW = 3.346 = average days worked in a week. These two coefficients are estimated from the survey data and discussed elsewhere in the report. Thus, based on these parameters, the day labor population in the area is estimated as follows: Total number of day laborers = 2.179 × 2,676 = 5,831.   Furthermore, a more accurate range can be estimated using two points of observation: (1) the number of workers counted on the day prior to when the survey was administered and (2) the number of workers counted on the day of the survey. To estimate the population range, the lowest counts were added to produce the lower bound (4,349 day laborers) and the higher counts were added to produce the upper bound (8,283 day laborers). These figures likely underestimate the total day laborer population in the region. The estimates do not take into account the many reasons why a day laborer might not be at a hiring site on a given day (e.g., working in the formal economy, sickness, looking for permanent work, injured). In addition, it is likely that additional sites exited in the region yet were unknown to the research team and its informants. 5 Because the survey was administered during the peak season months of June and July, it is likely that these wage rates tend toward the upper bound of typical wage rates for day laborers. 6 Worker centers, which are “official” or city-sanctioned hiring sites (usually openair, in empty lots, parkways, or nearby stores), provide space where workers and employers are allowed to come together to negotiate work for the day. A worker center is usually a community-based institution that provides support to day laborers and other low-skilled workers. They assist in linking workers to jobs, mediating wages, and resolving conflicts over pay and working conditions. They also undertake other activities related to day labor, including worker organizing, teaching employment and civil rights, filing wage claims, and increasing human capacity by providing Englishlanguage courses, skills training, and computer training.

Day laborers in New York’s informal economy  151

Bibliography Buchanan, Susan. 2004. Day labor and occupational health: Time to take a closer look. New Solutions: A Journal of Environmental and Occupational Health Policy 14:253–260. Claghorn, Kate Holladay. 1901. The foreign immigrant in New York City. In Reports of the Industrial Commission, vol XV. Washington, DC: U.S. Government Printing Office. Cowgill, Theodore T. 1928. The Employment Agencies [MA thesis]. Chicago: University of Chicago. Foner, Nancy. 2000. From Ellis Island to JFK: New York’s Two Great Waves of Immigration. New York: Russell Sage Foundation. Gordon, Jennifer. 2005. Suburban Sweatshops: The Fight for Immigrant Rights. Cambridge, MA: The Belknap Press of Harvard University Press. Henken, Ted, and Héctor Cordero-Guzmán. 2005. Labor markets, informal. In The Oxford Encyclopedia of Latinos and Latinas in the United States, edited by S. Oboler and D. J. González. Oxford: Oxford University Press. Hum, Tarry. 2003. Mapping global production in New York City’s garment industry: The role of Sunset Park, Brooklyn’s immigrant economy. Economic Development Quarterly 17:294–309. Jensen, Vernon H. 1964. Hiring of Dock Workers and Employment Practices in the Ports of New York, Liverpool, London, Rotterdam, and Marseilles. Cambridge, MA: Harvard University Press. Larrowe, Charles P. 1955. Shape-up and Hiring Hall: A Comparison of Hiring Methods and Labor Relations on the New York and Seattle Waterfronts. Berkeley, CA: University of California Press. Malpica, Daniel Melero. 2002. Making a living in the streets of Los Angeles: An ethnographic study of day laborers. Migraciones Internacionales 2:124–148. Martinez, Tomás. 1976. The Human Marketplace: An Examination of Private Employment Agencies. New Brunswick, NJ: Transaction Books. McGrath, Siobhàn, and Nina Martin. 2005. Unregulated work: Is enforcement the next battle in the fight for workers’ rights? Dollars & Sense 261(16-19):34–35. Mehta, Chirag, and Nik Theodore. 2006. Workplace safety in Atlanta’s construction industry: Institutional failure in temporary staffing arrangements. Working USA 9(59– 77). Ness, Immanuel. 2005. Immigrants, Unions, and the New U.S. Labor Market. Philadelphia: Temple University Press. Sassen, Saskia. 2001. The Global City: New York, London, and Tokyo, 2nd ed. Princeton, NJ: Princeton University Press. Theodore, Nik. 2003. Political economies of day labour: Regulation and restructuring of Chicago’s contingent labour markets. Urban Studies 40:1811–1828. ———. 2006. Closed borders, open markets: Immigrant day laborers’ struggle for economic rights. In Contesting Neoliberalism: Urban Frontiers, edited by H. Leitner, J. Peck, and E. S. Sheppard. New York: Guilford Press. Turnovsky, Carolyn Pinedo. 2004. Marking the queue: Latino day laborers in New York’s street corner labor markets. In Center for Comparative Immigration Studies. San Diego: University of California, San Diego. U.S. General Accounting Office. 2002. Worker Protection: Labor’s Efforts to Enforce Protections for Day Laborers Could Benefit from Better Data and Guidance. Washington, DC: U.S. General Accounting Office. Valenzuela Jr., Abel. 2002. Working on the margins in metropolitan Los Angeles: Immigrants in day labor work. Migraciones Internacionales 1:5–28.

152  Edwin Meléndez, Nik Theodore, and Abel Valenzuela, Jr ———. 2003. Day labor work. Annual Review of Sociology 29:307–333. Valenzuela, Abel Jr., and Edwin Meléndez. 2003. Day Labor in New York: Findings from the NYDL Survey. Los Angeles: Center for the Study of Urban Poverty: Institute for Social Science Research, UCLA and New York: Community Development Research Center, Milano Graduate School of Management and Urban Policy, New School University. Walter, Nicholas, Philippe Bourgois, H. Margarita Loinaz, and Dean Schillinger. 2002. Social context of work injury among undocumented day laborers in San Francisco. Journal of General Internal Medicine 17:221–229. Wilentz, Sean. 1984. Chants Democratic: New York City and the Rise of the American Working Class, 1788–1850. New York: Oxford University Press.

10 Effects of wage and hour law enforcement on informal work Jordan Rickles and Paul M. Ong

Introduction In this chapter, we examine how political, operational, and structural forces influence enforcement of workforce laws and regulations. The decision an employer makes to operate in the informal economy is influenced by the probability of (and penalty associated with) being caught. The probability of being penalized for violating a labor law varies across businesses based on firm characteristics, worker characteristics, and decisions regarding government enforcement efforts. As that probability is partially determined by the government, the political and administrative operations related to that probability must be better understood and taken into account when studying the informal economy. We argue that the approach to labor law enforcement in developed, regulated economies is partially based on political and administrative decisions, which result in systematically different influences on the demand for informal labor across and within industries. A growing body of knowledge contains both theoretical and empirical assessments of what causes informal work (for a review of the literature, see Chapter 2 in this book). Most agree that the tax and regulation burdens imposed by the state play a major role (Schneider and Enste, 2000; Fugazza and Jacques, 2003). As taxation and regulation cause the cost of labor in the formal economy to rise above wages paid directly to workers, employers and employees face an economic incentive to enter the informal sector (Schneider and Enste). Political, social, and structural forces may also influence employer and worker behavior. Bureaucratic burden can lead people to the informal sector (Friedman et al., 2000), the social structure, itself politically influenced, can direct activity to the informal sector (Weiss, 1987), or political and bureaucratic failures can promote an informal economy (Loayza, 1996). Within this political-economic context is the important role that enforcement plays in an employer’s or worker’s decision to operate in the informal economy, with greater enforcement/penalties and more effective legal systems resulting in less activity in the informal economy (Friedman et al.; Loayza; Schneider and Enste, 2000). The dominant policy response to curb the informal economy is to increase regulation and enforcement (Williams and Windebank, 1998). However, Williams and Windebank (141) argue that “states adopt the strategy of lax enforcement

154  Jordan Rickles and Paul M. Ong rather than active promotion” because it is “not politically feasible to increase enforcement or eradicate informal work.” The inability to eradicate informal work may also stem from the prioritizing of limited resources, operational choices, and structural barriers rather than an implicit strategy to minimize enforcement. A handful of past work addresses the segmenting effects of regulation and enforcement on the labor market. Williams and Windebank (1998) point out that increased enforcement will widen disparities between marginalized and affluent social groups because the former are more dependent on informal work. As labor markets are socially regulated and this regulation varies across geographic areas, informal labor markets are geographically (or locally) variable (Peck, 1996). Furthermore, the size of the undocumented immigrant population is an important geographically specific variable that affects both the extent of informal employment and challenges facing local enforcement agencies. Therefore, regulation and enforcement can potentially reinforce segmentation across localities. We do not evaluate whether regulation and enforcement are the most appropriate policy options for dealing with informal work. Rather, we describe the current enforcement efforts in California to provide greater insight into how the system works in a state with a large informal sector. Employing state documentation, publicly available workforce data, and administrative data, we use California as a case study of the role enforcement plays in the decision to operate in the informal economy. California is unique in that the presence of a large and growing number of legal and illegal aliens has created an anti-immigrant climate, which can affect enforcement of labor laws, and visa versa. Before discussing the specifics of enforcement in California, however, it is important to outline how regulation and enforcement influences an employer’s decision to operate in the informal economy.

Enforcement and the decision to operate informally In a competitive, capitalist economy, businesses face an unrelenting drive to minimize the cost of production. In part, this is inherent in the underlying motivation of self-interest and profit maximizing. Given the neo-classical economic assumption that firms operate in a price-taking, competitive market, profits are based on the price of goods sold and the costs of production. Clearly, for any given revenue, reducing costs allows more surplus for investors and owners. Competition balances the instinctual drive for profit by driving down prices and revenue. Thus, an environment of “creative destruction” exists, which spawns efficiency and innovation but can also pressure businesses to find savings through other means. Given that labor is a major component of production in most industries, side-stepping labor law regulations presents itself as an attractive strategy for cost reduction. For most businesses, the drive to reduce wages and benefits is countered by a worker’s ability to move among employers, industries, occupations, and locations. The competitive demand for labor controls the desire of any one business to reduce a worker’s compensation. Moreover, the labor market as a whole must offer wages

Effects of wage and hour law enforcement on informal work  155 and benefits at a level to compensate workers for their investments in education and training to maintain and replace the supply of labor. Heterogeneity in both production and labor markets, however, implies that some businesses face greater price-suppressing competitive forces and some face more inelastic labor demand and/or supply. As a result, some businesses operate with structural characteristics more inviting to violations of labor regulations that tend to increase labor costs. In the short run, any given business can lower labor costs by violating labor laws, but only those in markets with a highly elastic supply of labor can operate in the long run by violating labor laws and entering the informal economy. In a regulated economy, an employer makes the decision to operate in the formal or informal sector based on expected production costs. This means the employer’s decision depends, in part, on the expected costs of complying with all workforce regulations compared to the expected costs of not complying (i.e., expected amount of government fines). An employer’s demand for labor in the informal sector depends on the indirect tax and wage rates in the formal sector, plus detection probabilities for tax evasion and penalty rates (Schneider and Enste, 2000). Though subjective factors are likely to influence the decision to operate informally, such as the psychic costs of breaking the law or tax morale, we focus on the objective costs associated with the probability of being caught and fined (Fugazza and Jacques, 2003). Both regulation and noncompliance costs can differ across businesses and create a systemic incentive for particular businesses to enter the informal sector. Variations in regulation costs In general, regulations are fixed for all firms within a given political jurisdiction. For example, all firms operating in California face the same minimum wage regulations. The relative size of regulation costs, however, varies across businesses based on how labor-intensive the production process is (businesses more reliant on labor will face higher regulation costs compared to total costs) and the skillmix of the workforce (businesses more reliant on low-skill labor are more likely to be affected by minimum wage laws). Other regulatory costs differ based on certain business characteristics such as labor turnover (unemployment insurance rates) and injury rates (workers’ compensation). As regulation costs are not equally distributed across all firms, firms operating in labor-intensive, low-skilled industries that face strong competition from businesses in other political jurisdictions (i.e., states and countries with lower regulation costs) are more likely to face a greater incentive to rely on informal work. Even within industries, firms that are more labor-dependent (such as smaller employers) are more likely to use informal work. Some studies go so far as to use establishment size and lack of physical and/or human capital as a proxy for the informal economy (see Klein and Tokman, 1996 and Chapter 3 in this volume) because businesses with such characteristics are over-represented in the informal economy.

156  Jordan Rickles and Paul M. Ong Variations in expected fines Like regulation costs, fines for violating laws and regulations are typically fixed for businesses within a given political jurisdiction, but the expected fine amount in any given period depends on the probability that the business will get caught and fined. The likelihood of being fined varies across businesses based on firm characteristics, worker characteristics, and political decisions regarding government enforcement efforts. As a result, certain businesses are more likely to avoid inspections and fines and therefore face a lower incentive to comply with labor law regulations. Certain types of businesses are more likely to avoid inspection and penalties based on the characteristics of the firm. For example, everything else being equal, smaller operations are less likely to be fined because of their low visibility and ease of displacement (Friedman et al., 2000; Portes, 1987). Businesses more mobile than others, such as contractors, are more difficult to target for inspection and can avoid fines by dissolving and reconstituting as a new business. As we discuss later, the industry of a business impacts the probability of inspection, as industries with a history of labor law violations are more likely to be targeted for inspection. Workforce characteristics also influence the probability of a business getting caught for violating labor laws. Workers knowledgeable of the labor laws and willing to voice their concerns are more likely to report any violations by their employer. Conversely, businesses predominately employing low-educated, limited-English-speaking workers leery of government authorities (particularly illegal immigrants) are less likely to fear repercussions for working informally (Marcelli, 2001, 2004). Third-party oversight from, for example, unions or immigrant rights groups help facilitate any labor law violation claims made by workers, however. Though firm and workplace characteristics can marginally affect the chances of facing a penalty for violating labor laws, the political jurisdictions and agencies responsible for enforcing those laws hold the most sway over whether a business will be fined. The ability of enforcement to deter informal work hinges on the political backing received from the office holders. This backing generally manifests itself through annual budget allocations. Given limited resources, administrative and operational decisions regarding the allocation and use of those resources becomes an important determinant of whether businesses operating in the informal economy can expect to be penalized. In the following section, we use California’s enforcement of wage and hour laws to describe how the probability of being fined varies across businesses. In particular, we examine how political and administrative decisions influence the extent to which the state enforces regulations and targets enforcement.

Effects of wage and hour law enforcement on informal work  157

The case of California enforcement In general, California has more stringent wage and hour laws than mandated by the U.S. federal government and fewer exemptions than allowed at the federal level. For instance, the minimum wage in California is $6.75 per hour, whereas the federal minimum wage rate is $5.15 per hour. Additionally, California’s laws regarding hours worked and the workday are more restrictive—and not as flexible—as those of the federal government. The Division of Labor Standards Enforcement (DLSE) branch of the California Department of Industrial Relations (DIR) is responsible for enforcing statutes contained in the California Labor Code that cover employee–employer relationships and regulations contained in the Industrial Welfare Commission (IWC) Orders. The IWC Orders regulate wages, hours, and working conditions for private sector employees in California. The DLSE fulfills these mandates through its major programs: the Wage Claim Adjudication (WCA), the Bureau of Field Enforcement (BOFE), the Public Works program (PW), and the Discrimination Complaint Investigation (DCI) unit. An abbreviated organizational chart for the DIR is provided in Figure 10.1. The DLSE has two primary ways of dealing with wage and hour law violations: through its process for wage claim adjudication and through the BOFE. The wage claim adjudication process handles individual worker-initiated claims of wage and hour law violations. The BOFE handles multiple worker claims and independently initiates workplace investigations. The duties of the DLSE sometimes overlap with those of other state departments and the federal Department of Labor. Owing Office of the Governor Labor and Workforce Development Agency

Department of Industrial Relations

Division of Occupational Safety and Health

Department of Labor Standards Enforcement

State Mediation and Consolidation

Licensing and Investigation

Discrimination Complaint Investigation

Division of Worker’s Compensation

Division of Labor Statistics and Research

Bureau of Field Enforcement

Wage Claim Adjudication

Public Works (Legal)

Figure 10.1  California Department of Industrial Relations organizational chart

158  Jordan Rickles and Paul M. Ong to this overlap and the involvement of different state agencies in aspects of labor law enforcement, several cross-departmental cooperative programs have been created to combat violations of labor laws in California. For the purposes of this chapter, we focus on the labor law inspections conducted by the BOFE, which represents a component of enforcement heavily influenced by political and administrative decisions. A BOFE claim is generally filed against an employer for violations applicable to all or a group of employees. The BOFE also independently initiates workplace investigations and responds to multiple complaints with industry “sweeps.” According to DIR staff, the BOFE conducts 40 to 50 sweeps per year, targeting various industries in various areas. Sweeps can be initiated internally or by outside leads such as advocacy or community groups and others; in 2003, a media “exposé” on the car wash industry resulted in the BOFE’s targeting that industry, first in Los Angeles and then the Bay Area and Central Valley. When the BOFE issues a citation, an employer can choose to appeal the citation through a hearing before an administrative law judge, with the DLSE as one party and the employer as the other. Employers have the right to appeal these decisions further in California Supreme Court (Bar-Cohen and Carrillo, 2002). Temporal trend in BOFE investigations and citations The number of BOFE inspections conducted in California has fluctuated over time. This fluctuation is not a simple response to the changing size of the informal economy. The International Monetary Fund estimates that the informal economy in the United States has more than doubled over the past three decades, whereas the current level of resources dedicated to enforcement in California is markedly lower than what was available in the 1970s and 1980s (Gallagher, 2001). During the second half of the 1990s, for instance, the size of the low-wage informal workforce is estimated to have grown by about 200,000 workers (Marcelli, 2001), but the number of BOFE inspections actually declined during this period. Not surprisingly, the amount of resources dedicated to enforcement efforts— which is partly a political decision and partly an administrative/policy decision based on the state revenue base and perceived size of the problem—appears to have a direct influence on inspection activities. During the first term of Democratic Governor Gray Davis (1999–2002), the average annual budget for DLSE enforcement efforts was 33 percent higher in constant dollars than in the second term of Republican Governor Pete Wilson (1995–1998). In 2002, the BOFE conducted almost 9,000 inspections, a 78 percent increase from the number of inspections conducted just prior to the Democrats taking over the governor’s office and the start of the economic growth spurred by the tech industry, in 1998 (Figure 10.2). The inspection rate trend, or the percent of California businesses inspected in a given year, mirrors the trend for the total number of inspections. Less than 1 percent of businesses were inspected in a given year from 1994 to 2002, with less than half a percent of businesses inspected in 1998. The citation rate, or the percent

Effects of wage and hour law enforcement on informal work  159 Inspection Rate

Citation Rate 1.0%

9,000

0.9%

8,000

0.8%

7,000

0.7%

6,000

0.6%

5,000

0.5%

4,000

0.4%

3,000

0.3%

2,000

0.2%

1,000

0.1%

0

Inspection/Citation Rate

# of Inspections

# of BOFE Inspections 10,000

0.0% 1994

1995

1996

1997

1998

1999

2000

2001

2002

Figure 10.2  Annual number of BOFE inspections and inspection/citation rate (1994-2002) (Source: California Division of Labor Standards Enforcement)

of businesses actually cited for a labor law violation by the BOFE, remained below half a percent during this period, with the rate in 2002 (0.3 percent) slightly higher than the period’s low of about 0.2 percent. The trend in inspections highlighted earlier indicates the significant changes that can occur when political backing and funding for enforcement change. As Williams and Windebank (1998) argue, it may not be politically feasible to eradicate informal work, but the definition of what is a politically feasible level of enforcement depends on the administration in office and interest group pressure. As each administration has a different policy agenda, enforcement efforts are not consistent over time or across political jurisdictions. More important, employers perceive differences in the political backing of enforcement and will incorporate that knowledge into their decision to operate informally. Overview of BOFE inspections in 2001 Overall inspection counts and rates mask the fact that the BOFE targets its enforcement efforts on specific industries with a history of violating labor laws. This targeting practice allows for the allocation of BOFE resources to systematically enforce sectors more likely to violate wage and hour laws. As with overall funding levels, however, political targeting may influence where the BOFE focuses its resources. For example, growing anti-immigrant sentiments in California during the 1980s and 1990s spurred state initiatives and legislative efforts that placed political attention on illegal immigration, informal work, and immigrant-dominated industries in general. Such efforts focused primarily on the use of English as the state’s official language, illegal aliens’ eligibility for public

160  Jordan Rickles and Paul M. Ong services (Alvarez and Butterfield, 2000; Tolbert and Hero, 1996), limitations of bilingual education, and prohibition for undocumented immigrants to obtain a driver’s license (Seif, 2003). The resulting climate may have influenced how the state agencies selected their target industries. Approximately 8,000 businesses in California were investigated by the BOFE in 2001. Of those businesses, almost half were in four industries: agriculture (growers and farm labor contractors), construction, garments, and restaurants. In 2001, these four industries accounted for less than 15 percent of all businesses in California. All four industries, however, depend on a workforce many associate with informal work. As shown in Figure 10.3, businesses in these industries employ a high percentage of low-wage and foreign-born workers with less than a high school education. Not surprisingly, the garment and agriculture workforce is dominated by foreign-born workers with little education. Given these workforce characteristics, the possibility of labor law violations is prevalent, and the workers may not have the empowerment, knowledge, or willingness to report such violations. These four industries have a concentration of low-wage, foreign-born workers and a history of labor law violations. BOFE inspection rates for each industry are presented in Table 10.1. In line with the workforce characteristics, businesses in the garment and agricultural industries were much more likely to face inspection than businesses in any of the other industries. However, even in these targeted industries, the extent of inspections and citations are not consistent. Just more than 5 percent of agricultural businesses were inspected in 2001, and only 7 percent 100% 90% 80%

Low-Wage

70%

Foreign Born

% of Workforce

Less Than HS Education 60% 50% 40% 30% 20% 10% 0%

Garment

Agriculture

Restaurant

Construction

Other

Figure 10.3  Workforce characteristics of targeted industries (Source: 1-Percent Public-Use Microdata Sample, Census 2000, Bureau of the Census) Note: Low-wage defined as workers reporting an hourly wage of $6.75 or less

Effects of wage and hour law enforcement on informal work  161 Table 10.1  BOFE inspection and citation rates in 2001, by industry Industry

Number inspected

Percent inspected

Percent cited

Garment

956

15.30%

39.30%

Agriculture

822

5.40%

7.20%

1,086

2.70%

37.10%

730

1.10%

13.00%

4,444

0.50%

24.30%

Restaurant Construction Other

Source: 2001 Bureau of Field Enforcement extract file, Department of Industrial Relations. Notes: The percent inspected based on the number of establishments reported in the 2001 Q3 ES-202, Employment Development Department. The percent cited is out of inspected establishments

Table 10.2  BOFE inspection outcomes in 2001, by industry Industry

Number inspected

Percent fined

Garment

956

35.9%

$2,000

75.3%

$500

Agriculture

822

4.9%

$3,625

56.5%

$200

1,086

34.3%

$3,000

72.6%

$750

730

11.8%

$2,900

57.1%

$500

4,444

23.1%

$3,000

60.0%

$500

Restaurant Construction Other

Median fine

Percent with Median payment payment

Source: 2001 Bureau of Field Enforcement extract file, Department of Industrial Relations

of those inspected were cited for a violation. In contrast, almost 40 percent of inspected businesses in the garment industry were cited for a violation. Everything else being equal, such targeted enforcement should create a greater disincentive for informal work in these industries relative to other industries. However, the probability of actually facing a fine and the fine amount are not high enough to create an adequate disincentive to informal work—particularly in labor-intensive, low-wage industries with strong competitive forces. Table 10.2 reports the percent of inspected businesses fined and making payments in 2001. Only about 5 percent of inspected agricultural businesses (less than half a percent of all agriculture businesses) were fined by the BOFE in 2001, whereas more than a third of inspected garment industry businesses (but only about 5 percent of all garment industry businesses) were fined. Unfortunately, no comprehensive studies exist to benchmark the enforcement activities and truly understand the extent of labor law violations. The citation and fine rates reported for these targeted industries seem low in relation to the extent of labor law violations found in other studies, however. For example, surveys conducted by the U.S. Department of Labor indicated that at least half of all garment shops and nursing homes are in violation of labor laws (U.S. Department of Labor, 2000, 2002).

