Although the term ‘informal sector’ has been described as an ‘unclear…but popular short-hand’ (Gilbert 1998: p. 65), it is generally used to refer to a wide spectrum of ‘precarious’ or ‘sub-terranean’ employment found in urban areas of developing countries (Portes and Schauffler 1993: p. 33).
The term was first coined back in the early 1970s when, in the wake of massive rural-urban migration and limited labour absorption in the expanding industrial sector of developing economies, academics and policy makers became increasingly interested in how the swelling ranks of the urban poor were managing to ‘get by’. On the basis of research in Ghana funded by the International Labour Office (ILO), the anthropologist Keith Hart found that low-income people who were unable to find waged work in import-substitution industries or the public sector devised wide-ranging and resourceful ways to generate income. From this, Hart developed the terms ‘formal’ and ‘informal’ employment, to refer to salaried jobs and self-employment respectively. He further distinguished between ‘legitimate’ and ‘illegitimate’ activities in the informal economy. The former comprised jobs that made a contribution to economic growth, albeit in small ways, such as petty commerce, personal services and home-based production. ‘Illegitimate’ informal activities, on the other hand, described occupations that, if not necessarily ‘criminal’ in nature, were arguably of dubious worth to national development. Activities falling under this heading included prostitution, begging, pickpocketing and scavenging (Hart 1973). Hart’s essentially positive conceptualisation of the legitimate wing of the ‘informal sector’ was taken up by the Kenya Mission of the ILO, with early definitions encompassing ease of entry, small size, individual or family ownership of enterprises, labour-intensive production methods, low levels of skill, capital and technology, and unregulated and competitive markets (ILO 1972; see also Table 38.1).
While it remains true that informal enterprises are often small in scale, use rudimentary technology and are characterised by self-employment or family labour, Roberts (1994: p. 6) asserts that the most generally accepted contemporary definition of the informal sector is ‘income-generating activities unregulated by the state in contexts where similar activities are so regulated’. Further noting that the formal sector is also characterised by a growing degree of informal labour arrangements, Roberts argues that ‘The persisting interest in the idea of an informal economy lies not in its analytic precision, but because it is a useful tool in analysing the changing basis of economic regulation’ (ibid.).
Definitions and characterisations of the informal sector have formed a major arena of debate over the years and are discussed in greater detail below. Other issues that have marked discussion