162  Jordan Rickles and Paul M. Ong The nature of the workforce makes it difficult for the BOFE and other enforcement agencies to identify and punish businesses that violate wage and hour laws. Efforts to monitor businesses in the at-risk industries are hindered by the fact that workers in these industries are not empowered to voice their concerns regarding labor law violations. An examination of the wage claim adjudication process indicates that worker-initiated claims disproportionately come from higher-wage workers. Even when workers from the targeted industries initiate claims, the DLSE does not have a systematic process in place to track complaints and identify businesses with repeated offenses. Once the BOFE makes a citation, the extent to which businesses can avoid fine payments further weakens targeted enforcement efforts. For example, when faced with a penalty, businesses can dissolve and reconstitute as a new operation. Of agricultural businesses with a fine in 2001, only about half paid at least part of the fine, whereas about three-fourths of garment industry businesses made a payment. As a result, the average amount paid by fined businesses is considerably less than the average size of a fine. The often convoluted and protracted nature of the penalization process, with backlogs and appeals, only compounds the problem. To put the small expected fine amounts in perspective, consider a business employing 10 workers for 35 hours per week over 50 weeks. If the employer wishes to operate in the formal economy, paying the California minimum wage of $6.75 per hour, the employer can expect a wage bill of $118,125 for the year. If the employer chooses to operate in the informal economy, paying $5.15 per hour, the employer will spend $28,000 less on the wage bill. Even ignoring other cost savings from operating in the informal economy, such as unemployment insurance and worker’s compensation expenses, the expected penalty for paying workers below minimum wage would have to be at least $28,000 for the employer to decide to operate in the formal economy. The inspection rates and fine amounts found in our data indicate that even in the targeted industries the expected penalty for operating informally are not sufficient enough to offset an employer’s “savings” in the informal economy. Given limited resources, targeting industries with a history of labor law violations makes sense. However, the degree of enforcement does not offset the lure of the informal economy for most businesses in these industries and leaves few resources to address potential wage and hour violations in the non-targeted industries. As the BOFE database groups the non-targeted industries into an “other” category, it is difficult to determine whether new “problem” industries emerge. Enforcement in the majority of industries often depends on workerinitiated claims and third-party oversight, but the workers most at risk of wage and hour violations are generally the least likely to initiate claims with the DLSE. Therefore, businesses in industries not traditionally targeted by the BOFE have even less of a disincentive to operate informally, everything else being equal. Even within industries, enforcement through the BOFE varies systematically across businesses. For example, the inspection statistics for the agriculture industry mask the emphasis placed on farm labor contractors (FLC). Though only 5 percent of businesses in the agricultural industry were inspected by the BOFE

Effects of wage and hour law enforcement on informal work  163 in 2001, more than half of the FLC were inspected. The focus on farm labor contractors highlights the fact that political and operational forces help determine what industrial sub-sectors to target as well. To get a more detailed understanding of this process, we examine enforcement efforts in the garment industry. Inspections within the garment industry To operate legally in California, garment businesses must register with the California DIR. The registration data maintained by the DIR serve as a universe of all registered businesses in this industry and enable us to examine within-industry variation in enforcement. A description of these variations provides a more detailed picture of where the DLSE directs enforcement and provides a greater understanding of the difficulty of imposing costs on the informal economy. Based on available characteristics in 2001, certain garment businesses face a greater probability of inspection by the BOFE than others (Table 10.3). Businesses located in the San Francisco Bay Area were almost twice as likely to be inspected as those located in other parts of the state. This is unexpected as labor law violations have been found to be more prevalent in the Los Angeles area than the San Francisco area (U.S. Department of Labor, 2002). Because the BOFE initiates sweeps of local geographic areas as one method of enforcement, the relatively high inspection rate in the San Francisco area might reflect a temporary localized concentration of inspections owing to a sweep in 2001 and not a permanent disparity in regional inspection rates. If such regional rotation of enforcement efforts are in fact the case, businesses that were just targeted by a sweep will recognize that the probability of “lightning striking twice” in the immediate future is low—and therefore the incentive to violate wage and hour laws increases. The relatively high inspection rate in the San Francisco area may also be the result of strong third-party oversight and political pressure. Given the high concentration and history of violations in the Los Angeles area, one would expect BOFE inspections to disproportionately fall in this region. Unions and immigrant advocacy groups tend to be more active in the San Francisco area, however. Such activity can direct enforcement resources in two ways: direct lobbying and monitoring. Besides geographic location, BOFE inspections of garment businesses varied by the structural composition of the industry. The garment industry is structurally organized in a way that pushes much of the incentive to violate labor laws off manufacturers and onto contractors; which is reflected in the inspection rates. Contractors and subcontractors were more than twice as likely as manufacturers to be inspected, and businesses owned by individuals were inspected slightly more often than other businesses. The focus on farm labor contractors in the agricultural industry is another example of this targeting practice. The BOFE also directs its resources on larger operations (i.e., more employees) even though smaller establishments are more likely to be in violation of labor laws. Targeting big employers may be a cost-effective approach of the Bureau, however, as inspecting a business with 50 employees covers more workers than inspecting a business with 10 employees.

164  Jordan Rickles and Paul M. Ong Table 10.3  Profile of garment industry firms with a BOFE case initiated in 2001 Universe

% Inspected

% Fined

5,656

13.60%

6.00%

4,433

13.30%

5.80%

Rest of southern California

744

10.60%

5.80%

San Francisco Bay area

394

23.10%

8.90%

85

10.50%

4.70%

Manufacturer

1,712

8.20%

3.70%

Contractor

All garment firms Region L.A. County

Rest of California Business type

2,363

19.00%

8.00%

Subcontractor

736

18.50%

8.70%

Other

845

5.20%

2.80%

Corporation

3,459

12.30%

5.10%

Individual/partnership

2,099

16.00%

7.60%

98

9.20%

3.00%

2,296

8.40%

4.10%

Ownership type

Other Number of employees* Less than 5 5 To 10

957

12.20%

6.30%

10 To 20

1,016

14.60%

6.90%

20 To 50

835

13.30%

5.40%

At least 50

368

20.90%

7.30%

Sources: 2001 Bureau of Field Enforcement extract file, Department of Industrial Relations; 2001 Garment Registry File, Department of Industrial Relations. * Based on 5,472 garment firms matched with the 2001 Q3 ES-202, Employment Development Department

The data presented in this section depict an enforcement effort that changes over time, across industries, geographies, and business structure. Political and administrative decisions regarding the size of the BOFE budget forces the Bureau to target enforcement activity. In general, BOFE inspections are allocated in an operationally rational process, whereby inspections are targeted on businesses perceived to be most likely to violate labor laws—although political lobbying and monitoring may cloud parts of the process. Even with targeted enforcement efforts that result in systematically different influences on the demand for informal labor, however, the probability of being inspected and the expected fine amount are low relative to the costs saved by operating in the informal economy.

Effects of wage and hour law enforcement on informal work  165

Implications for enforcement efforts and informal work Most assessments of the informal economy focus on the economic forces that drive businesses and workers into the informal sector, with some discussion of the burden imposed by regulation. Within the context of a regulated economy, however, one should not overlook the process in which such regulations are enforced. In this chapter, we described the labor law enforcement system in California to exemplify how political, operational, and structural factors can influence enforcement and ultimately impact the size of the informal economy. An employer’s decision to operate in the informal economy is influenced by the probability of (and penalty associated with) being caught. The probability of being penalized for violating a labor law varies across businesses based on firm characteristics, worker characteristics, and political decisions regarding government enforcement efforts. In this political-economic context, enforcement efforts vary across political jurisdictions and over time based on changes in political philosophies and priorities. An examination of these macro-level forces supports the notion of geographic variability in informal markets purported by Peck (1996) and extends the argument to include geographic variation of enforcement in addition to regulation. Our review of California also supports Williams and Windebank’s (1998) notion that eliminating informal work is politically infeasible. However, our analysis of the operational mechanics of enforcement does not indicate an inherent strategy to minimize enforcement activities. Budgets and resources for enforcement efforts reflect the priorities and policy agenda of the current administration, which in turn requires operational decisions to target fixed resources. These administrative and operational choices result in enforcement variations across geographies, industries, and business types. The variations in inspection rates highlighted in this chapter indicate systematic targeting of firms by the BOFE. Strategic targeting is a rational administrative response to limited resources for enforcement efforts, as long as the strategy employed seeks to target enforcement on those businesses most likely to be in violation of wage and hour regulations without ignoring the law of diminishing returns. Put differently, enforcement agencies should put their resources toward areas where it will get a “bigger bang for the buck,” but they must also balance the amount of deterrence an additional inspection in one type of business will generate relative to an inspection in a different type of business. For example, the agency must determine whether increasing the percent of contractors inspected from 20 to 30 percent will have a greater deterrence than increasing the percent of manufacturers inspected from 8 to 18 percent. Even with targeted enforcement, our analysis supports the notion that the degree of enforcement and penalties does not offset the lure of the informal economy for most businesses in industries that face strong economic pressure to operate informally. Indeed, the level of enforcement necessary to deter most businesses in the informal economy is, as Williams and Windebank (1998) argue, not politically feasible. We cannot say, however, whether this infeasibility is the

166  Jordan Rickles and Paul M. Ong result of an implicit political strategy or simply a consequence of prioritizing limited resources. As with all types of illegal activity, the state cannot completely eliminate informal work, but it should look for ways to make marginal improvements. Labor law enforcement agencies should seek ways to stabilize their funding from year to year so activities are not significantly altered by changes in political administrations. To help prioritize enforcement resources, agencies should systematically evaluate their efforts on a regular basis instead of simply targeting efforts on historically problematic industries. Targeting that is politically influenced by an anti-immigrant climate, for example, may focus resources on an industry with a disproportionately high immigrant workforce, thus creating a spiraling effect whereby the industry’s perception as a problematic industry is heightened and anti-immigrant sentiments are reinforced. A more systematic and analytically based approach could result in more efficient and equitable targeting. Additionally, governments must promote other oversight mechanisms besides traditional enforcement, such as greater worker outreach and education to dissuade the use of informal work.

Bibliography Alvarez, R. M., and T. L. Butterfield. 2000. The resurgence of nativism in California? The case of Proposition 187 and illegal immigration. Social Science Quarterly 8(1):167– 179. Bar-Cohen, Limor, and Deana Milam Carrillo. 2002. Labor law enforcement in California, 1970–2000. In The State of California Labor 2002, edited by R. Milkman. Berkeley, CA: Institutes of Industrial Relations. Friedman, Eric, Simon Johnson, Daniel Kaufmann, and Pablo Zoido-Lobaton. 2000. Dodging the grabbing hand: The determinants of unofficial activity in 69 countries. Journal of Public Economics 76:459–493. Fugazza, Marco, and Jean-Francois Jacques. 2003. Labor market institutions, taxation and the underground economy. Journal of Public Economics 88:395–418. Gallagher, T. 2001. Tough on Crime?: The Decline of Labor Law Enforcement in California: 1970–2000. Oakland: California Works Foundation. Klein, Emilio, and Victor E. Tokman. 1996. A comparative view of regulation and informality. In Regulation and the Informal Economy: Microenterprises in Chile, Ecuador, and Jamaica, edited by V. E. Tokman and E. Klein. Boulder, CO: Lynne Rienner Publishers. Loayza, Norman V. 1996. The economics of the informal sector: A simple model and some empirical evidence from Latin America. Carnegie-Rochester Conf. Series Public Policy 45:129–162. Marcelli, E. A. 2001. Informal employment in California. In The State of California Labor 2001, edited by P. M. Ong and J. R. Lincoln. Los Angeles: Institutes of Industrial Relations. Marcelli, E. A. 2004. Unauthorized Mexican immigration, day labour and other lowerwage informal employment in California. Regional Studies 38(1):1–13. Peck, Jamie. 1996. Work-Place: the Social Regulation of Labor Markets. New York: Guilford Press.

Effects of wage and hour law enforcement on informal work  167 Portes, Alejandro. 1987. Making it underground: Comparative material on the informal sector in western market economies. The American Journal of Sociology 93(1):30–61. Schneider, Friedrich, and Dominik H. Enste. 2000. Shadow economies: Size, causes, and consequences. Journal of Economic Literature 38(1):77–114. Seif, Hinda. 2003. ¿”Estado de Oro” o “Jaula de Oro”? Undocumented Mexican Immigrant Workers, the Driver’s License, and Subnational Illegalization in California. Working Paper No. 86. San Diego: Center for Comparative Immigration Studies, University of California. Tolbert, Caroline J., and Rodney E. Hero. 1996. Race/ethnicity and direct democracy: an analysis of California’s illegal immigration initiative. Journal of Politics 58(3):806–818. U.S. Department of Labor. 2000. Nursing Home 2000 Compliance Survey Fact Sheet. Retrieved November 14, 2000, from http://www.dol.gov/esa/healthcare/surveys/ nursing2000.htm 2000 [cited November 14 2003]. Available from http://www.dol.gov/ esa/healthcare/surveys/nursing2000.htm. ———. 2002. San Francisco Garment Compliance Survey. Retrieved November 24, 2002, from http://www.dol.gov/Opa/Media/Press/Opa/SanFrancisco_survey.htm 2002 [cited November 24 2003]. Available from http://www.dol.gov/Opa/Media/Press/Opa/ SanFrancisco_survey.htm. Weiss, Linda. 1987. Explaining the underground economy: State and social structure. The British Journal of Sociology 38(2):216–234. Williams, Colin C, and Jan Windebank. 1998. Informal Employment in the Advanced Economies: Implications for Work and Welfare. New York: Routledge.

11 The diverse nature of informal work in California Enrico Marcelli

Introduction As noted by the authors of Chapters 6 and 7 of this volume, most research on informal work has focused on its magnitude, or on how its magnitude varies geographically and temporally, rather than on the nature or characteristics of informal work or those engaged in it (Williams and Windebank, 1998). This selective approach has been in part the consequence of the questionable generalizing or “nomothetic” view that all informal work is undesirable and disappears in a linear fashion along with economic development. In short, given this presumed natural socioevolutionary organizational path toward more desirable formal employment relations, simply obtaining a credible estimate of the level of informal work so something can be done about it has often been the justification for studying it. This somewhat perfunctory approach also derives from the absence of an accepted methodology for obtaining individual-level representative estimates of those working informally in the United States that might permit a more particularizing or “idiographic” view (Carrier, 2005: 3). In this chapter, we employ the survey-based informal employment estimation methodology developed during the 1990s by Marcelli and colleagues (1999), and March 2004 and 2006 Current Population Survey data, to generate the most recent demographic profile of informal workers in California. To our knowledge, this methodology was the first to offer quantitatively systematic estimates of the number and characteristics of informal workers in the United States. Further, it is the first such statistical method that permits the possibility of exploring context-specific correlates, and thus interactive determinants, of working informally rather than assuming one pathway to informal work. I explicitly embrace a more catholic view that understanding why people work formally, informally, or both formally and informally is best understood empirically by observing “the activities through which people produce, circulate and consume things, [and] the ways that people and societies secure their subsistence or provision themselves” (Carrier, 2005: 3). This approach is distinctly aligned with the substantivist rather than the formalist school of economic anthropology (Isaac, 2005), and with the century-long tradition of American institutional labor economics rather than popular or neoclassical economics (Marcelli, 2004a). Both the formalist school of economic anthropology

The diverse nature of informal work in California  169 and neoclassical economics, as discussed in the first two chapters of this volume, view human economic activity mainly as emanating from one universal process of optimizing mental calculus. This is very different from the view adopted here: that whether and where one works is best understood by observing people where they live and work and how their circumstances and environment interact with their personal motivations acquired during childhood. Psychological optimization may still be involved, but this alone cannot explain whether one works informally without considering contextual factors. For instance, if education were the most important determinant of whether one works informally, we would expect to find few if any college graduates working informally. As is shown below, this is not the case in California. The purpose of this chapter is to assess the strength of two conventional beliefs concerning the nature of informal work in the United States. First, many presume that informal work, especially when performed by unauthorized immigrants, is a survival strategy (Vogel, 2006)—exploitative employment embraced only or primarily by those who have no other means of earning a living and performed in deprived inner-city areas. This belief may be separated into two components: one reflecting the economically desperate condition of informal workers and the other the urban context in which such work takes place. In an earlier study using data from the 1990s and focusing on California, Marcelli (2004b) estimated that working informally was positively related to residing in a more sparsely populated area rather than in a more urban area. This surprising finding about the location of informal work is tested again in this chapter. The second hypothesis I test is whether those working in relatively informal jobs have relatively low levels of education. The common assumption, closely connected with the idea that only the economically needy would work under such conditions, is that informal workers have no other options because they are poorly skilled for modern capitalist labor markets. At odds with this assumption is empirical evidence from the 1990s suggesting that across occupations with highly diverse levels of informality, average educational attainment was fairly similar (Marcelli et al., 1999). Further on, we test whether the distribution within occupations with relatively high levels of estimated informality compared to those with a medium or a relatively low level was similar. If it were, we may tentatively conclude that not all workers who work informally are doing so because they are unskilled or economically needy but perhaps because they are sometimes employing their market-oriented skills outside formal labor markets. Our results may be summarized succinctly. First, highly informal civilian jobs include those in agriculture; food preparation and serving; building and grounds maintenance; construction; transportation and material moving; production; and installation, maintenance, and repair. Second, although mean levels of education among those working in occupations with low, medium, and high levels of informality vary somewhat in the expected neoclassical direction, not all workers employed in highly informal jobs are relatively less educated. For instance, at least 10 percent of those employed in two informal job categories—food preparation and serving; and installation, maintenance, and repair—have at least a college

170  Enrico Marcelli education. Thus, we find some but not irrefutable support for the marginalization hypothesis of informal work. Third, we estimate that informal workers are more likely to reside in non-metropolitan and smaller metropolitan areas rather than in larger ones. This contradicts the notion that informal work is more likely to occur in poorer inner-city areas. Taken together, these two findings concerning the education and spatial distribution of informal workers in California suggest that a more nuanced view of informal work is needed—one that does not see it merely as work undertaken by desperate less educated workers stuck in poor urban neighborhoods.

The 2001 LAC-MILSS data and the survey-based methodology There are several steps involved in estimating the level of informality by occupation. We first employ the 2001 Los Angeles County Mexican Immigrant Legal Status Survey (LAC-MILSS) to generate individual-level demographic predictors of having been unauthorized among adult foreign-born Mexicans who resided in Los Angeles County. Specifically, past research has shown age, educational attainment, time residing in the United States, and gender to be very good predictors of legal status. When these predictors have been applied to these four characteristics among various Latino immigrant populations enumerated in public use data, for instance, they have generated estimated numbers of unauthorized migrants that were very close to those interpolated from the other dominant (“residual”) estimation method employed by demographers (Heer and Passel, 1987; Marcelli and Heer, 1997; Marcelli, 1999; Heer et al., 1992). In short, our survey-based methodology has been widely accepted as one that provides credible estimates of the number of unauthorized Latino immigrants and of their demographic characteristics at an individual level (Berk and Schur, 2001; Brown and Yu, 2002; Goldman et al., 2005). The final step of my following analysis is to use these estimated legal status predictors to estimate who was unauthorized among adult Mexican immigrants in the 2004 and 2005 March Current Population Survey data and to then estimate the proportion of all Californian workers ages 18 to 64 who were unauthorized Mexicans by occupation to rank occupations. Those occupations with higher proportions of unauthorized Mexican immigrants are viewed as more informal given what we know about work performed by unauthorized immigrants. Of course this method of estimating the relative level of informality is far from ideal— there may be occupations that are relatively informal but employ very few unauthorized Mexicans (e.g., automobile mechanic, hairdresser). However, our method does provide a way of ranking occupations by work conditions that are generally thought to offer fewer protections and benefits. As such, we may use it to analyze all workers employed in those occupations that are characterized as having lower levels of health, safety, and tax enforcement.

The diverse nature of informal work in California  171

Occupational distribution of informal workers Applying our four demographic predictors of unauthorized legal status obtained from analysis of the 2001 LAC-MILSS data (age, gender, years residing in the United States, educational attainment) to Mexican immigrants ages 18 to 64 years in the concatenated 2004 and 2006 March Current Population Survey files, we estimate that there were seven detailed occupational categories with relatively high levels of unauthorized Mexican immigrant workers and, thus, relatively high levels of informal work arrangements (Figure 11.1). These include agricultural, restaurant, gardening, construction, moving, and repair occupations, among others that are relatively labor-intensive. Past research has shown that health, safety, and tax regulations are less likely to be enforced in these seven occupations as compared to the seven estimated to have had a medium level of informality or the eight estimated to have had low levels of informality. It is important to note, however, that those working in jobs in the medium- and low-level categories also sometimes work informally. When my neighbor, who is a hairdresser, cuts my hair on a monthly basis or her husband, who is a contractor, agrees to assist me with building a new deck in my back yard in exchange for my tax or legal advice (if I were an accountant or lawyer), for instance, we are engaging in informal work. There are numerous other examples of informal work such as these that are performed by relatively educated individuals. Farming, fishing, and forestry Food preparation and serving related High Level

Building and grounds cleaning and maintenance Construction and extraction Production Transportation and material moving Installation, maintenance, and repair Personal care and service Sales and related Medium Level

Healthcare support Community and social service Arts, design, entertainment, sports, and media Office administration support Protective service Managerial Education, training, and library Business and financial operations Low Level

Architecture and engineering Computer and mathematical science Healthcare practioner and technical Legal Life, physical, and social science 0%

5%

10%

15%

20%

25%

30%

Figure 11.1  Detailed civilian occupational levels of informality, estimated by proportion of unauthorized Mexican immigrant workers, California 2004–2006

172  Enrico Marcelli

Educational distribution of informal workers Consistent with this more diverse occupational perspective of informal work, and contrary to conventional views of informal work in developed nations, some of our previous work has shown that mean educational attainment across occupations with quite different levels of estimated informality was very similar (Marcelli et al., 1999). This intimates that education may be a relatively unimportant factor for understanding who works informally and that the so-called marginalization hypothesis of informal work may be incorrect. However, this cross-occupation evidence is far from conclusive. What about the distribution of education within occupations estimated to be highly informal compared to that within other jobs? Similar average levels of educational attainment across occupations with different levels of informality may conceal wide disparities in the distribution of education within occupations, and this may provide an inaccurate portrait of informal worker skill levels as compared to others. Figure 11.2 suggests—contrary to an earlier study by Marcelli and colleagues (1999) and consistent with the marginalization hypothesis—that those employed in jobs that are estimated to be highly informal have fewer labor market opportunities as proxied by their educational attainment. Specifically, whereas the mean level of education for those employed in occupations estimated to have little informality was a college degree and the mean level for those employed in jobs with a middling level of informality was a high school degree, those employed in the seven highly informal jobs had only a ninth-grade level of education on average (results not shown here). Alternatively, although Figure 11.2 shows that only 7 percent of those working in highly informal jobs had a college education, 26 percent of those employed in jobs having a “medium level” of informality did, and fully 63 percent of those in jobs with very little informality did—there is considerable job-specific variation among the seven or eight occupations within the three levels of informality that warrants some attention. For instance, if we were to ignore agricultural jobs in the highly informal job group and both the community/social service and art jobs in the medium level of informality job group, the high- and medium-level informality groups would have much more similar educational attainment distributions on average. Finally, it is important to point out that the large majority of workers in the highly informal jobs were not unauthorized immigrants or even foreign-born (again, results not shown here). Rather, most were U.S.-born workers, and even in some specific highly informal job categories (e.g., installation, repair, food preparation), about 10 percent of workers had a college education. Even if most working informally had fewer work opportunities owing to their lower educational attainment, not only those with relatively low levels of education work informally. Informal work appears to be more demographically diverse than conventional wisdom maintains, and only with future surveys of more diverse population subgroups (e.g., highly educated U.S.-born, non-Latino whites residing in the suburbs) will researchers be able to obtain a more accurate portrait of the nature of informal work in the United States. The methodology employed in this chapter is likely providing

The diverse nature of informal work in California  173 Less than High School

High School

College

ALL OCCUPATIONS LOW LEVEL OF INFORMALITY Legal Life, physical, and social science Healthcare practitioner and technical Computer and mathematical science Architecture and engineering Business and financial operations Education, training, and library Managerial MEDIUM LEVEL OF INFORMALITY Protective service Office administration support Arts, design, entertainment, sports, and media Community and social service Healthcare support Sales and related Personal care and service HIGH LEVEL OF INFORMALITY Iinstallation, maintenance, and repair Transportation and material moving Production Construction and extraction Building and grounds cleaning and maintenance Food preparation and serving related Farming, fishing, and forestry 0%

50%

100%

Figure 11.2  Education among workers in jobs with low, medium, and high levels of informality, California 2004–2006

only a conservative picture of the diversity of informal work in California owing to its reliance on unmet work standards in occupations more likely to be filled by unauthorized Mexican immigrants. Nonetheless, this picture is more comprehensive than others of which I am aware.

Geographic distribution of informal workers Figure 11.3 suggests that informal work is less likely to occur in larger metropolitan areas as compared to non-metro areas and smaller metro areas. Nonmetropolitan areas and those with less than 1 million residents, for example, have at least 35 percent of their workforce estimated to have been working in relatively high informal jobs in 2004 to 2006. Metro areas with at least 1 million residents, conversely, had less than 35 percent. A reasonable assumption is that this spatial distribution of informal work is driven by the disproportionate number of unauthorized Mexican agricultural workers in California. However, when we remove these workers to test this

174  Enrico Marcelli 45%

Percent employed in highly informal jobs Excluding agricultural jobs

40%

35%

30%

25%

20%

Me (> 00 9)

,99

99

9)

,99

99

2,4

4,9

0)

0–

,00

,00

0–

9)

,99

99

–9

,00

00

00

00

5,0

,5 (2

1,0 o(

tro

tro

Me

tr Me

0,0 9)

,99

99

9)

,99

49

–2

–4

00

00

0,0

0,0

0 (1

0 (2

50 o(

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tro

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tro

me n-

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Figure 11.3  Percent high level of informality by metropolitan population size, California 2004–2006

possibility we see a fairly similar geographical pattern, whereby the proportion of workers employed in highly informal jobs tends to be higher in non-metropolitan and small metropolitan areas.

Conclusions This chapter tests two hypotheses linked to the dominant view of informal work emanating from initial research in the 1970s to 1990s in developing areas such as Africa and Latin America (de Soto, 1989; Marcelli, 2004; Williams and Windebank, 1998). The first hypothesis is that informal workers have no other employment options owing to their inadequate labor market skills (e.g., educational attainment) and are therefore in desperate need of any job. The second hypothesis is that informal work is more common in urbanized areas, wherein labor demand is stronger and the relatively uneducated poor are likely to migrate and reside. Results reported here lend some support to the first hypothesis but also provide evidence that calls such a dichotomous view into question. Although those working in jobs estimated to be highly informal have a lower level of education on average than those working in jobs estimated to have a medium or low level of informality, there is considerable variation across the 22 detailed occupations analyzed here.

The diverse nature of informal work in California  175 Additionally, some highly “informal” jobs include a sizable proportion of college graduates. Consistent with Marcelli (2004) and some of the evidence reported by other authors in this volume for Europe and the United States, the results of this chapter provide no support for the second hypothesis. Informal work is estimated to be more likely to occur in non-metropolitan and smaller metropolitan areas as compared to larger ones where the majority of the urban poor reside. Both findings—that some relatively educated people work informally and that informal work is more common in less densely populated areas—is at odds with the dominant view of informal work that originates from developing countries during the past three decades. Specifically, the findings reported here are more consistent with the contextual, idiographic, or particularizing approach of American institutional economics and the substantivist school of economic anthropology and less consistent with a neoclassical economic or formalist anthropological approach. Contextualized statistical evidence regarding the characteristics of informal workers in “developed” nations, or in an area within them such as California, is only beginning to emerge alongside the development of survey estimation methods capable of revealing these. Future work is needed in other areas within the United States if we are to obtain a better understanding of the nature, causes, and consequences of informal work in developed nations.

Bibliography Berk, Marc L., and Claudia L. Schur. 2001. The effect of fear on access to care among undocumented Latino immigrants. Journal of Immigrant Health 3:151–156. Brown, E. Richard, and Hongjian Yu. 2002. Latinos’ access to employment-based health insurance. In Latinos: Remaking America, edited by M. M. Suárez-Orozco and M. Paez. Berkeley: University of California Press, 236–253. Carrier, James G. 2005. Introduction. In A Handbook of Economic Anthropology, edited by J. G. Carrier. Northampton, MA: Edward Elgar. de Soto, Hernando. 1989. The Other Path: The Economic Answer to Terrorism. New York: Basic Books. Goldman, Dana P., James P. Smith, and Neeraj Sood. 2005. Legal status and health insurance among immigrants. Health Affairs 24:1640–1653. Heer, David M., and Jeffrey S. Passel. 1987. Comparison of two methods for computing the number of undocumented Mexican adults in Los Angeles County. International Migration Review 21(4):1446–1473. Heer, D. M., V. Agadjanian, F. Hammad, Y. Qiu, and S. Ramasundaram. 1992. A comparative analysis of the position of undocumented Mexicans in the Los Angeles County work force in 1980. International Migration 3(2):101–126. Isaac, Barry L. and Karl Polanyi. 2005. In A Handbook of Economic Anthropology, edited by J. G. Carrier. Northhampton, MA: Edward Elgar. Marcelli, Enrico A. 1999. Undocumented Latino immigrant workers: The L.A. experience. In Illegal Immigration in America: A Reference Handbook, edited by D. W. Haines and K. E. Rosenblum. Westport, CT: Greenwood Press.

176  Enrico Marcelli ———. 2004a. The institution of unauthorized residency status, neighborhood context, and Mexican immigrant earnings in Los Angeles County. In The Institutionalist Tradition in Labor Economics, edited by D. C. and. J. Knoedler. Armonk, New York: M. E. Sharpe. ———. 2004b. Unauthorized Mexican immigration, day labour and other lower-wage informal employment in California. Regional Studies 38(1):1–13. Marcelli, Enrico A., and David M. Heer. 1997. Unauthorized Mexican workers in the 1990 Los Angeles County labour force. International Migration 35(1):59–83. Marcelli, Enrico A., Manuel Pastor Jr., and Pascale M. Joassart. 1999. Estimating the effects of informal economic activity: evidence from Los Angeles County. Journal of Economic Issues 33(3):579–607. Vogel, Richard D. 2006. Harder times: Undocumented workers and the U.S. informal economy. Monthly Review July–August:29–39. Williams, Colin C., and Jan Windebank. 1998. Informal Employment in the Advanced Economies: Implications for Work and Welfare. New York: Routledge.

12 Informal work in rural America Theory and evidence Tim Slack and Leif Jensen

Introduction Social scientists have traditionally maintained that as capitalist economies develop, reliance on informal economic activities undergo concomitant decline. In this view, as the process of modernization advances, markets for labor, goods, and services in industrial and postindustrial economies increasingly occur within the legal and regulatory confines of the “formal economy.” Meanwhile, those markets outside the auspices of state control, the “informal economy,” are assumed to become increasingly marginal and to disappear with continued economic development. More recently, however, the linear trajectory of economic development has been challenged. There is growing recognition that the informal economy “has come to constitute a major structural feature of society, both in industrialized and less developed nations” and that contrary to past assumptions it “has grown in significance with the development of the modern world” (Portes, Castells, and Benton, 1989:1). Research on ethnic enclaves and immigrant employment, the economic structure of “global cities,” the livelihood strategies of the rural and urban poor, and popular media accounts of undocumented and “sweatshop” labor have fueled growing interest in gaining a greater understanding of informal work in more advanced economies. This book aims to contribute to this understanding by examining the dimensions of informal work in Europe and North America. The central thesis of this volume is that informal work needs to be understood as a socially, culturally, and geographically embedded phenomenon. Accordingly, we examine the character of informal work in rural America, and in rural Pennsylvania in particular. The chapter begins with a discussion of conceptual and theoretical issues related to informal work, including why space and the rural-urban continuum are important considerations. The chapter then turns to an examination of informal work as a family livelihood strategy in the context of rural Pennsylvania. Last, the chapter concludes with a summary of key points and a discussion of implications for public policy.

178  Tim Slack and Leif Jensen

Conceptual and theoretical considerations The social science literature is marked by a lack of consensus over what the informal economy is conceptually and how it should be defined and measured empirically. Until such a consensus emerges, any study, including those in this volume, must take time to describe its conceptual approach. This task is more than perfunctory, as the nature, correlates, and consequences of the informal economy can vary depending on how it is defined. In this section, we describe our conceptual approach to informal work, discuss some of its salient correlates including its theoretical relationship to formal labor supply and to socioeconomic status, and conclude by concentrating on how, theoretically, the nature and prevalence of the informal economy might differ between rural and urban locales. Measuring informal work Tickamyer and Bohon (2000) nicely summarize the many dimensions around which definitions of the informal economy differ. These dimensions give rise to a series of interrelated questions. For example, must the informal economy be a process that is income-generating exclusively or might it include activities that are done for payment in kind or, for that matter, for some measure of good will (social capital) that might be “cashed in” in the future? If the latter, should the definition be extended to include outright volunteer work? Does the informal economy include pure barter (trading this for that)? Can it include the barter of labor (“if you watch my kids after school, I’ll fix your car”)? Should self-provisioning be included (e.g., growing food for home consumption) or must it involve exchanges between economic actors? How should the dubious legality of many informal economic activities be handled? Should we draw the line at illicit activities (e.g., growing and selling marijuana) or at least treat illicit activities differently? Tickamyer and Bohon note that different combinations of these dimensions have been used to specify typologies that can then be drawn on to structure more nuanced studies of informal work. In the discussion that follows, we draw on data from a series of in-depth interviews and a telephone survey to gain a greater understanding of informal work. In our study, we define informal work as any work done for money, barter, or self-provisioning, that respondents viewed as part of their family’s livelihood strategy. The preamble to the in-depth interview script on informal work for money or barter read: “Not counting regular jobs or public assistance, many families today make ends meet in a lot of other ways. For example, some folks work under the table for a little extra money. Some folks work, not for money, but in return for other things of value, like firewood, car parts, or work you can provide them. Still other folks make crafts, grow vegetables, or produce other things at home that they sell or trade.” Respondents were then asked whether, over the past year, anyone in their household had participated in such activities. Additional questions probed for the types of informal work people engaged in (in terms of both type of exchange and the specific activity), who in the household participated in such activities

Informal work in rural America  179 and with whom, and the motivations underlying participation. Throughout, it was emphasized that we were interested in activities that helped respondents’ families make ends meet rather than those that were done primarily as a hobby. A series of questions were also asked about self-provisioning activities. The preamble to this section read: “Some folks do things themselves to save money that they might otherwise have done by others. For example, some folks do smaller things like their own car repair and some do bigger things like building their own homes.” Again, additional questions probed for the types of activities, who participated in such activities, and the motivations underlying participation. Following the approach used in previous survey research (Jensen, Cornwell, and Findeis, 1995; Tickamyer and Wood, 1998, 2003), telephone survey respondents were asked about the participation of household members in particular tasks to measure involvement in informal economic activities. The preamble read: “I’m going to read a list of extra work some people do to help make ends meet. You or others in your household might be doing one or more of these things to save your family money, earn extra money, or in exchange for something else. Again, we’re interested in things people in your household are doing to help make ends meet. We ask that you do not include something done purely for recreation or as a hobby.” Thirteen closed-ended questions followed that asked whether, in the past year, any member of the household had participated in a particular informal economic activity (see Tickamyer and Wood, 1998, for a discussion of this methodology). If the respondent answered that any member of the household had done so, additional questions followed to ascertain who in the household had done so, whether the activity was done primarily to “save money, earn extra money, or in exchange for something else,” and how important that activity was to the ability of their family to make ends meet. Important correlates of informal work As scholarly interest in the informal economy has increased, a natural question has been: “Who engages in informal work and why?” Though qualitative research has been invaluable in describing the contours of the informal economy (see, for example, Fitchen, 1981), definitive answers to this question have been elusive. This is owing, in part, to a lack of survey data with sufficient sample sizes to allow for statistical analysis of the correlates of informal work. A number of notable exceptions exist, including work by Jensen et al. (1995) and Tickamyer and Wood (1998, 2003). Jensen et al. conducted a survey on informal work among rural Pennsylvania households and confirmed a number of relationships that make intuitive sense. For example, informal work was found to be more likely in larger households. This stands to reason because additional family members will increase the flexibility of households to engage in informal work. However, research has also uncovered a number of findings that appear counterintuitive at first glance. Here we elaborate on two such provocative relationships. A common assumption is that informal work will be turned to as a last resort when families are otherwise struggling economically. Viewed as a survival

180  Tim Slack and Leif Jensen strategy, activities such as work for payment in kind, under-the-table work, or barter may allow a family to make it through a rough patch or may compensate for insufficient formal sector opportunities. In economic terms, the implication is that formal and informal work are substitutes, not complements. Empirically, this assumption should manifest itself in a negative relationship between formal labor supply and informal work. However, some studies suggest that just the opposite is true. Jensen et al. (1995) found both survey respondent employment and the total number of formally employed household members to be positively related to participation in the informal economy. Similarly, Nelson and Smith (1999) report that households headed by adults with “good jobs” (stable, higher-paying, with fringe benefits) are more likely to engage in entrepreneurial moonlighting and other less formal pursuits than are households headed by those with “bad jobs” (less stable, lower-paying, with poor fringe benefits or a lack thereof  ). Another common assumption is that informal work is more so the province of the poor and that informal work should decline as family incomes rise. There is some evidence for this. In a study of low-income families in the Ozarks, Campbell, Spencer, and Amonker (1993: 46) found that “the more the formal or cash income, the less the participation in the social informal economy—people participated in the use of such tactics by necessity.” However, Jensen et al. (1995) showed that though the prevalence of informal work does decline with rising income, those with the lowest incomes were actually the least likely to report informal activities. There is some evidence that the reasons for engaging in informal work differ by income. Jensen et al. (1995), for example, found that low-income participants in the informal economy were more likely to cite poor local labor demand as a motivation for participation, and they were much more likely than their higher income counterparts to report that the income generated from informal work was critical at times for family economic survival. On the other hand, it could be that those at the very bottom of the U.S. economic hierarchy are doubly disadvantaged—excluded from “good jobs” yet lacking the resources needed to engage in informal enterprise (Nelson and Smith, 1999). The point is, as with other aspects of the informal economy, things are seldom as simple as one might expect. In the remainder of the chapter, we pay special attention to the interplay between formal and informal work and the implications of socioeconomic status. Informal work in rural areas Much of the research on the informal economy in developed countries focuses on urban settings. This focus is certainly not misguided given the importance of the informal sector to immigrant and ethnic enclaves that are predominantly urban and the macroeconomic struggles (and hence constrained formal opportunities) facing many inner-city residents. However, there are theoretical reasons to expect that the informal economy may be relatively more important in rural than urban areas of developed countries. First, because rural areas are by definition more sparsely populated, they will often lack the economies of agglomeration needed to support essential services. If such services are deficient or altogether lacking, rural

Informal work in rural America  181 residents may be compelled to seek and provide informal alternatives (Levitan and Feldman, 1991). Second, some types of informal economic activities require access to land and other natural resources available only in the countryside. In rural Pennsylvania, for example, cutting and selling firewood is a very common way to earn extra money informally, as are petty agricultural enterprises. Conversely, there is reason to believe that other types of informal work (e.g., street vending) may be more common in urban settings (Tickamyer and Bohon, 2000). Last, in some cases, participation in the informal economy may be more socially than economically motivated (Levitan and Feldman, 1991). It also may require interdependence with kin, friends, and other community members as sources of both markets and labor. Given this consideration, the greater degree of gemeinschaft (Toennies, 1957) presumed to typify rural areas may constitute a more fertile setting for informal economies to emerge and prosper.

Methods Anthropologist Janet Fitchen once called upon social scientists to “listen first before you ask” (1990: 16). Her rationale was straightforward: fieldwork not only provides richer context and depth to the subject under study, it can clarify questions, open new lines of inquiry, and enhance the design of questionnaires and the interpretation of survey data. This study began with Fitchen’s advice in mind. The ultimate objective of the project was to develop a survey that would provide a representative account of the livelihood strategies undertaken by families in rural Pennsylvania, paying special attention to the circumstances of those with low incomes. However, before a survey instrument was constructed, a series of in-depth interviews were conducted with members of low-income families from across the Commonwealth. In the discussion that follows, we draw on the data obtained in these interviews to illustrate the character of informal work in the context of rural Pennsylvania and demonstrate how such work is socially embedded in relationships that facilitate and constrain participation. The in-depth interviews began in the summer of 2003 and were completed in the fall of that year. Respondents for the in-depth interviews were drawn from 5 of Pennsylvania’s 35 non-metropolitan counties.1 The five counties were purposively selected from various regions across the Commonwealth and on the basis of the rural-urban continuum codes and the economic and policy typologies of the Economic Research Service, United States Department of Agriculture, to capture the regional and economic diversity of rural Pennsylvania.2 These typologies allow for the identification of counties according to their degree of urbanization and proximity to metro areas, their primary economic activity, and themes of special significance for public policy. The five counties selected for this study ranged from being home to an urban population of between 2,500 and 19,999 and adjacent to a metro area to being completely rural and not adjacent to a metro area. The economies of these counties included those dependent on manufacturing, mining, and government activities and those with non-specialized (i.e., more diversified) local economies. The policy considerations for these

182  Tim Slack and Leif Jensen counties included those with land areas dominated by federal ownership, areas whose economies depend heavily on unearned income from transfer payments, and areas whose economies are dependent on commuting (e.g., 40 percent or more of the county’s residents travel outside the county for formal work). In each county, Penn State Cooperative Extension professional staff were contacted and asked to identify individuals who might serve as intermediaries to the low-income population in the area. Once intermediaries were identified and convinced of the legitimacy of the project, these individuals helped to contact potential respondents and schedule interviews. At each site, the aim was to interview one working-age member from five families—three married-couple families and two single-mother families—with at least one formally employed adult in the household. Among the interviewees from the three married-couple families the objective was to interview at least one adult male and one adult female (the third respondent could be either male or female). The majority of the interviews were held in people’s homes, in living rooms and at kitchen tables, though some were held in other mutually acceptable places. Most interviews were conducted one-to-one with the interviewee, though a number of couples participated jointly, and other family members offered intermittent input. The in-depth interviews were semi-structured and sought information on the range of economic activities respondents’ families were using to make ends meet, including formal work, informal work done for cash, barter, and selfprovisioning, and participation in assistance programs. All interviews were taperecorded, transcribed, and later analyzed. The interviews lasted an hour and a half, on average, though some were much shorter and others far longer. In all, 6 married women, 3 married men, 6 married couples, and 11 single mothers were interviewed. The data collected through these interviews were later used to inform the development of a statewide telephone of non-metro Pennsylvania family households in May, 2004. Summary findings from this survey are also included in the discussion that follows.

Informal work in rural Pennsylvania Globalization and economic restructuring have had a profound influence on the lives of rural Americans. This is, perhaps, especially true for rural Pennsylvanians, who have witnessed tremendous job losses in the sectors that have traditionally been the backbone of the working and middle classes. Findings from The State of Working Pennsylvania 2004, a report issued by the Keystone Research Center, illustrate this well (Wial, 2004). According to the report, between 1990 and 2003, Pennsylvania lost 35.4 percent of its jobs in natural resources and mining and 24.5 percent of its jobs in manufacturing. Job losses in manufacturing were especially severe in the period after the recession of 2001. From the beginning of that downturn through the summer of 2004, Pennsylvania lost 17.9 percent of its manufacturing employment, totaling 151,600 jobs. Though gains were made in the service sector—nearly 9 of every 10 jobs gained by the state between 1990 and 2003 were in education and health services or professional and business

Informal work in rural America  183 services—on balance, the quality of the jobs gained was below that of those lost. This was especially true in rural regions of the state (Wial, 2004), wherein income per capita and earnings per job are already consistently lower and poverty and unemployment consistently higher, than is the case in the state’s metropolitan areas (Economic Research Service, 2005). The profound impact of globalization and economic restructuring, particularly the loss of manufacturing employment, was articulated clearly by the interview respondents. Indeed, many respondents saw these changes as being central to the economic hardships they were facing. Those displaced by economic restructuring often found it extremely difficult to regain employment in their previous occupations or to find new employment at comparable wages. One man in his early fifties spoke of the impact that economic restructuring and job displacement had had on his family and community. Having earned a solid middle-class living in the manufacturing plants of the area as a younger man, he now earned a living as a short-order cook, earning a pittance of his former salary. All the major companies are laying-off, where all the good jobs and good opportunities are at, so there are a lot of people around here that are struggling. [This was] a good area where a lot of people were making good money and it’s just not available anymore. Everyone has had to take different jobs, lower jobs, multiple jobs. No one is living the same way they used to live…You know, you’ll hear the government say, “Oh, there’s loads of jobs out there.” Yeah, if you want to work for minimum wage…Obviously when you get laid off and you’re making $53,000 a year, you’re not going to apply at McDonald’s for minimum wage. You’re gonna try to apply to the same [kind of job that you used to have]. There is not a lot of it when everybody’s laying-off. So looking is tough and you start lowering your level in what you are going to look for and you start lowering your expectations. It’s tough. Another man, discouraged by the plant closings and layoffs in his region of the state considered moving his family out of Pennsylvania in search of better employment prospects. I might have to leave the state to see if I can get a job. There is nothing around here for me…The plants around here, they are all going out. Problem is I don’t know if other places is any better. Struggling with the loss of “good jobs” and facing a new menu of marginal employment options were common themes among respondents. Many, particularly the female respondents, had found formal work in home health care and food services. Such jobs were rarely full-time, and few offered formal fringe benefits, at least none that were affordable given prevailing wage rates. Further, such jobs offered little opportunity for advancement, as there was simply no career ladder to climb. One woman in her mid-forties reported that she officially worked 33 hours a week as a waitress, though her typical work week at the

184  Tim Slack and Leif Jensen restaurant far exceeded her officially documented hours. She felt that this was fairly typical of her area. Nobody up here is full-time. Everybody is part-time…In any kind of business, if it doesn’t have to do with the County, they are all part-time. You can’t get more than 28 or 33 hours…They would have to pay you more, pay overtime, pay health benefits, which nobody up here does. Another woman in her early forties, who worked in home health care, lamented a long search for full-time work. After losing a full-time job nearly two years earlier, part-time, on-demand work was all she had been able to find in the interim. I haven’t worked steady in almost a year and a half. [My current] job is parttime, as they need me. So I still haven’t found that permanent set schedule thing yet after a year and a half…[My current employer just doesn’t] have a lot of full-time people. They want part-time people. They don’t wanna have to provide health benefits. In fact, low-wages and the absence of jobs providing health and retirement benefits made withdrawing from the formal labor market the rational choice for some. One woman in her mid-thirties discussed how she and her husband had decided that given prevailing wage rates and the costs associated with childcare, their family was economically better off having her devote her labor to home and family. I don’t have any schooling. I mean, I have a little bit of computer classes that I took, but I don’t have any schooling that would get me a good job. If I got a minimum wage job, with having the little ones, I would just be giving my money to a babysitter. You know, they are almost wanting minimum wage now too. So we just felt it was useless for me to go out and work. It was clear that the bonds of family and community factored heavily in the economic calculus of those interviewed for this study. Many respondents spoke of the conflict between trying their best to provide for their family economically and trying to be there for their family as parents, spouses, and partners. Traditional values regarding the obligation of women to their families were voiced by male and female respondents alike, making the work–family conflict particularly trying for many women. Often, respondents viewed marginal employment as a tradeoff they were willing to accept, albeit reluctantly, in favor of maintaining their bonds with family, friends, and the place they called “home.” The stories shared by the interview respondents provided clear support for the perspective that economic action is embedded in social relationships and that these relationships serve to facilitate and constrain the economic opportunities people are able to realize (Granovetter, 1985). Though the embeddedness perspective provides valuable insights into formal economic action, its relevance is perhaps

Informal work in rural America  185 even greater in the case of informal work. For many the bonds of friends, kin, and community provided important economic opportunities outside the purview of the formal labor market. Indeed, the combination of formal and informal work was the most common livelihood strategy undertaken by those who participated in the in-depth interviews and among those who responded to the statewide survey that followed. Both types of data showed social networks and norms of reciprocity to be central to participation in informal work. One young woman in her early twenties reported that she rarely visited a grocery store and had little reason to visit the economic hub of her area at all. Her family was able to provide much of what it needed informally, through self-provisioning and kin and friendship networks. This quote also illustrates how the character of informal work can differ between rural and urban areas. We have our own chickens. We have a slaughter house…You know all the meat in the store is expensive and we don’t buy no meat from the store. We do our own butchering and we have our own garden. We have a milk cow, which we don’t get milk from the store. We make our own butter. Basically, we’re an old fashion family…If you [have] something and want it butchered you just bring it to us…In fact, deer season is a great source of [family] income. In contrast, another woman in her late thirties noted how social isolation impeded members of her family from engaging in informal work. Past legal problems and an interracial marriage left her estranged from her family and marginalized in the community. She also felt that a skill deficit compounded her family’s inability to engage in informal work. First of all, we don’t have a whole lot of friends…and neither one of us have family. I mean, we have family, but not that we can rely on…Neither one of us is mechanically inclined…[We] don’t hunt, don’t grow nothing, can’t fix cars…[We] just don’t really have any bartering chips. Among those who engaged in informal work, the types of activities performed and types of exchange involved varied. For example, one woman in her early thirties noted that bartering with friends and neighbors was an important component of her family’s livelihood strategy. We helped a friend of ours build a shed, and then he come out and helped us split firewood…We helped another friend build his garage and then he come out and helped us with our garage. You know, we go back and forth that way…[My husband also sells] car parts and stuff. In fact, he has a motor out here right now. The guy that wants it, he grinds tree stumps, and we have a whole bunch [of stumps] in our backyard. So he’s gonna grind those up in exchange for that motor.

186  Tim Slack and Leif Jensen Another woman in her mid-forties commented that she and her husband often engaged in informal work for cash, barter, and savings. She noted that the type of exchange was typically contingent on the couple’s relationship with the other party. We get paid in different ways: 20 bucks, a bag of tomatoes, it just depends. Like the guy I clean house for, he takes me to work in the winter. He’s got a four-wheel drive truck. So that’s how I get paid there. We often get paid by things. And a lot of the time when we do things for people around here it’s in exchange for another job. Like [my husband], he just finished painting a house. Well, he’s getting paid in two truck loads of stone for our road out there. That’s a hell of a lot of money we saved [on that gravel]. Many interview respondents perceived informal work for money as being quite common. Indeed, it was the modal type of exchange cited by respondents to the telephone survey. Interview respondents often cited doing odd jobs in exchange for money, in some cases for formal sector employers. The latter was particularly common among those who worked in restaurants and bars. One man in his late thirties provided the following comments: There’s lots of people that work under that table around here. You know, odd jobs for cash. Like when I use to work out at the bar, that was just straight up cash there. And just the other day, this guy down the road here needed help unloading a truck and I did that. You know, things just come up, somebody needs something done, and they offer to pay you for it. The literature on the informal economy suggests both economic and noneconomic motivations for engaging in informal work (Duncan, 1992; Jensen et al., 1995; Levitan and Feldman, 1991; Portes, 1994; Tickamyer and Bohon, 2000). Consistent with the findings of Jensen et al., the two most commonly cited reasons for engaging in informal economic activities by survey respondents were “to help out neighbors and relatives” (77.2 percent) and “to make ends meet” (69.7 percent). This is also consistent with the information gathered in the interviews. In fact, many interview respondents found it quite difficult to decipher between economic and non-economic motivations. For example, when posed with this dichotomy the response of a man in his mid-twenties captured the sentiments of many: It’s both at the same time. I mean, sometimes it’s neighborly and sometimes it’s to get a little extra cash in my pocket. Whatever the situation calls for. A number of interview respondents did note that informal activities helped get them through times when their families were struggling to make ends meet. The young man just quoted went on to say that, along with participation in assistance programs, informal work had been an important source of income for his family

Informal work in rural America  187 during a long spell of unemployment. However, having recently found full-time work, albeit with a two-hour daily commute, he found himself doing less informal work as a result. Whenever I was out of work [the income from informal work] was all we got. I worked on cars. I worked for my dad. I moved furniture. I did whatever I needed to do. [My wife] actually did tattoos. It got us by. We did a lot of it. I don’t have the time for it now [that I’m working full-time] or else I still would. Another man in his late thirties told of a similar experience. He had actively sought out informal work after losing his job but was doing so less now that he had regained formal employment. There used to be more opportunities out there [when I was out of work] because I was looking. You know, we didn’t have no money, so I had to be looking for things. It was real crucial to find stuff. If you have the initiative and you go out and look for it it’s out there. But if you’re not looking, you sure ain’t gonna find it. A woman in her mid-forties noted that though she and her husband engaged in informal work on a regular basis, such opportunities were particularly important at certain times of year. It can be really worth it to us sometimes. I mean, the only time we do anything [informal] because we really need the money is like at Christmastime. We do extra around then so we can have a decent Christmas. Results from the statewide survey show that, on average, lower-income families view their participation in informal economic activities as more important than do those with higher incomes. Though the rank order of reasons given for participation in informal work is similar between lower and higher income families, interesting differences exist. “To make ends meet” was cited most often among lower-income families, whereas “to help out neighbors and relatives” was the most common among higher-income families. The percentage of respondents reporting “there aren’t enough good jobs,” “so you can work at home,” and “don’t have to worry about transportation” as important reasons for engaging in informal work was also higher among lower-income families. However, despite having different reasons for engaging in informal work, the survey results did not show great differences in the prevalence of participation across different income groups. Figure 12.1 shows the percent reporting engagement in informal work by household income. Though the results suggest a curvilinear relationship between income and informal work, these differences do not achieve statistical significance. The results shown in Figure 12.1 provide support for the contention that informal work is not simply a survival strategy

188  Tim Slack and Leif Jensen 60

50

Percent

40

30

20

10

0 < $15,000

$15,000–24,999

$25,000–34,999

$35,000–49,999

$50,000 +

Household income

Figure 12.1  Prevalence of informal work by household income

for the poor but rather a form of economic relationship that cuts across the social class hierarchy (Castells and Portes, 1989). The interview respondents made clear that both economic and non-economic considerations influence participation in the informal economy and that central to engaging in informal work are the social relationships within which economic action is embedded. The words of this man illustrate this well: [After] I got that job for my buddy, then something went wrong with my car and I couldn’t get it inspected. Well, his neighbor knew how to fix cars and did it cheap. So I dropped the car off over there after work and he did the brakes and a few other things that didn’t pass inspection…That helped us out a lot right there. [It] was like a complete circle. I helped him and he helped me.

Conclusions and implications for policy To borrow from Levitan and Feldman (1991), we found no evidence of a “selfsufficient peasantry” in rural Pennsylvania. However, we did find that informal work is widespread and in some cases vital to the ability of low-income families to make ends meet. Among those families who did participate in informal work, there was great variance in the amount and type of activities in which they engaged and in the importance they placed on such work as a component of their family’s livelihood strategy. The degree to which the rural context of this research—and the idiosyncrasies of rural Pennsylvania in particular—shaped our findings is difficult to say. What can be said, however, is that informal economic activities

Informal work in rural America  189 were common among those who participated in this study. Indeed, combining formal and informal work was the most common livelihood strategy pursued by both the interview and the survey respondents. In keeping with the central thesis of this volume, both types of data collected for this study show that a fuller understanding of informal work must appreciate the social and geographic context in which such activities are embedded. The profound impact of globalization and economic restructuring on the lives of those interviewed for this study factored prominently in their narratives. The role of social networks and norms of reciprocity clearly acted to facilitate and constrain informal economic action. Indeed, in some cases, maintaining and building social capital—the resources inherent in social relationships—was just as important as any tangible economic remuneration. What implications does all of this have for public policy? Policymakers face a paradox when it comes to the informal economy (Thetford and Edgcomb, 2004). On one hand, as informal work is by definition outside the legal and regulatory control of the state, it can be seen as negative economic force, posing a public threat through noncompliance with environmental, health, safety, and labor standards and placing a drain on public coffers through the nonpayment of taxes. On the other hand, to the extent that the informal economy provides needed goods and services, jobs, and income, it can be seen as a positive economic force, particularly for underserved communities and low-income populations. Given that the informal economy constitutes a major structural feature of advanced capitalist societies, the key for public policymakers is to devise programs that help to encourage its positive contributions while ameliorating its negative consequences (Thetford and Edgcomb, 2004). We believe that crafting programs aimed at encouraging micro-entrepreneurship holds promise as a social welfare and community/economic development strategy. This may be particularly true in the context of areas where, like so much of rural Pennsylvania, economic restructuring has eroded job opportunities and new economic opportunities have been slow to materialize. Micro-credit and micro-enterprise programs that make capital and business development services available to informal entrepreneurs hold potential not only for helping families achieve and maintain economic self-sufficiency but for facilitating locally owned and operated businesses with deep roots in their communities. Though programs of this nature should aim to assist micro-entrepreneurs in overcoming barriers to formality when such assistance is sought, they must also recognize the legitimacy and value of informal work in and of itself (Ratner, 2000). Such recognition requires understanding informal work as not only economic in nature but as a socially, culturally, and geographically embedded phenomenon.

Acknowledgements This research was made possible by support from the Rural Policy Research Institute (RUPRI), Rural Poverty Research Center (RPRC), the Rural Sociological Society (RSS), the Penn State Alumni Association, and the College of Agricultural

190  Tim Slack and Leif Jensen Sciences, The Pennsylvania State University. We extend our deepest thanks to all who devoted their time and energy to participate in this project. Those who served as intermediaries not only helped to identify potential interviewees, they helped to legitimize our efforts with individuals who might have otherwise been wary of our intentions. Participants invited the lead author into their homes and shared their stories selflessly. All are owed a debt of gratitude for their generosity.

Notes 1 Metropolitan (metro) and nonmetropolitan (non-metro) areas are county-level classifications defined by the Office of Management and Budget (OMB) based on data from the decennial censuses. The metro-non-metro classification scheme used to select counties in this study was based on the 1990 Census and issued by the OMB in 1993. According to this classification scheme, metro areas contain (1) core counties with one or more central cities of at least 50,000 residents or with a Census Bureau-defined urbanized area (and a total metro area population of 100,000 or more) and (2) fringe counties that are economically tied to the core counties. Nonmetro counties are outside the boundaries of metro areas and have no cities with as many as 50,000 residents. In June 2003 (after the project design was established and research was underway), the OMB released the Census 2000 version of metro and non-metro areas and added a new micropolitan area classification. The new category subdivides previously undifferentiated non-metro territory into two distinct types of counties—micropolitan (counties with an urban cluster of 10,000 or more) and noncore (counties without an urban cluster of 10,000 or more). Of the five counties from which respondents for the in-depth interviews were drawn, all remained nonmetro according the 2003 classification. Two of these counties were designated as micropolitan areas. For the purpose of this chapter, the terms rural and non-metro are used interchangeably. 2 The definition of the rural-urban continuum codes and the county economic and policy typologies of the ERS, USDA, are available at http://www.ers.usda.gov/.

Bibliography Campbell, Rex R., John C. Spencer, and Ravindra G. Amonker. 1993. The reported and unreported Missouri Ozarks: Adaptive strategies of the people left behind. In Forgotten Places: Uneven Development in Rural America, edited by T. Lyson and W. Falk. Lawrence, KS: University Press of Kansas. Castells, Manuel, and Alejandro Portes. 1989. World underneath: The origins, dynamics, and effects of the informal economy. In The Informal Economy: Studies in Advanced and Less Developed Countries, edited by M. Castells, A. Portes, and L. A. Benton. Baltimore: The Johns Hopkins Press. Duncan, Cynthia M. 1992. Persistent poverty in Appalachia: Scarce work and rigid stratification. In Rural Poverty in America, edited by C. M. Duncan. New York: Auburn House. Economic Research Service. 2005. State Fact Sheets: Pennsylvania. Retrieved on March 2, 2005, from http://www.ers.usda.gov/StateFacts/PA.htm 2004. Fitchen, Janet M. 1981. Poverty in Rural America: A Case Study. Boulder, CO: Westview Press. ———. 1990. How do you know what to ask if you haven’t listened first: Using anthropological methods to prepare for survey research. The Rural Sociologist 10:15–22.

Informal work in rural America  191 Granovetter, Mark. 1985. Economic action and social structure: The problem of embeddedness. American Journal of Sociology 91:481–510. Jensen, Leif, Gretchen T. Cornwell, and Jill L. Findeis. 1995. Informal work in nonmetropolitan Pennsylvania. Rural Sociology 60(1):91–107. Levitan, Lois, and Shelley Feldman. 1991. For love or money: Nonmonetary economic arrangements among rural households in central New York. Research in Rural Sociology and Development 5:149–172. Nelson, Margaret K., and Joan Smith. 1999. Working Hard and Making Do: Surviving in Small Town America. Berkeley, CA: University of California Press. Portes, Alejandro. 1994. The informal economy and its paradoxes. In The Handbook of Economic Sociology, edited by N. J. Smelser and R. Swedberg. Princeton, NJ: Princeton University Press. Portes, Alejandro, Manuel Castells, and Lauren A. Benton. 1989. Introduction. In The Informal Economy: Studies in Advanced and Less Developed Countries, edited by A. Portes, M. Castells, and Lauren A. Benton. Baltimore: The Johns Hopkins Press. Ratner, Shanna. 2000. The Informal Economy in Rural Community Economic Development. Retrieved on March 10, 2005, from http://www.rural.org/publications/Ratner00-03. Thetford, Tamra, and Elaine Edgcomb. 2000. Microenterprises in the U.S. Informal Economy: A Summary of Research Findings. Retrieved on March 10, 2005, from http:// fieldus.org/publications/Field_Forum15.pdf. Tickamyer, Ann, and Stephanie Bohon. 2000. The Informal Economy. In The Encyclopedia of Sociology, edited by E. F. Borgatta and R. J. V. Montgomery. New York: MacMillan Reference. Tickamyer, Ann R., and Teresa A. Wood. 1998. Identifying participation in the informal economy using survey research methods. Rural Sociology 63(2):323–339. ———. 2003. The Social and economic context of informal work. In Communities of Work: Rural Restructuring in Local and Global Contexts, edited by W. W. Falk, M. D. Schulman, and A. R. Tickamyer. Athens, OH: Ohio University Press. Toennies, Ferdinand. 1957. Community and Society. New York: Harper Torchbooks. Wial, Howard. 2004. The State of Working Pennsylvania 2004. The Keystone Research Center. Retrieved on March 1, 2005, from http://www.keystoneresearch.org/ SWP2004. pdf 2004 [cited March 1 2005]. Available from http://www.keystoneresearch.org/ SWP2004.pdf>.

13 Informal work in Canada Bernard Fortin and Guy Lacroix

Introduction Canada is composed of 10 provinces that share common features but also differ in a number of important matters. The Province of Quebec is the second largest in terms of population and size of the economy. Among its distinctive features, the imprint of the French culture certainly ranks highest. Indeed, more than 80 percent of the population speaks French, and Montreal is the world’s second largest French-speaking city. The Province’s economy may be qualified as small, diversified, and very open. Its main trading partner by far is the United States, which accounted for more than 85.2 percent of total trade in 2002 (up from 75.7 percent in 1990). Conversely, residents of the Province are the most highly taxed in North America, and the labor market is among the most heavily regulated. With labor and capital mobility, governments have little scope to differentiate their fiscal policies as higher tax rates and pervasive regulation may induce individuals and firms to migrate to neighboring provinces or states that offer more business-friendly environments. Yet, the unique cultural and linguistic fabric of the Province of Quebec probably limits the ability and the will of its population to migrate in response to intrusive tax policies. Indeed, the ability to migrate is limited by the fact that a large fraction of the population does not speak English. The will to migrate may also be mitigated by the fact that the province’s social programs are more generous than those found in neighboring states and provinces. To some extent, limited labor mobility allows the provincial government to increase tax rates to secure more generous social programs. Inasmuch as these programs reflect preferences for public goods, little need be said about the government’s fiscal policy. Yet high tax rates lead to important efficiency, equity, and moral issues that need to be addressed. Efficiency concerns arise because high tax rates induce individuals to modify their behavior to avoid paying their fair share of the programs’ costs. Working in the hidden sector and consuming hidden goods and services are two options individuals may resort to. Resources are thus reallocated to sectors that are usually less productive than those in which taxes cannot be avoided. This may entail large social and economic costs. In addition, resources spent to avoid being detected and those spent by the government for auditing purposes need to be factored in.

Informal work in Canada  193 Hidden activities also involve important equity issues. In public finance, the notion of horizontal equity refers to the fact that two identical individuals should contribute the same amount to secure public goods. Yet if one works in the hidden sector and the other does not, clearly their tax burdens will differ. Finally, working in the hidden sector and consuming hidden goods raise important moral issues. Hidden workers and consumers are said to be “free riders” because they enjoy the same level of public goods as honest workers and consumers but do not pay their fair share of the burden. Widespread hidden consumption and work may thus jeopardize confidence in the government and in democracy. The public perception in the Province of Quebec in the mid-1980s and mid1990s was to the effect that the hidden activities had become widespread. Most believed that the majority of their fellow citizens somehow were engaged in the informal markets. The media often reported figures according to which the hidden economy represented anywhere between 0.5 percent and 50 percent of the GNP. These perceptions, although wrong, had their roots in particular facets of the fiscal policies of those days. In the mid-1980s, income tax rates were the highest ever (though most services were tax-free). The mid-1990s saw the introduction of a new value-added tax that applied to all goods and service and followed a substantial reduction in income tax rates. Both these events prompted some researchers (including the authors of this chapter) to conduct large-scale surveys in 1985 and 1994 to better understand the functioning of the informal markets and with an aim at measuring the overall size of the informal economy. The former focused on a single metropolitan area and the latter was based on a geographically more representative sample. In each case, detailed demographic information was asked from respondents. They were also asked detailed questions about expenditures on informal goods and income from informal work activities. The two surveys thus offer a unique opportunity to provide cross-sectional information on the detailed characteristics of the informal markets in French-speaking Canada. The purpose of this chapter is to report the main empirical findings from the two surveys. The structure of the chapter is the following: in section 2 we provide a detailed description of the surveys and their sampling schemes; in section 3 we provide a detailed analysis of the expenditures on broad groups of goods and services. We also look at income stemming from broad categories of activities. Differences between urban/rural areas are underlined. Demographic characteristics of buyers and sellers of informal goods and services in 1994 are also investigated, with particular attention devoted to gender and age groups. Section 4 compares the results from the two surveys. Expenditures and consumption patterns and demographic characteristics are contrasted. The purpose of this section is to determine whether any structural change has occurred between the two surveys. Section 5 concludes.

Investigating the hidden economy: two large-scale surveys In Quebec, public interest for the hidden economy peaked at two very distinct periods that coincided with two particular fiscal regimes. First, in 1985, the income

194  Bernard Fortin and Guy Lacroix taxes levied by both the federal and provincial governments were the highest ever. Discontent became so widespread that a major fiscal reform was enacted in 1987. The second period is linked to the introduction of the Goods and Services Tax (GST) in 1991. The proposal was an instant controversy, and in many circles it became known as the “Gouge and Screw Tax”. The vast majority of the Canadian population was irate and disapproved of the tax. The 1987 Canadian fiscal reform aimed at simplifying the income tax system. It did so by reducing the number of tax brackets and by lowering the marginal tax rates. Conversely, it broadened the fiscal base by replacing personal exemptions and most of the other deductions with nonrefundable tax credits. Both changes have had a significant impact on the effective marginal tax rates. The Quebec government amended its own tax regime along similar lines in 1991. Consequently, the marginal tax rates for the low-earners have gone up while those of the highearners have gone down. The GST is a multi-level sales tax similar to the value-added taxes found in Europe. In fact, it was more directly modeled on a similarly named tax in New Zealand. When it was introduced, it replaced the Manufacturer’s Sales Tax (MST) that had been previously applied at the wholesale level on manufactured goods (services were not taxed) and had been in effect since 1924. The MST was generally levied at a rate of 13.5 percent but was also highly complex in that it was subject to no fewer than 22,000 special provisions and administrative arrangements. The GST is a 7-percent charge on all goods and services except certain essentials such as food, residential rent, and medical services. Low-income individuals can also receive a GST rebate calculated in conjunction with their income tax. The replacement of the MST by the GST has helped to make Canadian manufacturers more competitive. The GST applies to all imported goods and services but does not apply to Canadian manufactured goods and services that are exported to other international markets. The GST has also made consumption tax rates more equal across commodities, thereby reducing relative price distortions in the economy. Both the discontent with high income taxes and the controversy surrounding the GST have led to the widespread belief that hidden work and consumption were rampant in Quebec in the middle 1980s and early 1990s. It is in both these contexts that our surveys were conducted. The 1985 survey The survey was conducted under the supervision of Fortin and Fréchette (see Lemieux, Fortin and Fréchette, 1994) during the spring of 1985 in the census metropolitan area of Quebec City. Quebec City is the capital of the Province of Quebec whose population amounted to 603,267 back then. The survey was limited to this geographical area primarily to limit the surveying costs. The government was by far the main employer of the region. Furthermore, the population is almost entirely French-speaking and very homogenous. The sample includes 2,134 individuals ages 18 and older but is by no means representative of the population of the province. The sample design was based on the methodology used by

Informal work in Canada  195 Statistics Canada in its Labor Force Survey. The main sample (1,878 individuals) is of the random-cluster type. It was supplemented by a small quota sample (256 individuals) to compensate for difficulties in reaching people in some areas and some socioeconomic groups. In addition to asking standard socioeconomic questions, the survey also included a host of questions on jobs in the regular and hidden sectors and on expenditures on goods and services produced in the hidden sector. Hidden jobs are those whose proceeds are not reported to the tax authorities.1 In theory, this definition could encompass both criminal activities and tax evasion. In practice, however, criminal hidden activities such as drug dealing or prostitution were rarely reported in the survey. Interviewers were trained to entice individuals to take part in the survey by explaining its purpose and by stressing its anonymous, confidential, and strictly academic character. The interviewers were clearly identified as working for Laval University, which is well known in Quebec City. As the survey included questions on general attitudes toward taxation and tax evasion, hours of work, and expenditures on hidden goods, most respondents could relate to at least part of the questionnaire. The interviewers delivered the questionnaires by hand and offered to help explain the content or specific details about the questionnaire. Respondents were asked to put the questionnaire in a sealed envelope that was picked up a few days later. The response rate was relatively high: in 63.8 percent of the sampled households, at least one adult answered the questionnaire. Furthermore, because as many as 81.1 percent of all household members completed the questionnaire, the overall response rate is 51.7 percent. The 1994 survey The questionnaire and sample design of the 1994 survey are very similar to those used in the 1985 survey. It was conducted under the supervision of Fortin et al. (1996). Instead of focusing on a single metropolitan area, the survey includes three distinct regions: the metropolitan areas of Quebec City (2,014 individuals), Montreal (2,035 individuals), and the region of “Bas St-Laurent” (1,093 individuals). Montreal is the largest city of the province and the most heavily industrialized. The “Bas St-Laurent” region is composed of small villages and cities in a semi-urban or rural environment. As in the 1985 survey, the sample methodology is based on the random-cluster approach used by Statistics Canada in its Labor Force Survey. The survey was conducted by a well-known polling agency in Quebec (Léger & Léger Inc.). Interviewers were trained to emphasize the scientific purpose of the survey and to highlight the anonymous and confidential character of the collected data. Respondents were asked to put the questionnaire in a sealed envelope that was picked up the day after. In all, 4,990 households were contacted, of which 2,940 residents (59 percent) agreed to answer the questionnaire. The participation rate was highest in Bas St-Laurent (75.7 percent), followed by Quebec (58.2 percent) and Montreal (54.2 percent). Of the 5,796 household members, as many

196  Bernard Fortin and Guy Lacroix as 88.6 percent actually completed the questionnaire (5,132). The overall response rate is thus 53 percent, which is very close to that of the 1984 survey. Table 13.1 provides descriptive statistics on both surveys and on the 1994 Survey of Consumer Finances (SCF) for comparative purposes.2 Only data from the metropolitan area of Quebec City are used in each case to allow comparisons across surveys.3 In general, both our surveys agree relatively well with the SCF. The proportions of men and women are reasonably close, although in both surveys the young and the highly educated are slightly over-represented. Small discrepancies also exist with respect to marital and labor market status. Several reasons might explain why these arise. First, the sample means based on our surveys are not weighted, whereas those using the SCF surveys use sample weights. Second, the definition of some variables differs between our surveys and the SCF. This is the case for the labor market status and the education variables. Third, only 763 observations are used to compute the means for the SCF survey. The number of observations reported at the bottom of Table 13.1 is in fact the sum of individual weights. Despite these caveats, the sample means from our surveys closely match those of the SCF. Hence, it is probably fair to claim that the nature of the topics addressed in our surveys has not impacted the representativeness of our sample in any significant way.

The hidden markets in 1993 Both the 1994 and 1985 surveys were designed to allow investigation of the determinants of hidden consumption and labor supply. In addition to their demographic characteristics, respondents were thus asked to report detailed information about expenditures on hidden goods and services and hours worked in the hidden market. Income and hours of work in the hidden market Table 13.2 reports the main characteristics of hidden workers. The table reports figures for the whole sample (column 1) and for each region separately (columns 2–4). In each of the four main columns, we also indicate the percentage of the sample reporting positive hours of work, the mean conditional hours of work, and the associated mean conditional income.4 The data show that in both urban and rural areas, young men and singles are the most likely to be active in the hidden labor market. Participants are also highly educated, partly reflecting the fact that younger cohorts have a higher level of schooling. Students and unemployed workers are also particularly active in the hidden market. This is especially true in Montreal. Except for Bas Saint-Laurent, the participation rate is twice the average among welfare and unemployment-insurance recipients. In general, the participation rate is negatively correlated to regular labor income and hours of work. This indicates that hours of work in the regular and the hidden markets may be substitutable to a certain extent.

46.3 53.7 17.2 38.2 32.5 12.1 66.3 5.5 15.0 10.4 36.1 28.3 25.2 15.2 10.6 10.0 6.5 57.7

48.0 52.0

13.9 32.9 34.2 8.9

74.0 4.1 10.8

14.2 38.7 22.8 24.3

9.7 5.6 17.2 2.8 64.7

1,878

Num. observations

2,014

1994 Survey 100.0

1985 Survey 100.0

Total Gender Men Women Age 18–24 25–39 40–59 60+ Marital Status Married Single Parent Single Education Less than high school High school College University Labour Market Status Student Retired Housekeeper Unemployed Worker 529,728

7.1 13.3 7.5 8.3 61.0

14.0 39.4 33.5 13.0

67.9 10.8 20.0

13.5 33.4 36.0 17.1

45.6 54.4

1994 SCF 100.0 SA claimant UI claimant Regular-labour income 0–10,000 10,000–20,000 20,000–30,000 30,000–40,000 40,000+ Hours of work, regular sector 0 1–500 500–1,000 1,000–1,500 1,500–2,000 2,000+ Industry in the regular job Primary Manufacturing Construction Transportation Trade Finance, insurance Services Public service Num. observations

1994 Survey 100.0 4.8 13.1 48.7 12.0 15.2 10.5 13.6 33.5 7.7 10.0 9.7 29.5 9.6 0.5 6.5 3.6 5.6 15.2 19.1 15.0 34.5 2,014

1985 Survey 100.0 4.5 11.0 43.2 10.9 13.6 11.5 20.7 30.7 6.4 7.7 10.0 33.9 11.2 1.3 5.4 3.0 4.7 10.2 7.6 15.4 21.6 1,878

0.1 7.2 4.0 4.1 12.1 5.8 18.4 27.4 529,728

39.1 4.7 3.9 4.4 23.2 24.6

47.1 11.8 14.6 12.1 14.4

1994 SCF 100.0 8.5 10.6

Table 13.1  Comparison between the 1985 and the 1994 Survey, and the 1994 Surveys of Consumer Finances, Metropolitan Area of Quebec City

Table 13.2  Income and hours of work in the hidden market, 1993 Total Quebec City Percent Hours Income Percent Hours Income of work (Y>0) of work (Y>0) (H>0) (H>0) Total 5.0 463 3,658 4.8 410 3,499 Gender Men 5.6 453 3,847 5.4 403 3,093 Women 4.5 473 3,477 4.2 417 3,994 Age 18–24 14.0 394 3,598 11.7 381 3,049 25–39 5.0 402 3,584 4.3 313 3,033 40–59 2.6 869 6,513 3.4 623 5,105 60+ 0.6 289 1,446 0.4 432 1,500 Marital status Married 2.7 669 5,424 2.6 513 4,073 Single parent 3.7 493 6,213 4.5 116 3,297 Single 8.1 385 2,977 6.6 500 4,197 Education Less than high 1.6 496 4,211 – – – school Highschool 3.9 350 2,156 4.3 562 5,066 College 7.4 247 1,865 6.0 487 3,400 University 6.1 280 2,449 6.1 203 2,040 Labour market status Student 14.3 356 2,328 13.5 329 2,633 Retired 1.1 471 5,167 1.0 416 3,750 Housekeeper 4.3 858 4,264 4.5 691 3,502 Unemployed 8.9 386 3,140 8.5 507 4,027 1,102 766 422 539 433 525 1,250 274

3.4 4.3 9.3 6.7 14.7 1.2 5.7 11.4

2,351 8,615 5,381 2,804

4,124 3,633 5,046

9,214

921 7,172 1,018 11,333 326 2,214

3.7 3.0 10.1

5,136 3,949

449 5,136 507 3,949 1,540 11,070 147 1,423

581 614

15.7 6.8 2.6 0.7

6.6 5.5

Montreal Percent Hours Income of work (Y>0) (H>0) 6.0 596 4,567

14.8 1.1 1.4 4.8

2.4 6.4 5.0

1.3

1.1 3.3 7.1

15.0 3.0 0.9 1.0

4.1 3.2

263 – 438 370

225 376 316

285

491 213 281

316 373 79 –

309 317

1,722 1,390 3,600 2,126

2,484 2,026 2,150

2,700

4,675 2,100 2,144

1,760 3,921 667 1,390

2,850 1,652

Bas Saint-Laurent Percent Hours Income of work (Y>0) (H>0) 3.6 313 2,267

Worker Social assistance Unemployment ins. Regular-labour income 0–10,000 10,000–20,000 20,000–30,000 30,000–40,000 40,000+ Hours of work, regular sector 0 1–500 500–1,000 1,000–1,500 1,500–2,000 2,000+ Industry in the regular job Primary Manufacturing Construction Transportation Trade Finance, insurance Services Public service Num. observations

497 510 387

517 424 321 232 93

621 325 383 272 162 554

129 643 308 202 234 393 238 316

3.3 8.3 8.8

7.1 4.6 3.0 3.0 1.4

6.6 10.2 6.0 4.6 2.2 2.8

12.8 2.5 7.6 4.2 3.3 4.0 2.7 4.4 5,132

734 5,686 4,154 3,615 4,985 4,497 3,169 2,620

3,931 2,466 5,125 2,601 2,789 5,840

3,572 3,543 4,335 3,067 5,500

4,983 4,673 4,021

14.3 2.1 5.8 3.7 1.8 2.9 1.9 4.7 2,014

7.1 11.6 4.5 3.6 1.2 3.6

7.6 3.3 0.7 2.8 1.8

2.9 7.2 8.0

10 1,131 232 200 321 274 70 345

494 312 485 278 147 409

453 387 260 252 45

411 554 503

500 10,200 2,833 2,121 9,987 3,320 2,335 2,281

3,666 2,340 7,320 2,463 2,707 2,248

3,754 2,528 3,300 2,260 2,786

4,383 5,521 4,647

16.7 3.5 10.0 4.7 4.8 6.0 3.9 5.0 2,025

7.2 12.4 8.9 6.6 3.0 2.4

7.9 6.2 5.8 4.1 1.0

4.3 11.4 12.4

300 342 248 204 173 708 448 341

882 378 414 298 171 702

676 521 515 286 140

650 540 366

1,200 2,484 2,313 5,100 2,250 7,826 5,440 3,600

5,092 3,455 3,859 3,531 3,531 9,597

4,239 4,998 4,925 4,986 8,200

6,532 4,368 4,078

2.9 1.5 6.7 – 2.7 2.4 2.0 2.7 1,093

4.7 3.6 3.3 2.8 2.5 1.9

4.5 4.1 1.9 1.1 –

2.2 4.5 3.7

2,267 867 3,425 1,133 1,564 5,500

2,003 2,717 5,150 1,000 –

3,218 3,676 2,763

30 300 300 3,300 560 10,000 – – 185 833 30 500 160 500 216 1,428

372 252 136 215 175 548

340 313 75 96 –

373 373 211

Table 13.3  Expenditures on Hidden Goods and Services, 1993 Total Quebec City Percent Expenditures Percent Expenditures (C>0) (C>0) Total 20.4 1,688 21.2 1,565 Gender Men 22.4 1,929 24.4 1,726 Women 18.7 1,452 18.5 1,390 Age 18–24 17.0 1,240 18.4 1,633 25–39 25.9 1,772 26.5 1,553 40–59 19.0 1,924 19.6 1,654 60+ 13.4 1,164 12.5 1,227 Marital Status Married 21.8 1,732 22.7 1,470 Single parent 21.8 1,314 23.4 899 Single 17.4 2,109 19.5 2,390 Education Less than high school 9.6 1,242 8.1 1,037 High school 16.2 1,659 17.5 1,813 College 23.9 1,550 23.2 1,252 University 29.4 1,824 29.6 1,690 Labour Market Status Student 15.9 1,563 16.8 2,371 Retired 13.5 1,249 13.8 1,462 Housekeeper 12.4 896 9.5 784 Unemployed 19.7 1,135 21.5 800 Worker 24.6 1,894 25.8 1,569 SA claimant 18.6 2,088 18.6 2,895 UI claimant 24.6 1,616 24.0 1,536 2,290 1,683 1,012 2,243 2,397 850 2,230 1,966 1,598 1,014 1,696 1,924 2,465 1,296 932 1,144 1,136 2,406 1,619 1,818

25.2 21.9 19.1 30.2 21.3 17.7 25.4 23.2 19.9 11.2 18.4 27.9 33.9 17.4 15.4 17.1 20.9 28.3 22.1 28.5

Montreal Percent Expenditures (C>0) 23.5 1,986

11.5 9.6 9.2 14.3 15.5 11.9 18.5

9.4 9.6 17.6 20.6

13.5 16.4 9.0

10.5 16.9 13.8 7.2

13.3 13.0

568 1,444 644 1,751 1,545 1,471 1,388

2,044 1,309 1,404 882

1,292 870 2,540

937 1,305 1,546 1,629

1,636 1,136

Bas Saint-Laurent Percent Expenditures (C>0) 13.0 1,361

Regular-labour income 0–10,000 10,000–20,000 20,000–30,000 30,000–40,000 40,000+ Hours of work, regular sector 0 1–500 500–1,000 1,000–1,500 1,500–2,000 2,000+ Industry in the regular job Primary Manufacturing Construction Transportation Trade Finance, insurance Services Public service Num. observations 1,317 1,643 1,612 1,763 2,387 1,564 998 1,319 2,134 1,750 1,932 1,539 1,746 1,582 1,746 1,841 2,071 1,790 1,621

15.4 20.7 22.3 27.3 31.1

13.5 19.2 23.9 24.5 23.8 29.0

20.9 18.9 19.2 21.5 22.5 31.2 24.3 22.9 5,132

28.6 16.0 19.2 21.0 25.2 29.7 28.1 23.2 2,014

13.6 16.8 26.9 26.0 23.9 31.6

15.1 22.1 23.5 29.4 33.2

2,282 1,790 1,606 1,634 1,572 2,194 1,543 1,262

1,647 891 1,136 1,949 1,582 1,745

1,297 1,568 1,202 1,788 2,134

16.7 26.2 22.5 26.4 25.8 35.5 26.0 25.9 2,025

15.4 24.8 25.9 26.8 28.8 32.5

18.4 23.5 24.4 27.9 36.3

1,100 1,757 1,912 2,171 2,041 2,252 2,124 2,343

1,470 1,430 1,563 2,586 2,225 2,335

1,344 1,674 2,223 2,094 3,054

14.3 10.6 13.3 13.3 11.5 26.2 14.3 16.9 1,093

9.8 13.1 14.8 17.4 14.4 17.8

10.6 12.8 16.0 22.3 17.5

982 1,643 925 1,165 1,965 1,507 1,624 945

1,584 397 1,205 1,639 1,178 1,531

1,302 1,724 1,235 1,106 1,618

202  Bernard Fortin and Guy Lacroix According to the survey, the majority of workers in the hidden market in Montreal and Quebec City also hold a job in the regular labor market (55 percent and 52 percent, respectively). In the rural area of Bas Saint-Laurent, the proportion drops to 43.5 percent. These numbers clearly indicate that, for many, work in the hidden market is a form of moonlighting. This is also evidenced by the fact that the mean conditional hours of work and income in the hidden market are approximately 463 and 3,658, respectively. Hours of work and income are highest in Montreal and lower in Bas Saint-Laurent.

Expenditures on goods and services in the hidden market Table 13.3 focuses on the demand side of the hidden market. It reports the proportion of individuals reporting positive expenditures and the mean conditional expenditures by demographic characteristics for each region separately. In both urban areas, proportionately more men report buying goods and services in the hidden market. In Montreal, as many as 25.2 percent of men and 21.9 percent of women did so over the course of 1993. In the rural area of Bas Saint-Laurent, only 13 percent of the sample reports positive purchases. Likewise, mean conditional expenditures are highest in Montreal ($1,986) and lowest in Bas Saint-Laurent ($1,361). Individuals in the 25- to 39-year age bracket are the most active in the market whereas those ages 60 and older are the least active. In Montreal and Quebec City, contrary to what was found on the supply side, married individuals and singleparent households have higher participation rates than singles. In the Bas SaintLaurent region, no clear pattern exists between the demand and supply behavior and marital status. In all three regions, individuals with a high level of schooling are more likely to consume hidden goods and services. Except for Bas SaintLaurent, they also spend more than those with a lower level of schooling. In all three regions, the unemployed and those holding a regular job are more likely to consume hidden goods than are the students, the retired, and the housekeeper. Whereas students are the largest spenders in Quebec City, in Montreal and Bas Saint-Laurent, the workers and the unemployed are the heaviest spenders on hidden goods and services, respectively. In all three sampled regions, the proportion of unemployment-insurance recipients who consume hidden goods and services is higher than the overall average, whereas the converse holds for welfare recipients. In Quebec City, on the other hand, the latter group has the highest mean conditional expenditure (2,895$) of all demographic groups of the table. Contrary to what is observed on the supply side of the market, the proportion and the conditional mean expenditure both rise with regular income and hours of work. In all three regions, workers in the financeinsurance sector are the most likely to consume hidden goods and services.

Informal work in Canada  203 Sectoral composition of hidden income and expenditures The previous section focused on the main demographic characteristics of those who supply and demand hidden goods and services. We noted that the demanders and the suppliers constitute two distinct groups. In this section, we identify the markets in which transactions of hidden goods and services occur. Table 13.4 synthesizes the main findings from our 1993 survey. As with the previous tables, Table 13.4 is broken down into four main columns, one for each of the three sampled regions and one for the whole survey. Each of these four columns is then subdivided into “Income” and “Expenditures.” Finally, for each of those, we report the proportion of participants (percent), the mean conditional income/ expenditure, and the relative share of each sector. According to Table 13.4, renovation and housekeeping are the two most important sectors in Montreal and Bas Saint-Laurent. The two sectors represent as much as 23 percent of the total hidden income in both regions. In Quebec City, conversely, professional services and childcare are the most important sectors of activity, adding up to more than 22.4 percent of total income.5 The figures on expenditures clearly indicate that in all three sampled regions, renovation is the most important sector. In Montreal and Quebec City, the sector accounts for more than 29 percent of all expenditures. It is followed by cigarettes and childcare and by maintenance and housekeeping. These sectors globally represent between 65 percent and 70 percent of all expenditures, according to which region we consider. In Quebec City the conditional mean expenditure on games and drugs, room and boarding, childcare, renovation, and construction is relatively high. In both Montreal and Bas Saint-Laurent, the most important sectors are childcare, renovation, and construction. It is important to stress that the relative shares of the sectors outlined in the table, whether determined from the income or expenditures point of view, lend support to the validity of our survey data. Indeed, in sectors such as renovation, in which intermediary inputs make up an important share of total bill, expenditures are much larger than hidden income. Expenditures include intermediary inputs, whereas income includes only net earnings of the worker. Furthermore, earnings and expenditures are relatively similar in sectors that involve little intermediary inputs such as housekeeping. Only childcare does not fit this pattern. As a final check on the validity of our data, we may note that if the hidden goods and services are consumed locally, in principle total expenditures should approximately be equal to total income. As stressed earlier, the cost of intermediary inputs should be subtracted from expenditures to ensure that aggregate income and expenditures are compatible. Obviously this cannot be done given the nature of the date at our disposal. We should thus expect income to be systematically smaller. Table 13.5 reports per capita income and expenditures for each region separately.6 The ratio of aggregate income over aggregate expenditures varies between 60.8 percent and 78.5 percent. Given the relative importance of sectors with high intermediate inputs such as renovation and construction, such ratios lend credence to the survey data.

Category Renovation Construction House keeping Maintenance Room and boarding Childcare Personal care Personal services Private courses Sales services Restaurant Reception Transport Games and drugs Manufacturing Alcohol Cigarettes Farm products Professional services Other Residual Total Observations

%

0.72 0.43 0.84 0.35 0.06 0.47 0.24 0.31 0.24 0.10 0.18 0.16 0.12 0.12 0.04 0.00 0.08 0.04 0.63 1.87 0.55 4.99 5,132

Total Income

2,172 1,097 2,645 2,252 866 2,762 1,165 1,820 1,252 933 1,758 2,935 2,834 3,795 978 – 1,638 196 3,108 3,015 2,283 3,658

Average Income (Y>0) 8.9 3.0 10.2 4.2 0.3 7.2 2.0 3.0 1.9 1.5 1.7 2.5 1.4 3.4 0.4 – 1.2 0.1 10.4 30.9 6.3 100.0

Rel. share (%)

6.86 1.68 4.50 4.43 0.39 2.51 0.18 3.47 0.84 0.65 1.60 0.51 0.80 1.17 0.27 3.35 5.71 0.37 3.92 – 2.87 20.32

Expenditures %

Table 13.4  Hidden income and expenditures, by type of service, 1993

1,417 1,145 582 603 1,068 1,568 1,982 202 381 166 538 384 265 940 294 255 764 2,404 286 – 821 1,687

Average Expend. (C>0) 27.9 5.6 7.7 7.9 1.3 11.6 0.5 2.0 0.9 0.3 2.4 0.6 0.6 3.9 0.4 2.4 12.3 1.4 3.3 – 7.0 100.0

Rel. share (%)

0.60 0.40 0.94 0.30 0.05 0.50 0.25 0.25 0.25 0.15 0.10 0.10 0.15 0.20 0.05 0.00 0.00 0.10 0.65 1.84 0.40 4.77 2,014

Quebec City Income %

1,453 766 1,258 3,271 500 3,324 2,130 2,389 966 1,049 1,336 1,535 250 6,150 2,000 _ – 500 3,223 2,981 2,273 3,499

Average Income (Y>0) 5.2 1.8 7.1 5.8 0.2 9.9 3.2 3.6 1.4 0.9 0.8 0.9 0.2 7.3 0.6 0.0 0.0 0.3 12.5 32.8 5.4 100.0

Rel. share (%)

7.70 1.99 4.57 4.97 0.45 2.33 0.35 3.33 0.60 0.50 1.39 0.65 0.84 1.69 0.35 3.62 5.81 0.25 4.22 – 1.99 21.15

Expenditures %

1,273 1,175 532 533 1,419 1,287 486 186 293 134 726 631 217 1,605 179 232 597 500 251 – 688 1,565

Average Expend. (C>0)

29.6 7.1 7.3 8.0 1.9 9.1 0.5 1.9 0.5 0.2 3.1 1.2 0.6 8.2 0.2 2.5 10.5 0.4 3.2 – 4.1 100.0

Rel. share (%)

0.99 0.44 0.74 0.35 0.05 0.54 0.15 0.30 0.15 0.00 0.30 0.25 0.10

0.10 – – 0.20 – 0.69 2.17 0.89 5.98 2,025

Games and drugs Manufacturing Alcohol Cigarettes Farm products Professional services Other Residual Total Observations

%

Category Renovation Construction House keeping Maintenance Room and boarding Childcare Personal care Personal services Private courses Sales services Restaurant Reception Transport

Montreal Income

3,500 – – 4,150 – 3,981 3,735 2,661 4,567

2,805 1,418 4,914 2,063 1,400 3,017 479 1,883 1,672 – 3,100 5,508 5,800

Average Income (Y>0)

1.3 – – 3.0 – 10.1 29.7 8.7 100.0

10.2 2.3 13.3 2.6 0.3 6.0 0.3 2.0 0.9 – 3.4 5.0 2.1

Rel. share (%)

0.99 0.20 4.10 7.21 0.64 4.30 – 4.15 23.46

7.36 1.78 4.89 4.74 0.35 2.86 0.05 4.59 1.09 1.09 1.93 0.49 1.04 610 125 300 884 198 335 – 1,003 1,986

1,825 1,308 706 671 986 2,109 4,000 274 578 179 520 280 411

Expenditures % Average Expend (C>0)

1.3 0.1 2.6 13.7 0.3 3.1 – 8.9 100.0

28.8 5.0 7.4 6.8 0.7 13.0 0.4 2.7 1.4 0.4 2.2 0.3 0.9

Rel. share (%)

– 0.09 – – – 0.46 1.37 0.18 3.57 1,093

0.46 0.46 0.82 0.46 0.09 0.27 0.37 0.46 0.37 0.18 0.09 0.09 0.09 – 909 – – – 1,278 1,742 1,602 2,267

2,323 1,114 1,000 726 550 1,253 658 656 1,000 2,450 50 750 2,100

Bas du Fleuve Income % Average Income (Y>0)

0.0 1.0 – – – 7.2 29.6 3.6 100.0

13.1 6.3 10.2 4.1 0.6 4.3 3.0 3.7 4.5 5.5 0.1 0.9 2.4

Rel. share (%)

0.55 0.27 1.46 2.74 0.09 2.65 – 2.10 12.99

4.39 0.91 3.66 2.84 0.37 2.20 0.09 1.65 0.82 0.09 1.37 0.27 0.27

Expenditures %

328 817 212 848 10,000 261 – 729 1,361

926 790 445 604 575 1,084 1,000 98 179 200 223 123 83

Average Expend (C>0)

1.0 1.3 1.8 13.2 5.2 3.9 – 8.7 100.0

23.0 4.1 9.2 9.7 1.2 13.5 0.5 0.9 0.8 0.1 1.7 0.2 0.1

Rel. share (%)

206  Bernard Fortin and Guy Lacroix Table 13.5  Total unreported income and expenditures, by region, 1993* Income % Average income (Y>0)

Per capita income

Expenditures % Average Per capita expend. expend. (Y>0)

Total income expenditure ratio

Region Quebec 4.1 3553.0 144.6 19.3 1533.0 296.1 60.8 Montreal 5.5 4635.7 256.4 21.2 1947.0 413.4 78.5 Bas Saint-Laurent 2.9 2266.5 66.4 11.9 1464.3 174.2 61.7 Total 4.4 3706.2 172.1 18.5 1681.7 316.4 68.0 *Includes "under the table income" but excludes incomes and expenditures on cigarettes and alcohol.

The demand and the supply of hidden goods and services: a characterization The figures presented so far are numerous and allow us to make the following observations. First, a large fraction of low-income and unemployed workers are active on the supply side of the market. Second, in Quebec City and Montreal a third of those in the high-income groups are active on the demand side of the market. These individuals typically face very high marginal income tax rates owing to the progressive tax structure alluded to earlier. High marginal tax rates combined with the new sales tax of 1991 (GST), not surprisingly, make these wealthy consumers likely to turn to hidden goods and services to decrease their fiscal burden. It thus seems reasonable to conjecture that the tax structure is to some extent responsible for generating a strong demand for hidden goods and services, thereby sustaining hidden labor supply. Our observations thus run counter to that part of the literature that played down the relation between fiscal burden and the existence of hidden labor markets.7 Our point is that the existence of hidden labor markets may partly arise owing to the high income tax rates faced by wealthy consumers. To illustrate our point, Figure 13.1 shows the proportion of individuals in each of our sampled regions who reported consuming hidden cigarettes in 1993 and in 1994, one month prior to our survey (February, 1994). In 1993, tax rates on cigarettes were the highest ever. Cigarettes smuggling from the United States became a political issue. To curtail the problem, taxes were cut dramatically in 1994. As a consequence, the proportion of individuals consuming hidden cigarettes, according to our survey data, dropped by as much as 90 percent. Thus, high tax rates on the demand side may generate a demand for hidden goods or services despite the fact that there are little fiscal incentives to supply these. Provincial estimates Previous sections have highlighted the relative importance of hidden activities based on sample information. As stressed earlier, the 1994 survey can legitimately be considered as representative of the hidden activities found in the metropolitan

Percentage of population

Informal work in Canada  207 70

1993

60

1994

50 40 30 20 10 0 Montreal

Quebec City

Bas Saint-Laurent

Figure 13.1  Hidden cigarette consumption

areas of Montreal and Quebec City and in a typical rural area such as Bas SaintLaurent. Yet, one must guard against extrapolating sample results straightforwardly to get provincial estimates because there might exist systematic differences between sample and population characteristics. Fortunately, our sampling frame closely mimics that of the Survey of Consumer Finance. It is thus possible to calculate a weight for each observation in our sample based on those contained in the SCF once differences in the distributions of demographics characteristics are taken into account.8 Table 13.6 reports provincial estimates on participation in, expenditures for, and income from hidden activities by demographic characteristic. Globally, it is found that 4 percent of adults ages 18 and older—210,000 individuals—spend some time working in the hidden markets. The average income is estimated to be approximately $3,443. Hidden labor supply typically consists in a part-time job involving 422 annual hours, which is equivalent to 12 full-time weeks (35 hours). The average hourly wage rate in the hidden market amounts to about 75 percent of that in the regular market. The difference between the two is partly explained by the fact that hidden work is untaxed but also by the nature of work and the characteristics of the workers. It is also found that more than 17.5 percent of adults, that is 920,150 individuals, spend an average of $1,618 on hidden goods and services. In all, it is estimated that 20.2 percent of all adults are involved either on the supply or the demand side of the hidden market in the Province of Quebec. That these aggregate numbers are somewhat smaller than those reported in Table 13.5 simply reflects the fact that our sample is not perfectly representative of the population. At the provincial level, young men and singles are those with the highest participation rate in the hidden labor market. In general, participants have a relatively high level of schooling, and most are either full-time students or unemployed workers. Welfare (6.2 percent) and unemployment-insurance recipients (7.5 percent) have a participation rate above the average. According to the table, both the participation and the number of hours worked decrease as regular income increases. Finally, construction workers have the highest participation rate of all workers.

Total Gender Men Women Age 18–24 25–39 40–59 60+ Marital Status Married Single parent Single Education Less than high school High school College University Labour Market Status Student Retired Housekeeper Unemployed Worker SA claimant UI claimant

4.0 4.5 3.6 13.4 4.7 1.4 0.9 1.8 2.9 5.9 1.8 3.6 5.5 5.5 11.4 1.5 2.6 8.2 3.1 7.5 6.2

46.7 52.4 14.1 32.6 34.0 19.3 58.2 4.7 19.8 17.5 46.3 22.3 13.9 8.6 12.7 11.2 8.0 59.6 6.0 15.3

Part. Rate

100.0

% of population

Table 13.6  Provincial estimate, 1993

334 236 1,027 368 451 447 247

724 411 358 434

750 791 259

337 397 930 157

416 427

422

2,006 2,050 4,601 2,140 4,877 3,306 2,946

5,360 3,061 2,743 4,664

6,516 8,892 1,991

2,204 3,914 7,588 1,144

3,862 2,973

3,443

Income Hours of Income work (H>0) (Y>0)

50 10 15 34 94 24 50

16 87 64 40

54 7 61

97 79 25 9

111 98

210

Est. Num. Workers (1,000)

11.5 12.6 13.9 14.0 20.9 14.7 18.2

11.0 13.7 22.6 30.2

18.5 19.4 14.8

15.1 23.0 16.8 11.7

18.0 17.1

17.5

887 1,251 822 1,259 1,869 1,288 1,433

1,575 1,532 1,546 1,857

1,645 1,630 1,848

1,108 1,711 1,906 1,137

1,902 1,362

1,618

51 82 80 58 641 47 146

100 332 263 220

558 47 152

110 386 294 116

442 472

920

Consumption % of Expend. Est. Num. population (C>0) Cons. (1,000)

Regular-labour income 0–10,000 10,000–20,000 20,000–30,000 30,000–40,000 40,000+ Hours of work, regular sector 0 1–500 500–1,000 1,000–1,500 1,500–2,000 2,000+ Industry in the regular job Primary Manufacturing Construction Transportation Trade Finance, insurance Services Public service 5.1 3.7 3.4 2.9 0.7 5.0 7.2 4.6 4.4 2.1 1.7 1.9 1.8 8.8 2.1 2.3 3.0 1.9 4.0

50.6 15.9 13.0 10.2 10.4 36.7 7.2 9.4 10.7 24.4 11.7 3.1 12.4 3.5 5.3 10.1 8.0 4.5 22.7

80 378 193 195 183 714 347 317

542 383 302 226 145 738

472 393 344 244 114

472 3,116 4,114 3,179 2,774 7,900 4,448 3,081

3,118 2,702 4,959 3,230 2,259 8,640

2,906 3,884 5,304 4,488 3,437

3 12 16 6 12 13 5 48

97 27 23 25 28 11

136 31 23 16 4

14.7 17.9 15.2 21.6 16.7 30.9 19.3 19.3

11.9 15.5 14.3 20.6 22.7 24.9

13.5 14.9 19.7 25.0 30.5

1,022 1,873 1,241 1,522 1,930 1,972 1,420 1,538

1,455 959 1,135 1,921 1,634 2,075

1,196 1,817 1,757 1,594 2,283

24 117 28 60 89 130 46 231

230 59 70 116 291 154

359 124 135 134 167

210  Bernard Fortin and Guy Lacroix On the demand side, those in the 25- to 39-year age group are the most likely to consume hidden goods and services, whereas seniors are those less likely to do so. Interestingly, though there are no differences between men and women in terms of participation rate, men certainly spend more on hidden goods and services. Likewise, those with a low level of education spend less and are less likely to buy such goods relative to those with a high level of schooling. Provincial estimates also suggest that individuals holding a job have a higher participation rate and spend more than any other labor market strata. The proportion of unemployment-insurance recipients who consume hidden goods and services (18.2 percent) is slightly above the provincial average, whereas the converse holds for welfare recipients (14.7 percent). The participation rate on the demand side is closely linked to the level of income and the number of hours worked in the regular market. Those with an annual income above $40,000 or who work more than 2,000 hours spend an average of $2,283 and $2,075, respectively, way above the provincial average of $1,618. Workers in the finance-insurance sectors are the most likely to consume hidden goods and services. The figures presented in Table 13.6 provide useful and interesting information. One must nevertheless exercise caution in interpreting them for policy purposes. Indeed, a number of variables presented in the table are highly correlated. For instance it is found that the participation rate in the hidden labor market decreases with age and increases with education. Because the two variables are negatively correlated (young cohorts are better educated than older cohorts), they may very well convey the same information. Conversely, it is also found that consumption of hidden goods and services (participation and expenditures) increases with education and income. Thus, the link between education and consumption may in fact reflect an income effect as income and education are positively linked. Consequently, only through appropriate statistical techniques can rigorous relations between demographic variables and consumption and supply of hidden goods and services be drawn. Table 13.7 reports provincial estimates of the relative importance of various markets from the supply and demand points of view. On the supply side, the participation rates are highest in housekeeping, renovation, and professional services. These three sectors account for nearly half the total participation rate of 4 percent. Average income is highest in the games and drugs ($4,970), transport ($3,243), reception ($3,604), and professional services ($3,243) sectors. On the demand side, the most important sectors in terms of total expenditures are renovation, cigarettes, childcare, maintenance, housekeeping, and construction. These six sectors alone represent as much as 72.5 percent of all hidden expenditures in 1993. Based on these aggregate figures, hidden income is estimated to amount to 0.61 percent of the provincial GDP ($980 million), whereas estimated expenditures represent 1.09 percent of GDP, or $1.75 billions. Given the inherent difficulties associated with measuring hidden activities through survey data, these aggregate numbers probably represent a lower bound to the true size of the hidden economy. It can thus legitimately be concluded that hidden markets are an important economic

Informal work in Canada  211 Table 13.7  Unreported income and expenditures, by type of service, provincial estimates, 1993 Category Renovation Construction House keeping Maintenance Room and   Boarding Childcare Personal are Personal   services Private courses Sales services Restaurant Reception Transport Games and   drugs Manufacturing Alcohol Cigarettes Farm products Professional   services Other Residual Total

% 0.58 0.31 0.66 0.35 0.05

Income Average Rel. Est. num. income share workers (Y>0) (%) 2,651 11.1 30,330 1,222 2.8 16,470 2,782 13.4 34,910 848 2.2 18,460 783 0.3 2,650

% 5.47 1.40 4.30 3.62 0.26

Expenditures Average Rel. expend. share (Y>0) (%) 1,213 23.5 1,507 7.5 529 8.1 638 8.2 752 0.7

Est. num. cons. 288,320 73,600 226,720 190,690 13,640

0.25 0.17 0.35

2,743 938 664

5.1 1.2 2.4

13,320 9,140 17,530

1.79 0.13 3.04

1,584 1,076 253

10.0 0.5 2.7

94,060 6,590 160,080

0.16 0.06 0.26 0.10 0.06 0.40

1,199 2,290 1,543 3,604 3,798 4,971

1.4 1.0 2.9 2.5 1.6 1.6

8,270 3,010 13,670 5,060 3,180 2,330

0.71 0.50 1.51 0.31 0.69 0.81

391 163 420 411 330 538

1.0 0.3 2.2 0.5 0.8 1.5

37,420 26,300 79,460 16,180 36,560 42,470

0.03 – 0.07 0.01 0.46

1,146 – 1,479 698 3,243

0.2 – 0.7 – 11.0

1,440 – 3,580 280 24,470

0.25 2.70 5.07 0.31 2.97

512 388 852 1,595 281

0.5 3.7 15.3 1.8 3.0

13,000 142,390 267,240 16,360 156,430

1.49 0.59 3.98

2,710 2,314 3,443

29.5 10.0 –

78,740 31,100 209,750

– 2.79 17.50

– 860 1,618

– 8.5 –

– 146,900 920,150

phenomenon in the Province of Quebec. It is also an important social issue as more than one resident in five is involved either as a supplier or a demander of hidden goods and services. What our data suggest, conversely, is that the popular belief according to which the size of the hidden economy is out of control has no empirical basis.9 Another popular belief claims that the hidden economy has grown dramatically over time. This issue can be tackled empirically using both our 1985 and 1993 surveys.

Investigating the growth of the hidden economy As argued earlier, the introduction of the GST at the beginning of the 1990s was likely to have increased consumption of hidden goods and services as a means to avoid paying sales taxes. We also stressed that an increased demand for hidden goods was sufficient to give rise to a burgeoning hidden labor market for a given income tax system. Yet the introduction of the GST was preceded by a substantial decrease in marginal income tax rates with the passage of the Fiscal Reform Act

Total Gender Men Women Age: 18–24 25–39 40–59 60+ Marital Status Married Single parent Single Education Less than high   school High school College University Labour Market Status Student Retired Housekeeper Unemployed Worker

365 349 359 –

290 590 490 – 1,014

385 355 210

335 – 637 379 279

17.4 6.0 2.8 0.6

3.4 11.7 9.0

4.7 8.8 7.3

19.4 1.0 5.0 24.5 3.9

3.0

275 450

6.4 5.6

6.0

Percent

Income Hours of work (H>0) 357

2,228 647 3,581 2,657 2,567

2,989 2,252 1,784

5,913

2,726 2,925 3,572

2,143 2,658 3,692 647

2,744 2,444

Income (Y>0) 2,599

1985

10.6 5.7 10.2 7.5 20.7

12.8 19.0 28.3

4.2

17.7 22.1 13.9

10.5 20.1 17.3 8.4

20.0 13.7

494 633 1,302 1,416 2,197

1,577 1,792 2,351

2,125

2,224 976 1,310

546 2,232 1,947 1,647

2,107 1,759

Consumption Percent Expend. (C>0) 16.7 1,959

13.5 1.0 4.5 8.5 2.9

4.3 6.0 6.1

–

2.6 4.5 6.6

11.7 4.3 3.4 0.4

5.4 4.2

4.8

Percent

329 416 691 507 411

562 487 203

–

513 116 500

381 313 623 432

403 417

Income Hours of work (H>0) 410

Table 13.8  A comparison of income and hours of work in the hidden market, Quebec City, 1985, 1993

2,633 3,750 3,502 4,027 4,383

5,066 3,400 2,040

–

4,073 3,297 4,197

3,049 3,033 5,105 1,500

3,093 3,994

Income (Y>0) 3,499

1993

16.8 13.8 9.5 21.5 25.8

17.5 23.2 29.6

8.1

22.7 23.4 19.5

18.4 26.5 19.6 12.5

24.4 18.5

2,371 1,462 784 800 1,569

1,813 1,252 1,690

1,037

1,470 899 2,390

1,633 1,553 1,654 1,227

1,726 1,390

Consumption Percent Expend. (C>0) 21.2 1,565

Social-assistance 20.2   claimant Unemployment 9.7   insurance claimant Regular-labour income 0–10,000 9.4 10,000–20,000 4.4 20,000–30,000 4.7 30,000–40,000 3.7 40,000+ 1.8 Hours of work, regular sector 0 7.7 1–500 14.2 500–1,000 8.3 1,000–1,500 5.9 1,500–2,000 3.0 2,000+ 4.3 Industry in the regular job Primary 8.0 Manufacturing 3.9 Construction 8.9 Transportation 6.7 Trade 5.2 Finance, insurance 1.4 Services 2.8 Public service 7.4

2,893 2,042

2,590 2,996 2,373 2,463 2,731 3,119 1,553 2,389 2,492 2,464 2,735 3,978 4,059 3,689 967 1,681 1,608 3,250 1,889

450

286

415 463 249 91 86

548 190 359 187 163 408

610 287 243 33 211 75 122 249

36.0 24.5 14.5 19.1 12.0 18.2 23.4 18.8

10.6 10.0 13.8 20.2 20.8 23.7

10.0 11.8 16.8 22.2 30.1

12.6

6.0

1,756 1,875 5,147 2,226 2,187 2,637 2,313 1,609

1,231 1,539 1,699 1,986 2,105 2,646

1,322 1,169 1,654 2,080 2,625

1,666

1,208

14.3 2.1 5.8 3.7 1.8 2.9 1.9 4.7

7.1 11.6 4.5 3.6 1.2 3.6

7.6 3.3 0.7 2.8 1.8

8.0

7.2

10 1,131 232 200 321 274 70 345

494 312 485 278 147 409

453 387 260 252 45

503

554

500 10,200 2,833 2,121 9,987 3,320 2,335 2,281

3,666 2,340 7,320 2,463 2,707 2,248

3,754 2,528 3,300 2,260 2,786

4,647

5,521

28.6 16.0 19.2 21.0 25.2 29.7 28.1 23.2

13.6 16.8 26.9 26.0 23.9 31.6

15.1 22.1 23.5 29.4 33.2

24.0

18.6

2,282 1,790 1,606 1,634 1,572 2,194 1,543 1,262

1,647 891 1,136 1,949 1,582 1,745

1,297 1,568 1,202 1,788 2,134

1,536

2,895

214  Bernard Fortin and Guy Lacroix of 1987. To the extent hidden labor supply is motivated by high income tax rates, the reform should have had beneficial effects on the supply side of the market. The net effect of increased sales taxes and lower income tax rates on hidden markets is uncertain. The 1985 survey pictures the state of the hidden markets in an environment of high income taxes and in which many goods and services are left untaxed. The 1994 survey, on the other hand, was carried out in an environment characterized by lower income taxes, with nearly all goods and services subjected to a relatively high sales tax. Three other major events occurred between the two surveys. First, residential renovation was partially deregulated in 1988, a sector that was deemed particularly vulnerable to hidden activities given the rigidity of centralized wage setting and working conditions. Second, both the unemployment insurance and welfare systems were made relatively less generous. In particular, enhanced controls of job search activities by welfare recipients were introduced, and the implicit marginal tax rates they face upon entering the labor market were significantly reduced. Both the deregulation of the residential renovation sector and the changes made to the unemployment-insurance and welfare systems should have decreased the size of the hidden activities. The third major event to occur between the surveys was a major recession that lasted from 1990 until 1992. The impact of an economic downturn hidden activities cannot be determined theoretically. On the supply side, those who lose their jobs may turn to hidden activities to complement their benefits and maintain their consumption level. Conversely, once their benefits are exhausted, they may prefer to work in the regular market instead to regain eligibility. On the demand side, a general fall in income should depress the demand for all goods and services. Yet the possibility that consumers turn to hidden goods and services as their income falls cannot be ruled out because these goods are generally cheaper. The impact of the recession on both the supply and the demand for hidden activities is thus uncertain and can be answered only empirically. To gain insight into these issues, we compare the 1985 and 1994 surveys in what follows. As only residents of the metropolitan area of Quebec City were sampled in 1985, we will restrict our 1993 sample to the same region. Difference between the two surveys, if any, will be attributable to fiscal changes, deregulation of certain markets, to the 1990 recession, and the like. Evidently, it will not be possible to single out which factors are responsible for changes should they be observed. A comparison of the characteristics of participants Table 13.8 reports the main characteristics of the participants on the supply and the demand side of the market in Quebec City in 1985. To ease the comparison, we have also reported information for the year 1993 gleaned from Tables 13.2 and 13.3. The first thing to notice is that the overall participation rate on the supply side has decreased a little between 1985 and 1993, from 6 percent to about 4.8 percent. Conversely, the mean conditional hours of work have increased from 357 to 410. As a result, the total average per capita annual hours of work has decreased

Informal work in Canada  215 slightly from 21.4 in 1985 to about 19.7 in 1993. Productivity in the hidden sector has increased considerably between the two periods as mean conditional income increased from $2,599 (1993 dollars) to more than $3,499. The most striking feature of the table is that the participation pattern on the supply side of the market is almost identical in both survey years. The differences occur mainly in terms of levels, with 1993 participation rates being systematically below those of 1985. Hence, in 1985, just as in 1993, the participation rate of men was higher than that of women (6.4 percent vs. 5.6 percent), whereas the annual hours of work were higher among women (450 vs. 275). Just as in 1993, the data for 1985 indicate that the participation rate decreases with age, being highest among the youngest age group. The sharp decrease in the participation rate among the 18- to 24-year age group may be partially explained by the economic downturn. Indeed, it is well known that those who suffer most when employment deteriorates are the young and the poorly educated. Both surveys agree that there is a negative correlation between participation in the hidden labor market and education. In addition, both find that students and the unemployed workers have the highest participation rates. For the latter group, the sharp decrease from 24.5 percent to 8.5 percent deserves some attention. First, it is likely that proportionately more unemployed workers are involuntary in 1993 owing to the economic downturn. They are also probably less inclined to work in the hidden market. Further, opportunities to find employment in the hidden market are probably fewer in 1993 for the exact same reason. A similar result is observed concerning welfare recipients. The sharp decrease in the participation rate from 20.2 percent to just more than 7 percent is probably caused by the same factors that drove the participation rate of the unemployed workers down, that is the economic downturn, to which we may add the effects of more stringent auditing controls. It is important not to underestimate the consequences of the sharp decline in the participation rate among the welfare recipients. Indeed, had the participation rate been identical in 1993, the overall participation rate would have been 5.4 percent instead of 4.8 percent, much closer to the 1985 figure. The fall from 20.2 percent to 7.2 percent is responsible for nearly half the aggregate fall in the participation rate. It is thus important to understand the factors that led to such a pronounced decline. Though the participation rate on the supply side has decreased somewhat between 1985 and 1993, the exact opposite is observed on the demand side of the market. Indeed, the fraction of individuals reporting positive expenditures on hidden goods and services rose from 16.7 percent in 1985 to more than 21.2 percent in 1993.10 Conversely, the mean conditional expenditures has decreased from $1,959 (1993 dollars) to $1,656. The decrease is perhaps partly explained by the fact that expenditures on alcohol and tobacco are smaller than the mean ($232 and $597, respectively). The analysis of the characteristics of the buyers reveals that in 1985, just as in 1993, men are more likely to consume hidden goods and services than women. Furthermore, mean conditional expenditures by men are higher ($2,107

216  Bernard Fortin and Guy Lacroix vs. $1,759). Just as with the supply side of the market, the distribution of the characteristics of demanders of hidden goods and services remains remarkably constant across the two surveys. Differences occur in levels, but the pattern within each subcategory is almost always the same. For instance, the proportion of buyers first increases then decreases with age starting with the 40- to 59-year age group. Likewise, the proportion is higher among single parent families (22.1 percent) and married individuals (17.7 percent). Furthermore, the proportion of buyers increases with education and is high among workers. Finally, we find that the proportion of buyers and the level of expenditures are positively correlated to income in the regular sector. Sectoral comparison of income and expenditures Table 13.9 breaks down the income and expenditures by main sectors of activities for each survey year. On the demand side, the five most important sectors in 1985 were renovation, childcare, housekeeping, construction and maintenance, and professional services. These sectors account for as much as 84 percent of all hidden expenditures. If we leave out cigarettes and gaming, these same sectors were also the most important in 1993 and globally represented more than 61.1 percent of all expenditures. We previously underlined the possibility that the introduction of the GST could have resulted in increased hidden activities in the service industries. If we add up the relative shares of all services in both years, we find that their overall magnitude increased from 7 percent in 1985 to more than 10.2 percent in 1993 in terms of per capita expenditures. This represents an increase of approximately 44 percent, whereas overall expenditures increased by only 1.3 percent on a per capita basis. In particular, restaurant and reception services, two sectors that were hard hit by the GST, saw their combined share increase from about 1 percent of total expenditures to more than 4.3 percent. It thus seems likely that consumers responded to the new consumption tax by turning to hidden goods and services. On the income side of the market, the top five sectors in 1985 were childcare, professional services, housekeeping, personal services, and renovation. Together these accounted for just under half the total income (47.8 percent). Four of these also figured among the five most important sectors in 1993. The games sector has increased from 1.5 percent to 7.3 percent, which is consistent with what was observed on the demand side of the market. Finally, it must be noted that while the service industries witnessed an important increase between 1985 and 1993, the opposite seems to be happening on the supply side. One must bear in mind that the figures on expenditures are generally more reliable as they are based on more observations than those on income.

Conclusion The previous sections have listed numerous empirical findings from the 1985 and 1994 surveys on informal work in Quebec. The overall picture that emerges from

Category Renovation Construction House keeping Maintenance Room and boarding Childcare Personal care Personal services Private courses Sales services Restaurant Reception Transport Games and drugs Manufacturing Alcohol Cigarettes Farm products Professional services Other Residual Total

0.75 0.37 0.96 0.37 0.11 0.96 0.05 0.32 0.27 0.32 0.32 0.32 0.32 0.11 0.05 – – 0.11 0.69 2.18 0.16 5.96

%

1,274 2,089 1,359 2,033 1,551 2,371 1,349 3,081 882 1,349 1,326 1,942 809 2,158 405 – – 540 2,750 1,850 1,916 2,599

1985 Average income (Y>0) 6.1 5.0 8.4 4.9 1.1 14.7 0.5 6.4 1.5 2.8 2.7 4.0 1.7 1.5 0.1 – – 0.4 12.3 26.1 2.0 100.0

Rel. share (%)

Income

0.60 0.40 0.94 0.30 0.05 0.50 0.25 0.25 0.25 0.15 0.10 0.10 0.15 0.20 0.05 – – 0.10 0.65 1.84 0.40 4.77

%

1,453 766 1,258 3,271 500 3,324 2,130 2,389 966 1,049 1,336 1,535 250 6,150 2,000 – – 500 3,223 2,981 2,274 3,499

1993 Average income (Y>0) 5.2 1.8 7.1 5.8 0.2 9.9 3.2 3.6 1.4 0.9 0.8 0.9 0.2 7.3 0.6 – – 0.3 12.5 32.8 5.4 100.0

Rel. share (%) 8.63 1.92 5.32 3.09 0.27 3.25 0.16 2.61 0.37 0.21 0.48 0.32 0.96 1.01 0.64 – – 0.91 1.49 0.64 1.12 16.67

%

Table 13.9  Unreported income and expenditures, by type of service, 1985, 1993, Quebec City

1,350 1,341 816 422 2,072 2,320 128 265 312 472 465 348 186 508 146 – – 220 664 629 950 1,959

1985 Average income (Y>0) 35.7 7.9 13.3 4.0 1.7 23.1 0.1 2.1 0.4 0.3 0.7 0.3 0.6 1.6 0.3 – – 0.6 3.0 1.2 3.3 100.0

Rel. share (%)

%

7.70 1.99 4.57 4.97 0.45 2.33 0.35 3.33 0.60 0.50 1.39 0.65 0.84 1.69 0.35 3.62 5.81 0.25 4.22 – 1.99 21.15

Expenditures

1,273 1,175 532 533 1,419 1,287 486 186 293 134 726 631 217 1,605 179 232 597 500 251 – 688 1,565

1993 Average expend. (Y>0)

29.6 7.1 7.3 8.0 1.9 9.1 0.5 1.9 0.5 0.2 3.1 1.2 0.6 8.2 0.2 2.5 10.5 0.4 3.2 – 4.1 100.0

Rel. share (%)

218  Bernard Fortin and Guy Lacroix these can be summarized as follows. On the supply side of the market, it can reasonably be inferred that approximately 4% of the adult population is involved in informal work. The average yearly earnings accruing from these activities are estimated to be approximately $3,500 (1993 dollars). Informal work is first and foremost a part-time activity involving mainly young and relatively well-educated men living in urban areas. Not surprisingly, welfare recipients, unemployed, and underemployed individuals are also overrepresented in informal work. On the demand side, the data reveal that as much as 17.5 percent of the population has consumed goods or services bought on the informal market in a given year. The main sectors of activity are home renovation, cigarettes, and childcare. The typical consumer lives in an urban area and is relatively well educated. From a policy perspective, two important results emerge from the data. First, informal earnings are a decreasing function of formal earnings whereas informal expenditures are an increasing function of formal earnings. Informal markets thus entail complex redistributive effects. Unfortunately, the size and direction of these cannot be ascertained from a simple descriptive analysis. Second, it is somewhat disturbing that most respondents are under the impression that informal work is widespread. This contradicts not only the data but the fact that the same respondents report that very few adults in their neighborhood are involved in such activities. If policy makers have the same perceptions, ill-advised and costly policies to contain the phenomenon may be implemented with little or no effect.

Notes 1 The key question used in the survey to distinguish between jobs in the regular and the hidden sectors is “… les emplois dont vous déclarez actuellement les revenus dans votre rapport d’impôt.” This can be translated as “… the jobs for which you actually report the proceeds in your income-tax statement.” The term hidden (or its French equivalent “travail au noir”) is never used in the survey. 2 The Survey of Consumer Finances is a supplement to the Labor Force Survey. 3 Note that the descriptive statistics for the 1985 survey do not use the quota sample. Furthermore, the SCF surveys prior to 1994 do not allow the identification of Quebec City residents. 4 The conditional means are computed using non-zero values only. 5 Although Games and Drugs is an important sector on the supply side, we do not comment on these results as they involve very few individuals and because of the inherent difficulties associated with measuring adequately such criminal activities. 6 The figures in the table are different from those of previous tables because data on alcohol and cigarettes smuggling from the United States are not accounted for. They are omitted because the intermediate inputs are clearly very important and because these goods are not considered part of the “hidden economy.” They are produced in the regular sector and traded illegally. 7 In particular, the work of Van Eck and Kazemier (1988) concluded to the effect that the link between taxes and hidden labour was relatively weak. To the contrary, Lemieux et al. (1994) concluded that the high implicit tax rates faced by welfare recipients upon entering the regular labour market motivated many to turn to the hidden market. 8 The differences in the distribution of demographic characteristics are accounted for through regression analysis. The details can be found in Fortin et al. (1996).

Informal work in Canada  219 9 When asked about the perceived proportion of adults working in the hidden sector, nearly 46 percent of our sample reported that at least “half the population holds an undeclared job,” the highest proportion being in Montreal (57 percent). When asked about the proportion of adults in their neighbourhood who were working in the hidden sector, the majority (48 percent) of our sample reported that less than 0 percent to 9 percent did. 10 If we exclude cigarettes and alcohol, for which we have no information in 1985, the participation rate on the demand side decreases to 19.3 percent in 1993.

Bibliography Fortin, B., G. Garneau, G. Lacroix, T. Lemieux, and C. Montmarquette. 1996. L’économie souterraine au Québec: mythes et réalités. Québec: Les Presses de l’Université Laval. Lemieux, T., B. Fortin, and P. Fréchette. 1994. An empirical model of labor supply in the underground economy. American Economic Review 84:231–254. Van Eck, R. V., and B. Kazemier. 1988. Features of the hidden economy in the Netherlands. Review of Income and Wealth 34:251–273.

14 Conclusions Colin C. Williams and Enrico Marcelli

Introduction Taken together, the chapters throughout this book display how this field of inquiry is moving away from the promulgation of universal hues about informal work and toward a more socially, culturally, and geographically embedded appreciation of this economic practice. In this final chapter, therefore, our intention is to pull the preceding strands together. To do this, we could simply summarize the main arguments of the individual chapters. Here, however, our intention is not only to synthesize the ways in which the findings brought together in this volume advance understanding of the informal sector but to directly relate the ways in which this is occurring to some wider shifts taking place in the social sciences. To achieve this, the findings reported in this volume with regard to informal work are related to two broader contemporary social scientific projects. On the one hand, the current shifts in how informal work is being conceptualized are related to the wider social scientific project of deconstructing Western hierarchical binary thought. On the other hand, they are shown to feed directly into the broader emerging body of thought that is seeking to both rethink the “economic” and re-embed the economic in the social. First, therefore, this concluding chapter shows how emerging understandings of the informal sector and the particular advances made in this book can be related to the broader attempt in the social sciences and beyond to contest binary thought. Following this, it will detail the ways in which inquiry on the informal sector is contributing to the wider process of not only redefining the economic but also re-embedding the economic in the social. The intention, in so doing, is to provide an appreciation of the broader importance of the current work taking place that is seeking to rethink informal work and to offer a route map for future research on the informal sector.

Beyond binarism: the trajectory of thought on the informal sector All the chapters in this book clearly delineate that the way in which the informal sector is understood is rapidly evolving. For us, a particularly useful way of synthesizing these changes in how the informal sector is being conceptualized is to

Conclusions  221 read these shifts as a move away from what Derrida (1967) called “logocentrism.” For this French philosopher and key exponent of post-structuralism, Western thought is characterized by a mode of thinking that, first, conceptualizes objects/identities as stable, bounded, and constituted via negation and, second, reads the resultant binary structures in a hierarchical manner in that the first term in any dualistic opposite (the superordinate) is endowed with positivity and the second term, the subordinate (or subservient) “other,” is endowed with negativity. Examples of such binary hierarchies in Western thought might include masculinity/femininity, human/non-human, soul/body, global/local, professional/ lay, reason/emotion, objectivity/subjectivity, economic/non-economic, hetero-/ homosexual and production/reproduction. For Derrida, the outcome of this dominant binary mode of thinking is that it establishes a relation of opposition and exclusion rather than similarity and mixture between the two terms and, more important, it locks mindsets into particular ways of thinking about the past, present and future. Written into binarism, whatever binary hierarchy is investigated, is a narrative of “progress” whereby the superordinate “us” is privileged over the subordinate “others” in the trajectory of historical development. Indeed, the rise to dominance of the superordinate over the subordinate (e.g., the global over the local, professional over lay knowledge) is often somehow conjectured as some natural and inevitable (evolutionist) historical tendency. As is here explicated, such a theoretical framework represents a useful starting point for understanding the shifts in how the informal sector is being conceptualized. Viewing the debates in this field through this lens allows one to see how the majority of debates taking place surrounding the informal sector relate to the contestation of the view of the formal/informal dualism as a binary hierarchy. Here, therefore, the first step required is to show that the formal/informal employment has been conventionally depicted in such hierarchical binary terms whereby formal employment is the superordinate term endowed with positivity and informal employment the subordinate other endowed with negativity and whose meaning is established solely in relation to its superordinate opposition. To see that this is the case, one needs look no further than the multitude of different adjectives variously used to denote the informal sphere. As Latouche (1993: 129) recognizes, “most of them simply qualify—either directly or indirectly—whatever is meant, in a negative way.” The informal sector, that is to say, is variously denoted as “non-structured,” “non-official,” “non-organized,” “a-normal,” “hidden,” “a-legal,” “black,” “submerged,” “non-visible,” “shadow,” “a-typical,” or “irregular” (see Williams, 2004a; Williams and Windebank, 1998). In other words, it is denoted as “bereft of its own logic or identity other than can be indicated by this displacement away from, or even effacement of, the ‘normal’” (Latouche: 129). It is described by what it is not— what is absent from, or insufficient about, such work— relative to the formal sphere and this absence or insufficiency is always defined as a negative feature of its configuration compared with formal employment. It is not simply at the level of the adjectives used to denote this sphere, however, that it becomes clear that the formal/informal dualism is a hierarchical binary.

222  Colin C. Williams and Enrico Marcelli It is also evident from the vast majority of the discourses or narratives about the informal sphere. Heavily permeating most of the literature on the informal sector until very recently is a (hierarchical binary) portrayal that envisaged it as a separate or discrete realm that is constituted in its opposition to the formal sphere and endowed wholly with negative attributes. Indeed, seen in this light, much of the contemporary work on the informal sphere can be read as a bid to deconstruct various strands of this hierarchical binary conceptualization of the formal/informal sector. Here, therefore, and to summarize both the trajectories of thought on the informal sector and the advances made in this book, we structure our review by first outlining the conventional logo-centric portrayal of the informal sector as the subservient other in a formal/informal hierarchical binary and, following this, map the ways in which both the literature on informal work and this book are deconstructing this binary hierarchy and replacing it with a more refined understanding. Reading informal work as a subordinate “other” in a formal/informal binary hierarchy To understand the conventional depiction of informal work as a subordinate other in a formal/informal binary hierarchy, one needs look no further for a starting point than the “modernization thesis” discussed in Chapters  2 and 5. Here, the prevailing view was that informal work was in long-term decline, a pre-capitalist vestige of the past awaiting incorporation into capitalism. In this evolutionist or staged reading of economic development, the narrative of progress privileges the superordinate term in the binary hierarchy over the subordinate other. The informal sector is read as a primitive or traditional, stagnant, marginal, residual, weak, and about-to-be-extinguished sphere; a leftover of pre-capitalist formations that the inexorable and inevitable march of modernization will eradicate. Indeed, there is seen to be a natural and inevitable shift toward the formalization of goods and services provision as societies become more “advanced.” The persistence of supposedly traditional informal activities, therefore, is taken as a manifestation of “backwardness,” and it is assumed that such work will disappear with economic progress (modernization). Informal employment is thus read as existing in the interstices or as scattered and fragmented across the economic landscape. Formal employment, by contrast, is represented as systematic, naturally expansive, and coextensive with the national or world economy. The result is that such “modernist” studies focused upon either the imminent destruction of this sphere, its protocapitalist qualities, its weak or its determined position, viewing it either as “the mere vestige of a disappearing past [or as] transitory or provisional” (Latouche, 1993: 49). Never is the informal sector represented as resilient, ubiquitous, capable of generative growth, or as driving economic change in this modernist view. A further common depiction that reflects how the formal/informal dualism is treated as a binary hierarchy is that it is often the case that the informal realm is treated as entirely separate to the formal sphere (e.g., International Labour Office, 2002). Those engaged in informal work have been, on the one hand, viewed as

Conclusions  223 wholly off-the-books businesses; on the other hand, there has been a strong and resilient view, characterized by the “marginality thesis,” that views individuals engaged in informal work to be those marginalized from formal employment and reliant on this sphere as a survival strategy. As such, these have been conceptualized as separate spheres, a dual labor market, where there are one set of individuals/firms engaged in formal employment and another (“othered”) set of individuals/firms participating in informal employment. Indeed, based on this, the past decade or so has seen many attempts to enumerate the number of individuals and businesses located in the informal sector (e.g., International Labour Office). Third, and reflecting how binarism views the subordinate other in a binary hierarchy as having wholly negative attributes, the study of the informal sphere has been persistently and recurrently colored by a view of such work as exploitative, low-paid, and sweatshop-like in character. Indeed, and reflecting the power of binarism, endowing such work with these negative attributes has perhaps proven remarkably resistant to change. A strong contemporary stream of thought on the informal sector, for example, grounded in political economy, views the informal sector as a new form of work emerging in late capitalism as a direct result of economic globalization (a dangerous cocktail of deregulation and increasing global competition) that is encouraging a race to the bottom. In this reading, informal workers are portrayed as sharing the same characteristics subsumed under the heading of “downgraded labor”: They receive few benefits and low wages and have poor working conditions (e.g., Castells and Portes, 1989; Gallin, 2001; Portes, 1994; Sassen, 1997). Such accounts, therefore, solely highlight the negative attributes of this sphere such as that it is: fraudulent activity that causes a loss of revenue for the state in terms of nonpayment of income tax, national insurance, and value-added tax (e.g., Grabiner, 2000); it leads to “dumping” of wages and social security payments (e.g., Mateman and Renooy, 2001); it weakens trade unions and collective bargaining (e.g., Gallin, 2001); it creates unfair competitive advantage for firms that use undeclared labor over those that do not (e.g., Grabiner, 2000); it leads to competition between informal and formal workers and businesses and generates circumstances of “hypercasualization” as more formal workers are forced to “informalize” to compete effectively (Evans, Syrett, and Williams, 2004; Small Business Council, 2004); it leads to a loss of regulatory control over the quality of jobs and services provided in the economy (Grabiner, 2000); it erodes compliance with health and safety standards (Small Business Council, 2004); it creates circumstances conducive to the exploitation of workers owing to the reduction of wage rates (Gallin); and it results in the loss of various employment rights (e.g., annual and other leave, sickness pay, redundancy, training). The notion that it might also have more positive attributes, and attempts to document these positive attributes, as are discussed further, is only recently starting to be taken seriously on board in the literature. In sum, the depiction of the informal sector as an exploitative, low-paid, and sweatshop-like realm that has largely negative consequences and hinders economic and social development or “progress” is very much in keeping with a logo-centric reading of informal employment as a subordinate other in a formal/informal

224  Colin C. Williams and Enrico Marcelli binary hierarchy. Yet, recent decades have started to witness a deconstruction of this reading of informal work as a subordinate other. Further, therefore, we evaluate both the degree to which this logo-centric view has been deconstructed in the emerging literature on informal work and, more particularly, the ways in which this book has further advanced the deconstruction of this binary hierarchy. Evaluating the deconstruction of informal work as a subordinate other To evaluate the degree to which the view of informal work as a subordinate other has been deconstructed, we start with the modernization thesis that views the informal sphere as a primitive or traditional, stagnant, marginal, residual, weak, and about-to-be-extinguished sphere. Today, few commentators on the informal sphere adhere to such a view. As shown throughout this book, the recurring theme wherever one looks is that even in modern economies, the informal sector persists and often becomes mutually entangled with the formal sphere (see, for example, Chapter 8). Yet, even if the informal sector is today seldom if ever read as stagnant or dwindling, there perhaps remains an implicit belief that this is a scattered and fragmented sphere that is transitory or provisional, as shown in attempts to map its uneven distribution temporally, spatially, and socioeconomically. Even if no longer seen as in demise, therefore, few commentators ultimately read informal employment as equivalent to formal employment. It is still more often than not seen as a by-product of, or response to, changes in the formal economy (see Chapter 4). Few so far have engaged with the idea that the formal economy might shape, and be shaped by, the informal sphere in a process of mutual iteration or even the complex interdependence between these realms. Until this is achieved, the informal sphere as a subordinate, negative, and opposite realm will not be brought into independent or, perhaps more precisely, codependent existence in its own right. It will remain a sphere characterized simply by some absence or insufficiency contained within, in opposition to, or dependent on formal employment. Turning to the second aspect of informal work, that is, its treatment as an entirely separate sphere, some significant advances can be identified in the literature in transcending this view. It is today seldom the case that informal work is read as entirely conducted by wholly informal businesses and workers who engage solely in informal employment. Over the past two decades, as shown throughout this book, a multitude of studies have revealed that the bulk of informal work in many populations is conducted by formal businesses who conduct a portion of their trade off the books (e.g., Small Business Council, 2004; Williams, 2004a) and formal workers who engage in “on-the-side” informal work. Although this at first led to one universal generalization (i.e., the marginality thesis) being replaced by another (what might be called the “reinforcement thesis” in that informal work was asserted to reinforce the inequalities produced by the formal economy), recent years have witnessed the emergence of a more refined understanding. However, evidence found to support the view that the bulk of informal work is conducted by people marginalized from formal employment and wholly underground businesses

Conclusions  225 in some specific populations (e.g., Kesteloot and Meert, 1999; Leonard, 1994, 1998) has resulted in a more embedded understanding that recognizes that there are particular economic, political, cultural, and/or geographical circumstances wherein this does hold (e.g., Kesteloot and Meert; Mateman and Renooy, 2001; Renooy et al., 2004; Williams and Windebank, 1995, 1998). This, in turn, has led to a recognition that it is how various factors combine together in particular circumstances, rather than individual causal factors per se, that influence the extent and nature of the informal sphere (e.g., Mateman and Renooy; Renooy et al; Williams, 2004a; Williams and Windebank, 1998). Today, therefore, and as far as the dualistic treatment of people and businesses as either informal or formal is concerned, considerable progress has been made in transcending such binary thought. Is it also the case, therefore, that the attribution of negative characteristics to informal work and positive characteristics to formal employment has also been transcended? One might think that the recognition that it is usually affluent populations who engage in informal work would have led commentators to radically rethink the caricature of informal work as exploitative, low-paid, and sweatshop-like work. However, on the whole, those who have sought to rethink this largely negative portrayal of informal work have been in the minority, many of whom have been brought together in this edited volume. Of all the negative attributes that have been attached to informal work, it is probably its low-paid character that has been most widely questioned (see Fortin and Lacroix, Chapter 13). Indeed, it is now widely recognized that the wages and incomes from informal work display just as wide a distribution as those in the formal economy and that the view that all informal work is low-paid has been widely refuted. Perhaps less widely addressed, however, is the assumption that such work is predominantly exploitative work conducted under sweatshop-like conditions. Recent years, nevertheless, have seen some significant re-inscribing of the character of informal work. Indeed, since the mid- to late-1990s, it has been much more widely accepted that besides exploitative low-paid sweatshop-like work, or what is commonly referred to as “organized” informal employment, there exist “autonomous” types of informal employment (e.g., Benton, 1990; Warren, 1994; Williams and Windebank, 1998). The outcome is that rather than view informal work as a sweatshop realm sitting at the bottom of a hierarchy of types of formal employment, informal work is now more widely depicted as a heterogeneous labor market with a hierarchy of its own. Just as there is a segmented formal labor market, a segmented informal labor market is also seen to exist (Williams and Windebank, 1998). Following on from this recognition that informal work is conducted on an autonomous and an organized basis, the new millennium has witnessed the emergence of a small but growing corpus of thought that has begun to ask first whether such work should always be viewed as a hindrance to development and, second, whether greater emphasis needs to be placed on some of its more positive features. In particular, a view has started to emerge that fledgling entrepreneurs often use this sphere as a launch pad for business ventures such as a test-bed for

226  Colin C. Williams and Enrico Marcelli their enterprises and thus that this sphere represents an important seedbed for new enterprise creation and development (e.g., Evans et al., 2004; Global Employment Forum, 2001; International Labour Office, 2002; Leonard, 1998; Small Business Council, 2004; Tabak, 2000; Williams, 2004a,b, 2006). Indeed, this is beginning to result in a significant “policy turn” as far as the informal sphere is concerned. One can see in many developed nations the kernel of a new approach toward the informal sphere that is a direct result of this recognition that there is an interrelationship between the informal sector and entrepreneurship. Rather than pursue solely deterrence (push) initiatives by increasing the level of punishments and probability of detection, as in the past, there is starting to emerge a recognition that deterrence needs to be combined with more enabling (pull) initiatives that seek to help those working in the informal sector to formalize their business ventures (see European Commission, 2007; Renooy et al., 2004; Williams, 2004b). This is particularly the case in northern Europe. Ranging from demand-side measures that encourage consumers to employ formal labor through supply-side initiatives that help informal workers transfer their endeavor into the formal realm to awareness raising campaigns and ways of coordinating government action, taken together, these measures represent the emergence of a new public policy tool-kit for dealing with the informal sector (for a review, see Williams, 2004b, 2006). This idea that the informal sector represents a resource rather than a hindrance is in its early stages. It is clear, however, that the next few years will witness much greater interest in this rereading of the informal sector as a source of entrepreneurship and enterprise development. At first glance, therefore, it appears that the way in which this subordinate other has tended to be viewed in negative terms is starting to be transcended. After all, policy makers and academic commentators alike are now discussing this sphere as a resource to be harnessed rather than a negative phenomenon to be eradicated (see Williams and Round, 2007). Yet great care needs to be taken before concluding that this binary hierarchy has been transcended. In this emerging view, the informal sphere is being discussed only in relation to the contributions that it can make to the development of the formal sphere. Put another way, what GibsonGraham (1996, 2006) call a capital-centric view of the informal sphere, or perhaps what is better called a “formal employment-centered” imagining of its potential, is being adopted. The informal sphere is not being seen as an entity that itself contains positive features or attributes but only in terms of what it can offer the development of the formal sphere. In sum, this evaluation of the extent to which the formal/informal employment binary hierarchy has been contested shows that, at best, there has been only a partial and very incomplete deconstruction. Although it is now accepted that the subordinate other is not weak and in demise, it remains viewed as at best transitory or provisional and remains viewed as characterized by some absence or insufficiency either contained within, in opposition to, or dependent on formal employment. Viewed as a by-product of, or response to, changes in the formal economy (see Chapter 4), it is generally treated as having no independent existence in its own right. Indeed, even where positive features are being attributed to this

Conclusions  227 sphere, these characteristics relate solely to what it can offer the development of the formal sphere. It is seldom seen as resilient, ubiquitous, capable of generative growth, or as driving economic change. There thus remains a long way to go before the formal/informal binary hierarchy is deconstructed. Yet there remain signs of hope on the horizon, as is now discussed.

Rethinking the economic and re-embedding the economic in the social One of the major contributions of this book is that, for the first time, it has brought together many of the commentators for whom the informal sector is a lens through which one can both rethink the economic and re-embed the economic in the social. Here, in consequence, we evaluate not only the ways in which this rereading of the informal sector is altering the way in which informal work is theorized but how the body of work brought together in this volume is contributing to this wider project in the social sciences. As shown in many of the chapters in this volume, although earlier conceptualizations of the nature of the informal sector displayed how such work is not simply an exploitative form of low-paid employment sitting at the bottom of a hierarchy of types of formal employment but is a heterogeneous labor market with a hierarchy of its own, few until now have questioned whether all such work is conducted under market-like economic relations for the purpose of financial gain. Two stimuli, however, have recently led to many commentators in this volume questioning these assumptions about the economic relations and purposes underpinning informal work. On the one hand, and in the broader social scientific field of monetary exchange, there has been a growing opposition to the “thin” representation of monetary exchange as always market-like and motivated by financial gain. Arguing that “the major defect of such market-based models of exchange is simply that they do not convey the richness and messiness of the exchange experience” (Crewe and Gregson, 1998: 41) in developed nations, “thicker” descriptions have been increasingly promulgated that recognize the diverse economic relations and motives underpinning monetary transactions (e.g., Bourdieu, 2001; Carrier, 1997; Community Economies Collective, 2001; Gibson-Graham, 1996, 2006; Slater and Tonkiss, 2001). On the other hand, empirical data from the study of informal work itself have instigated some questioning of whether informal work is always market-like and profit-motivated (see Jensen, Chapter  12; Smith, Chapter  4; Pfau-Effinger, Chapter  5; Williams, Chapter  2; and Windebank and Williams, Chapter  6). As Travers (2002: 2) points out, “most research on [informal work] gives short shrift to the motivations of people to do this work. It is usually said that people do the work to earn extra money and left at that.” Despite this, as early as the 1980s, Cornuel and Duriez (1985) in their study of relatively affluent households in French new towns had highlighted how favors were exchanged on a paid basis between neighbors primarily to forge fledgling networks of support rather than

228  Colin C. Williams and Enrico Marcelli to make extra money. At the time, however, such a finding resulted in few, if any, analysts pursuing a wholesale rethinking of the nature of informal work. In this volume, nevertheless, it has been revealed that the number of studies now identifying the presence of non-market relations and rationales other than making extra money has reached the critical mass necessary to raise doubts about the validity of the so-far dominant market-centered reading of informal work. Taken together, these studies that range from studies of geographical and gender variations in informal work in the United Kingdom (Chapters  6 and 7) through analyses of informal work in Germany (Chapter 5), post-socialist EastCentral Europe (Chapter 4) and the Italian situation (Chapter 8) to studies of smalltown America (Chapter  9), including rural Pennsylvania (Chapter  12), reveal that besides profit-motivated market-like informal work, there exists informal work that is conducted under economic relations more akin to paid mutual aid. This latter type of informal work, moreover, has the following positive features: it enhances social cohesion through mutual aid and reciprocity; it enables the provision of goods and services to those in need; it helps cement and develop social networks of material support; and it extends the range of opportunities available to individuals and families to cope in situations of deprivation. Here, therefore, community-oriented informal work is being attributed a positive role in itself, rather than with regard to formal employment as in previous discourses on market-oriented informal work. Just as important as the fact that the identification of such a form of informal work is leading to the identification of new positive attributes with regard to this sphere is the fact that this re-theorization of the informal sphere is also contributing in a central manner to the wider project in the social sciences to rethink the meaning of the economic and to re-embed the economic in the social. Until now, a recurrent assumption across the social sciences has been that profitmotivated market-like exchange is stretching its tentacles wider across the globe and ever deeper into every nook and cranny of daily life. This has become known as the “commodification” or “marketization” thesis (see Williams, 2005). It has been thus concluded that “economic” (i.e., market-like) relations are everywhere encroaching deeper into social life (e.g., Carruthers and Babb, 2000; Gudeman, 2000; Watts, 1999). In recent years, however, there has emerged across the social sciences a growing body of literature that is starting to contest this thesis so as to open up work to futures beyond market hegemony (e.g., Community Economies Collective, 2001; Gibson-Graham, 1996, 2006). For these commentators, writing within a post-structuralist perspective, this narrative of marketization is a performative discourse in the sense that it is a “reiterative and citational practice through which discourse produces the effects that it names” (Butler, 1993: 2). By reciting the mantra of marketization, the future becomes closed. In assuming that this is the only future—that there really is no alternative—other non-market modes of production are occluded from consideration when seeking “progress” and “development” (see Escobar, 1995; Latouche, 1993). Until now, the principal way in which those who have contested the narrative of market hegemony have sought to engage in the demonstrable construction and

Conclusions  229 practice of alternative economic relations and logics of work beyond the market is by studying what Leyshon, Lee, and Williams (2003) refer to as “alternative economic spaces” such as car boot sales (Crewe and Gregson, 1998), second-hand and informal retail channels (Williams and Paddock, 2003), inflation-free local currency experiments such as Local Exchange and Trading Schemes (Lee, 1996; Williams et al, 2001), sweat-equity money projects such as time dollars (Cahn, 2000) and gift-giving (Carrier, 1990). These highlight the existence of forms of sourcing, commodity circulation, transaction codes, pricing mechanisms, and value quite different from those that typify more profit-motivated marketorientated exchange. The problem with these studies, however, is that these “alternative” spaces are easy to dismiss as small enclaves of what might be seen as “deviance” within an overarching market-oriented economy. By studying only small spaces viewed as existing on the “margins” of the mainstream economy, they fail to provide any significant challenge to those who view monetary transactions as imbued with the profit motive. Such spaces wherein the profit motive is absent can be explained away as minor, trivial, or marginal practices existing beyond the mainstream commodity economy and labeled “peripheral” or even “superfluous” spaces (Martin and Sunley, 2001). This is why these studies that question whether the informal sector is always and everywhere permeated by market-like profit-motivated exchange are proving so important to this broader social science project of rethinking the economic and re-embedding the economic in the social. Conventionally, the sphere of informal employment has been seen to epitomize market-like profit-motivated economic relations. This is a realm, as neo-liberals have been quick to point out (e.g. de Soto, 1989), wherein market-like relations and the profit motive can operate untainted by state intervention and where political economists believe that the worst excesses of profit-motivated capitalism are to be found (e.g., Castells and Portes, 1989; Sassen, 1989). Yet as soon as one starts to unravel the economic relations and motives involved in this supposed exemplar of “the economic,” what one is confronted with is anything but profit-motivated market exchange (see Chapters 2, 4, 5, 6, 8, and 12). If even in this sphere that epitomizes the market other economic relations and motives can be identified, the chances that such relations and motives are prevalent elsewhere are surely high. Although market hegemony may be a caricature of the times (see Williams, 2005), it is certainly not the reality in the informal sphere. The outcome is that these studies of informal work are displaying that the economic is not always and everywhere characterized by market-like relations and the logic of profit and that alternative relations and motives prevail even in this sphere seen to exemplify the market in the raw. Rather than project universal relations and logics onto the informal sector, this book has started to unravel that the nature of the economic relations and the motives attached to it can be understood only through a more socially, culturally, and geographically embedded appreciation of this economic practice. In other words, it is only by re-embedding this economic practice in its social, cultural, and geographical context that it can

230  Colin C. Williams and Enrico Marcelli be more fully understood. The economic, therefore, cannot be simply conjectured to be separate from the society in which it takes place; this economic practice is a subset of the society in which it occurs. The new conceptualization of this economic practice brought together in this book thus provides some central and profound insights to this wider project in the social sciences to rethink the economic and re-embed the economic in the social sphere of which it is a part. Until now, however, too few of the commentators who are seeking to unravel the meanings of the informal sector have perhaps recognized and contributed to this broader project. It is to be hoped, therefore, that the future will see those studying the informal sector more explicitly contest the logo-centric binary hierarchical thought that has led this sphere to be seen as a purely negative phenomenon operating separate from, and in opposition to, the formal economy and that needs to be deterred. It is also to be hoped that the important knowledge on the economic being amassed by those studying the informal sphere in the contemporary period will be fed into the wider social scientific project that is re-embedding the economic in the social. If these start to occur, this book will have done its job.

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Index

additional income: in Germany 72, 76–77 affluence: and location of workers 15, 98, 103–05, 106–09, 225; and marginalization 154, see also high income age(s): of New York day laborers 142, 143; of participants in Canadian hidden market surveys 202, 207, 208, 212, 215; of unauthorized immigrant workers 170 agricultural sector: California 160, 161, 162–63; Italy 117, 120 Aigner, D.: F. Schneider, and D. Ghosh 36 alternative economic spaces 22–23, 229, see also marginalization Alvarez, R. M., and T. L. Butterfield 160 America see California; day laborers; diversity; United States Amin, A. and N. Thrift 3 Amin, S. 20 anthropological approach 22, 168–69 Appalachia 87 artisan firms: in Italy 123–27 Artisan Statute, no. 860/1956 (Italy) 123 atypical jobs (lavori atipici) 116, 121, 128 autonomous (individual) informal work 18–19, 20, 225–26 badanti (caregivers) 119, 120 Bar-Cohen, L., and D. M. Carillo 158 barter 178, 185–86 Bas St-Laurent region: 1994 survey in 195–96, 202, 207 bazaar-economy 67 Begg, R., and J. Pickles 48 Belfast 87, 91 benefits see health benefits; retirement allowances; unemployment benefits Benton, L. 19 Berk, M. L., and C. L. Schur 170 Bernabè, S. 51–52 Bhattacharyya, D. K. 35 binarism 3, 220, 221–27 black market 69–70 BOFE (Bureau of Field Enforcement), California 157–59, 163–64

Boyle, D. 22 Bratislava 54–55, 56, 57, 58, 59, 60 Brianza, Lombardy: industrial sector work 122–27 Bridger, S., and F. Pine 51 Brown, E. R., and H. Yu 170 building work see construction work Bulgaria 52 Burawoy, M. 47 bureaucracy 153 Burroni, L. and C. Crouch 67 Butler, J. 228 Cagan, P. 35 Cahn, E. 229 California, enforcement in 154, 155, 157–66, see also diversity of informal work (California) California Employment Development Department 37 Campbell, R. R.: J. C. Spencer, and R. G. Amonker 180 Canada: gender and informal work 83, 88, see also hidden markets (Canada) capitalism 13, 154–55, 226 caporali (informal labor recruiters) 121 Cappechi, V. 19 car boot sales 22 caregivers (badanti) 119, 120 Carrier, J. G. 2, 21–22, 168, 229 cash: and general currency ratio 35 Cassa Integrazione Guadagni (Government Temporary Lay-off Indemnity) 116 Castells, M., and A. Portes 12, 20, 39, 67, 188 Central American immigrants: in U.S. 135, 141 child labour: in Italy 124–25 childcare: in Canada 203, 204, 205, 210, 216, 218; in Germany 71, 73, 74–75; in rural Pennsylvania 184 cigarette consumption, hidden 203, 206, 207, 210, 218 Ciscel, D. H., and J. A. Heath 21 citizenship, EU 74 Claghorn, K. H. 136

234  Index Clarke: S., et al 52 colf (domestic workers) 119 Colombo, A., and G. Sciortino 119 commodification 228 Community Economies Collective 53 community-orientated informal work 24, 83, 92, 99–102, 110, see also families; social networks construction work 72, 73, 75, 85; Californian foreign-born workers in 160, 161; in Canada 203, 204, 205; and day laborers in New York 137–38, 143, 146–47; Italian sector 117, 120–21 consumers see employers contextual view 2 cooperative di facchinaggio (cooperatives of porterage) 125 Cornuel, D. and B. Duriez 4, 23, 227 cost(s): of formal employment 106–07, 108, 154–56; of informal employment 137–38, 164 Cowgill, T. T. 135 craftsmen: and moonlighting in Germany 72, 73, 77 Crewe, L. and N. Gregson 22, 227, 229 currency ratio, general 35 Cyprian, R. 69 “dacha economy” 52 Dallinger, U. 76 Dangler, J. F. 40 Davis, Gray 158 Day Labor Survey, New York 139–48 day laborers (New York): and the construction industry 137–38; historical perspectives of 135–36; and immigration 139; and informal economy 136–37; occupations, wages and earnings of 143–46; profile of, in New York metro area 140–43; the worker center approach 148–49; working conditions and labor standards 146–47 de Certeau, M. 53 De Leeuw, F. 39 De Soto, H. 4, 20, 39, 174 demand/supply dichotomy 74, 206 Denmark 70, 83 Department of Labor, US 161 deprivation 15, see also low income; poverty deregulation: in Italy 116–17 Derrida, J. 62, 221 development, economic: and formalization of work 12–13, 227–30 dichotomies 3, 220, 221–27 DIR (Department of Industrial Relations), California 157–58, 163 direct surveys 40–41, 54–55 diverse economies 53–54 diversity of informal work (California) 168–70; the 2001 LAC-MILSS data 170; and educational distribution of informal workers

172–73; and geographic distribution of informal workers 173–74; and occupational distribution of informal workers 171 DLSE (Division of Labor Standards Enforcement), California 157, 158 DLTR 98 Dobozi, I., and G. Pohl 52 dockworkers 135 domestic food production 55, 56–62 domestic services: in Germany 71–72, 73, 75, 85, 89; in Italy 119, see also households; service sector domestic work (unpaid) 85–88, 90, see also English Localities Survey; paid/unpaid work “dual economy” 67 Dunford, M. 48 Dunford, M., and A. Smith 48 earnings see income; paid/unpaid work; spending; unemployment benefits; wage rates East-Central Europe: conceptions of informal economy 53–54, 62; household economic practices 54–55, 56–59; income inequality and poverty 55–56; the informal economy 51–53; migrant workers from 74; social polarization 47–51 econometric models 36 economic crisis 75, see also East-Central Europe “economic involution” 47–48 economic policy 226 economic theory see binarism; capitalism; globalization thesis; modernization thesis; post-structuralism “economy of jars” 62 economy(ies): alternative economic spaces 22– 23, 229; continuums of 3–4; development, and formalization of work 12–13, 227–30; diverse economies 53–54; impacts of restructuring 116–17, 183–89; and the social 227–30; underground economy 35–41 educational attainments: in California 169–70, 172–73; in Canada 196, 198, 200, 202, 207, 208, 212; of New York day laborers 142, 143, 147; in rural Pennsylvania 184 electricity consumption: and GDP figures 37–38, 52 employees: in Italian artisan firms 123, see also workers (informal) employer abuse 136, 146–47 employers (consumers): affluence and locality of 103; in Canadian hidden market 210–11, 215–16; of domestic services 71–72, 75, 90, 93; and law enforcement 159; motivations of 92–94, 106–09, see also spending employment figures 37, 67–68, 68–70; in Canada 196–202, 209; in East-Central Europe 48–50, 54, see also labor force; unemployment; unemployment benefits

Index  235 enforcement see law enforcement English Localities Survey: gender and informal work 82–83, 84, 85–88, 90, 91–94; geographical variations in nature of work 24, 105–11; spatial variations in participation 102–05; survey methodology 97–102 entrepreneurship 19–20, 189, 225–26 equity issues 193 Esping-Andersen, G. 75, 76 ethnographic studies 40 EU citizenship 74 Europe: informal employment levels 67–68, see also East-Central Europe Evans M.: S. Syrett, and C. C. Williams 223 exchange see barter; monetary exchange; reciprocity expenditure see spending exploitation 18, 19, 94, 136–37, 169, 223, 225 Faist, T. 72 families: and gender variations in work supply 90–92; “housewife” model in Germany 74–75; interviews with in rural Pennsylvania 182, 184; and Italian employment practices 122, 124–25; payment, trust and notions of charity 94, 109, see also household economic practices; households; social networks family-run-firms: in Italian construction work 122 Fei, J. C. H., and G. Ranis 1 Feige E. L. 35–36 Fernandez-Kelly, P., and A. Garcia 40 Filipová, J.: S. Valná, and I. Myslíková 55 fines: for labor law violation 156, 162 firm size 39 firm-centered economy 67 fiscal reform: in Canada 194, 211–15 Fitchen, J. 181 Flaming, D., et al 39 Flaming, D., B. Haydamack, and P. Joassart 37 flexible production: in Italy 119–20, 121–27, 128–29 Foner, N. 136 food production: in post-socialist East-Central Europe 51–52, 56–62 foreign-born workers: in California 160, see also illegal workers; immigrant workers formal employment: and cost 106–07, 108, 154–56; and gender 88 Formal and Informal Work in Europe project 71 formal/informal binary 3, 53–54, 221–24 Fortin, B. 194; et al 83, 85, 88, 89, 195 Frank, A. G. 20 Fréchette, P. 194 Frey, B., and H. Weck-Hannenman 36 Friedman, E.: et al 153, 156 Fugazza, M., and J-F. Jacques 166 full-time/part-time dichotomy 87–88, 184, 207

fuori busta payments 121, 125–27 Gallagher, T. 158 Galliano, L. 116 Gallin, D. 18, 223 garment industry: California 160, 161, 163–64 Gather, C., and H. Meissner 72 GDP: and electricity consumption 37–38, 52; and informal employment levels 1, 69–70; Italian informal economy as percentage of 117; and national economic output in East-Central Europe 48 Geertz, C. 67 Geissler, B. 72, 73, 75 gender 15, 72, 82–95; and employment ratios 48, 83–84; and hidden market in Canada 196, 197, 198, 202, 207, 208, 212, 215; and nature of work 85–94; of New York day laborers 142, 143; and segregated informal employment 73, 74–75, 85–88; traditional gender roles 87, 184; of unauthorized immigrant workers 170 gendered readings 24 general currency ratio 35 geographical contexts: California 173–74; England 24, 105–11, 165, see also English Localities Survey Germany see work-welfare arrangement Ghezzi, S. 117, 122 Ghezzi, S., and E. Mingione 122 “ghost” employment 124 Gibson-Graham, J. K. 3, 53–54, 226; S. Resnick, and R. Wolff 53 Giles, D. E. A. 35, 36 globalization 183, 189 globalization thesis 4, 12, 13, 18, 68 GNP: Canadian hidden market as percentage of 193 Goldman, D. P. et al 170 Goods and Services Tax (GST), Canada 194, 206, 211, 216 Gordon, J. 137, 149 Grabiner 223 Granovetter, M. 184 GST (Goods and Services Tax), Canada 194, 206, 211, 216 Gutmann, P. 35 Harris, J. R., and M. P. Todaro 1 Hart, K. 67 Harvey, D. 21 hazardous work 146–47 health benefits 184 Heer, D. M. 170 Heer, D. M., and J. S. Passel 170 Hellberger, C., and J. Schwarze 85, 88 Henken, T., and H. Cordero-Guzmán 137 heterodox economics 13

236  Index hidden markets (Canada) 192–93; expenditure in 202–11; growth of 211–16; income from 196–202; surveys on 193–96 high income: and globalization 68; and use of informal work 102–05, see also affluence Hillmann, F. 72 hiring sites 135–36, 140–41, 148–49 history: and “trace” 62 home health care services 184 home improvements (renovation): in Canada 203, 204, 205, 210, 214, 216, 218; in US 138 Hondagneu-Sotelo, P. 40 horizontal equity 193 hour law: in California 157–58 hours of work: in Canada 196, 198–99, 202, 207, 209, 212–14, 214–15; gender variations in 88; in Germany 71, 73; number of days worked by U.S. day laborers 144 household economic practices: gender variations in 90–92; in post-socialist Slovakia 54–55, 56–62; in rural America 178–80, 181–82 household work practices, England see English Localities Survey households: as consumers 71–72, 119–20; in Germany 74–75, see also domestic services “housewife” model 74–75 housewives 88 housing market: in U.S. 138 Hum, T. 137 Hussmans, R. 41 illegal workers: in Italy 119, 121; in U.S. 139, 147, 149, 159–60, 169–75 Illich, I 2 ILO (International Labour Office) 40–41, 48, 88, 89 IMF (International Monetary Fund) 40–41, 158 immigrant workers 1–2; in Germany 71, 74; in Slovakia 55; in Italy 119, 121, 122; in U.S. 135, 139, 141, 147 immigration: and New York day laborors 139; unauthorized 38–39 income(s): in Canada 196–202, 203–06, 207–09, 210–11, 212–14, 216, 217–18; and domestic food production in Slovakia 56–58, 60–61; in East-Central Europe 50–51, 52, 55–56; in England 100, 102, 103–05, 107–08; gender variations in 88; in Germany 71, 72, 76–77; and globalization 68; in Italy 126–27; of New York day laborers 143–44, 145–46; and participation in informal work 180; in rural Pennsylvania 183, 187–88; and use of informal work 102–03, see also low income; paid/unpaid work ; spending; unemployment benefits; wage rates indirect surveys 38–40 industrial workforce: in Italy 119–20, 121–27, 128–29; in Slovakia 54–55; in U.S. 160–64

informal sector: as subordinate “other” 222–27 informal work: conceptualizations of 1–2, 11–12; definitions and meanings of 178–79; market-centered readings of 20–24; measurements of 34–41; nature of 18; segmentation of 18–20; size of informal sphere 12–13; size variation across populations 13–17 informal/formal binary 3, 53–54, 221–24 injuries 147 inspections: for labor law violations in California 158–64, 165 International Labour Office (ILO) 40–41, 48, 89 International Monetary Fund (IMF) 40–41, 158 International Social Survey Programme attitude data 75–76 interviews: Canadian hidden market survey 195; household economic practices in post-socialist Slovakia 54–55; household, for English Localities Survey 98–99; household, in non-metro Pennsylvania 182 IRES-CGIL 124 Isaac, B. L. 168 ISTAT (Italian national statistical bureau) 117, 120, 124 Italy 114–29; flexible industrial production in 119–20, 121–27, 128–29; gender and informal work 83, 89; overview of informal employment 116–21 IWC (Industrial Welfare Commission) Orders, California 157 Jensen, L., et al 85, 179, 180 Jensen, L, G. T. Cornwell, and J. L. Findeis 4, 40 Jensen, L., and J. Rathlev 70, 78 Jensen, V. H. 135 Jessop, B. 22 Joassart-Marcelli, P., and D. Flaming 37 job losses: in rural Pennsylvania 182–83 jornaleros (day laborers) 135 Kaufman, D., and A. Kaliberda 37 Keystone Research Center: The State of Working Pennsylvania 2004 182 kinship groups see families; social networks knowledge economies: in Slovakia 61–62 Kocka, J. 76 Koehler, C. 75 labor force: employment figures 37; restructuring of in Italy 116–17, see also employment figures; workers (informal) labor hiring sites 135–36, 140–41, 148–49 labor law see law enforcement; legislation labor law inspections, California 158–64

Index  237 labor-market status see socioeconomic status LAC-MILSS data (2001) 170 Ľadoveň, Martin (Slovakian town) 54–55, 56, 57, 58, 59, 60 land: and domestic food production in Slovakia 55, 56–60 Larrowe, C. P. 135 latent variable models 36 Latinos: in Los Angeles County 38–39, 139, 141, 170–75 Latouche, S. 221 lavori atipici (atypical jobs) 116, 121, 128 lavori socialmente utili (make-work projects) 120 law enforcement 153–54; in California 157–64; and decision to operate informally 154–56; implications for enforcement 165–66 Law no. 443/1985 123 Lee, R. 22, 229 Lefebvre, H. 62 legal status 170 legislation 70, 121, 123, 128, see also law enforcement Lemieux, T. 83, 88 Leonard, M. 40, 85, 87, 90, 91 Levitan, L., and S. Feldman 181, 188 Lewis, A. W. 1 Leyshon, A., et al 22 Leyshon, A., and R. Lee 53 Leyshon, A., R. Lee, and C. C. Williams 97, 229 Loayza, N. V. 153 Lobo F. M. 84 location of workers: and affluence 15, 98, 103–05, 106–09, 169 Lombardy region 117 Lomnitz, L. A. 127 Los Angeles County: inspections in garment industry 163, 164; labor force participation 37, 38–39; LAC-MILSS data (2001) 170 low income: and gender 83, 89–90; in Germany 71; and globalization 68; and investment potential 39; and participation in informal work 1, 180, 187–88, 225; and use of informal work 102–05, 107–09, 160 Lozano, B. 40 Lucifora, C. 119 Lutz H. 71, 72, 74 MacDonald, R. 40, 83, 90 macro measures 35–38 Magatti, M., and F. Quassoli 119 make-work projects (lavori socialmente utili) 120 Manufacturer’s Sales Tax (MST), Canada 194 manufacturing industry: in Italy 123–27; in New York 136–37; in rural Pennsylvania 182

Marcelli, E. A. 38, 40, 156, 158, 168, 169, 170, 172, 174, 175 Marcelli, E. A., and W. A. Cornelius 2 Marcelli, E. A., and D. M. Heer 2, 170 Marcelli, E. A., M. Pastor, and P. Joassart 1, 38 March Current Population Survey data 170, 171 marginality thesis 11, 15, 83, 105, 170, 172, 223 marginalization 22–24, 93–94, 154, 229 marital status: in Canada 196, 198, 200, 202, 208, 212, 216; of New York day laborers 142, 143 market strength 39, 138 market-orientated informal work 20–23, 228–29; and gender 83, 85; and motivation 105–06; non-market relations 23–24, 228–29 marketization 228–29 Martin, R., and P. Sunley 229 Martin (Slovakian town) 54–55 Massey, D. S.: et al 2 Matthews, K. 20 McInnis-Dittrich, K. 83, 87, 88 McManus, P. 39 measures, of informal work 34–41 Mehta, C., and N. Theodore 147 Meldolesi, L. 120 men: and economic restructuring in rural Pennsylvania 186–87, 188; gender, and informal work 83, 142, 143, 196, 207; and moonlighting 72, see also gender metropolitan areas, Californian 173–74, see also rural economies; urban economies Meurs, M. 52 Mexican immigrants 38–39, 139, 141, 170–75 micro measures 38–41 micro-entrepreneurship 189 middle classes 75, 78 migrants see immigrant workers; immigration Milan 120–21 MIMIC models 36 Mingione, E. 83, 85, 117 Mirus, R., and R. S. Smith 39 modernization thesis 4, 11, 12, 67, 222, 224 Mogensen, G. V. 83 monetary exchange: in alternative economic spaces 22–24, 93–94, 186–87, 229; and profit motif 3, 21–22, 23, 106–07, 227–28, 229 monetary measures 3, 35–36; and nonmonetary measures 37–38 Montreal 195, 202, 207 moonlighting (informal work) 70, 72, 75–77, 125 Morokvasi, M. 72 Morris, L. 90–91 motivation: and economic/non-economic dichotomy 186–87; of employers 92–94, 106–09; gender variations in 90–92; geographical variations in 109–11; and

238  Index income levels 180, see also marketorientated informal work; profit motif MST (Manufacturer’s Sales Tax), Canada 194 national economic output 48 national income see GDP Nelson, M. K. 40 Nelson, M. K., and R. S. Smith 4, 40, 180 neo-classical economics 2, 67–68, 77–78, 154, 168–69 neo-liberalism 12–13, 20, 229 Ness, I. 137, 149 Netherlands 83 New York Day Labor Survey 136, 139–48, see also day laborers (New York) nomothetic (universalist) view 2 non-market relations 23–24, 228–29 non-metropolitan areas, Californian 173–74 non-monetary measures 3, 37–38; and monetary measures 35–36 North, P. 22 numbers: of days worked by U.S. day laborers 144; of employees in Italian artisan firms 123; of workers in U.S. informal economy 141, 158 occupation(s): and domestic food production in Slovakia 58–59; of informal workers in California 171; of unauthorized Latino immigrants in California 38–39, 171, see also employment figures; unemployment OECD 40–41, 50–51, 74 Offe, C. and R. G. Heinze 22 “organized” informal work 18–20, 225–26 “other” 221, 222–24 overtime payments, in Italy 121, 126–27 Pahl, R. E. 83, 85, 88, 99 paid/unpaid work: in domestic sphere, and gender 85–88, 90; and use of informal labor in England 99–102, see also income; spending; unemployment benefits; wage rates Paone, G., and A. Teselli 124 part-time/full-time dichotomy 87–88, 184, 207 participants see workers (informal) payment: social networks and trust 93–94, 107–08, see also income; paid/unpaid work; unemployment benefits; wage rates Peck, J. 154, 165 Pedersen, S. 68, 69–70, 71, 76 Pennsylvania, rural 177, 181, 182–88 pension rates: and retirement allowances 126 Pessar, P. 40 Petržlka, Bratislava 54–55 Pfau-Effinger, B. 72, 73, 75; L. Flaquer, and P. Jensen 71 Pickles, J. 53, 62 Pickles, J., and R. Begg 48 Polanyi, K. 22

policy, economic 226 Portes, A., and M. Castells 20, 37, 156 Portes, A., M. Castells, and L. A. Benton 177 Portes, A., and S. Sassen-Koob 39 Portes, A., and W. Haller 40 Portugal 84 post-socialist Europe see East-Central Europe post-structuralism 221, 228 poverty 50, 55–56 poverty escape (subsistence work) 70–72, 74–75 private households see household economic practices; households profit motif: and monetary exchange 3, 21–22, 23, 106–07, 227–28, 229 Prugl, E. 73 PUMS (Public Use Microdata Sample) 38 purchasers see employers Putnam, R. 107 Quebec, Province of 192, 206–11 Quebec City 194–96, 202, 207 questionnaire-type survey 195–96 Raijman, R., and M. Tienda 40 random-cluster type surveys 195 Ratner, S. 189 Ray, L., and A. Sayer 21 reciprocity 124–27, see also barter redistributive rationales 91–92, 108–09 reduction, of labor costs 154–56 regional economies: in Italy 120–27; in Pennsylvania 181–82; in Quebec Province 206–11 regulation 155, see also law enforcement; legislation Renooy, P. H. 16–17, 68, 78, 83, 88 renovation see home improvements repair work see construction work research see direct surveys; Formal and Informal Work in Europe project; indirect surveys; New York Day Labor Survey; surveys restaurant industry 160, 161 retirement allowances: and pension rates 126 retirement benefits 184 Reyneri, E. 119 rights: of U.S. day and low-wage workers 146, 148, 162 Rockwood Foundation study 68–70, 71 rural economies 5; in America 177–82; of East-Central Europe 55, 60, 61; English Localities Survey 98, 102, 105, 106–07, 109–10; in Pennsylvania 177, 181, 182–88, see also metropolitan areas; rural-urban continuum; urban economies rural-urban continuum 181–82, 195–96 Russia, post-socialist 50, 51–52 safety conditions 146–47 San Francisco area 163, 164

Index  239 Sassen, S. 68, 78, 120, 137 Sauvy, A. 20 Sayer A. 21 SCF (Survey of Consumer Finances) 196, 197, 207 Schatzki, T. 53 Schneider, F. 1, 35, 36, 37 Schneider, F., and D. Enste 52, 69, 72, 77, 153 Schuetze, H. J. 39 Schupp, J. 71, 75 second jobs 89 sectors, Canadian 203–06, see also childcare; cigarette consumption; construction work; domestic services; home improvements; renovation; service sector Seeth, H. et al 51 segregated informal employment 73, 74–75, 85–88 segregated unpaid work 85–87 Seif, H. 160 self-employment 39 self-provisioning activities 178, 179, 185, see also domestic food production self-regulated/other regulated continuum 3 semi-urban economies 181–82, 195–96 Sengenberger, W. 75 service sector: in Canada 203–05, 217–18; in Italy 123; in rural Pennsylvania 182–83, see also domestic services “shadow economy” 52, 69 short-term employment 125, 137, see also day laborers (New York) Siebel, W. J.: et al 72, 77, 78 Silver, H. 74 singles (i.e. not married): in Canadian surveys 196, 207, 216 skills: gendered 88; of U.S. informal workers 143, 147, 169, 185 Slovakia: household economic practices 54–55, 56–62; income inequality and poverty 55–56 Small Business Council 223 small construction contractors, New York 138 small firms: in Italy 123–27; and violation of labor laws 156 Smith, A. 54, 56, 61 Smith, A., and A. Stenning 53, 54 Smith, A., A. Swain, and A. Rainnie 50 Smith, R. S., et al 48 Smollet, E. 61–62 Snyder, K. 40 “the social” 90–92, 227–30 social change: in post-socialist Europe 50–51, 53–54, 61–62 social class: and domestic services 75, 78, see also socioeconomic status Social Compact 39 social networks: and gender variations in work supply 90–92, 93; in Italy 122, 124–25; payment and trust 93–94, 107–08; in rural

Pennsylvania 184–86; and social capital 107–08, 111, see also community-orientated informal work; families social polarization 47–51 social sciences 53, 227, 230 social security contributions: in Italy 121, 126 social welfare strategies 189, see also welfare state socialism, collapse of see East-Central Europe socio-cultural practices: in Germany 74–75, 78; in Slovakia 61–62; and social networks and attitudes 70 Socio-Economic Panel 71, 72 socioeconomic distribution 14–17 socioeconomic status: in Canada 196, 197, 198–99, 200, 202, 207, 212–13; of suppliers of informal work 104–05, 180, 181, 187–88, see also social class Soiffer, S. S. and G. M. Herrmann 22 South American immigrants 135, 141 Spain 84 spatial variations: in distribution of Californian informal workers 170; in English Localities Survey 102–05 spending: in Canada 200–201, 202–11, 215–16; gendered patterns of 90–91; on informal household work 102, see also employers; income(s) the state: of distrust in Germany 75–76 state intervention 67–68, 78 The State of Working Pennsylvania 2004 (Keystone Research Center) 182 Strath, B. 76 students 196, 197, 198, 200, 202, 208, 212, 215 subcontracting 124 subordinate/superordinate dualism 221, 222–27 subsistence food production 51–52 subsistence work (poverty escape) 70–72, 74–75 superordinate/subordinate dualism 221, 222–27 suppliers see workers (informal) supply/demand dichotomy 74, 206 Survey of Consumer Finances (SCF) 196, 197, 207 surveys: in Canada 193–96; in Germany 68–69; in rural America 178–82, see also direct surveys; indirect surveys survival strategy 179–80 Tanzi, V. 35 tax-free incomes 126–27 taxation rates 17, 35, 153; in Quebec Province 192, 193, 194, 206, 214 tenure: of New York day laborers 142, 147; of unauthorized immigrant workers 170 Theodore, N. 137, 149 theory see binarism; capitalism; globalization thesis; modernization thesis; poststructuralism Thetford, T., and E. Edgcomb 189

240  Index Thomas, J. J. 38, 66 Tickamyer, A. R., and S. Bohon 178, 181 Tickamyer, A. R., and T. Wood 40, 179 time see full-time/part-time dichotomy; overtime payments; tenure Tolbert, C. J., and R. E. Hero 160 “trace”: and history 62 trade unions 123 traditional gender roles 87, 184 training 143, 144, see also educational attainments transaction methods: and observed income 35–36 Travers, A. 23, 227 trust: social networks and payment 93–94, 107–08 unauthorized immigrants 139, 147, 149, 159–60, 170–75 underground economy 35–41 UNECE 50 unemployment: in Canada 196, 197, 207, 215; and gender 88; in Germany 71, 74; in post-socialist Europe 49–50, 54; in rural Pennsylvania 182–83, 187 unemployment benefits: in Germany 74, 76–77; in Italy 123, see also income; paid/ unpaid work; payment; wage rates unemployment-insurance: in Canada 196, 197, 202, 207, 214 United Kingdom: attitudes to informal work 70, see also English Localities Survey United States: home improvements market 138; immigrant workers in 135, 139, 141, 147; rural America 177–82, see also day laborers; diversity; diversity of informal work (California); Pennsylvania, rural unpaid work: see also income; paid/unpaid work; spending; unemployment benefits; wage rates urban economies 98, 102–05, 109–11, see also industrial workforce; metropolitan areas; rural economies; rural-urban continuum U.S. Census Public Use Microdata Sample (PUMS) 38 U.S. Department of Labor 161, 163 U.S. General Accounting Office 139 Valenzuela, A. 137 Valenzuela, A., and E. Meléndez 148 Van Eck, R., and B. Kazemeier 83 Viesti, G. 120 Vinay, P. 83 Vogel, R. D. 169 Voigtlaender, M. 77

wage rates: in Canada 207; and competition for labor 154–55; gender differences in 73, 84, 88–90; in Italian agricultural sector 119; in Italian artisan firms 123, 125–27; of New York day laborers 143–44, 145–46, 148; and payment of market rates 108; in rural Pennsylvania 183; and wage violations in California 157–58, 162, see also income; paid/ unpaid work; payment; unemployment benefits Warren, M. R. 19 Weiss, L. 122, 153 welfare benefits see unemployment benefits; unemployment-insurance welfare state 67–68; in Germany 75, 76; in Italy 114, 119–20, 121 Wial, H. 182, 183 Wilentz, S. 136 Williams, C. C. 22, 70, 92, 229 Williams, C. C., and C. Paddock 229 Williams, C. C., and J. Round 19 Williams, C. C., and J. Windebank 1, 4, 16, 19, 24, 40, 66, 70, 128, 153–54, 159, 165, 168, 174, 225 Wilson, Pete 158 Windebank, J., and C. C. Williams 35, 38 women: as domestic workers in Germany 72, 73, 75; and employment ratio 48; gender, and informal work 82, 84, 94, 128; levels of pay 72, 73; in rural Pennsylvania 183–84, 185–86, 187, see also gender work-welfare arrangement, informal employment in (Germany) 66–78; and development of informal employment 67–68; explanations of 73–77; gender differences in wage rates 89; special features of informal employment 68–73 worker centers, New York 148–49 workers (informal): in Canada 196, 197–202, 214–16; in Italian agricultural sector 119; in Italian artisan firms 123; knowledge of labor law 156; location of, and affluence 15, 103–05, 107–08, 225; motivation of 90–92, 109–11, 180; in rural America 179–80; supply of/demand for in Germany 74, see also day laborers (New York); labor force; motivation workforce laws see law enforcement; legislation World Bank 50, 55, 56 Ybarra, J-A. 20 Zelizer, V. A. 111