The term 'informal economy' refers to all economic activities by workers and economic units that are - either in law or in practice - not covered or insufficiently covered by formal arrangements. In developing countries, informal labour forces are primarily comprised of self-employed people working from home or street-vending. They have neither official nor permanent places of business. Typically, the incomes of informal workers are low, and are also unpredictable. In many developing countries, the informal economy is the main source of employment for as many as nine out of every 10 workers.
This study reviewed market demand for informal economy work skills; the various types of education and training opportunities available to informal workers; the target populations of skills development initiatives; and the environments best suited to drive economic growth through the professional development of informal workers. It also includes a global literature review on the informal economies of developing countries, as well as in-depth case studies on efforts in Cambodia, India, Kenya, and Senegal. The research revealed a large, and frequently unmet, employer demand for better technical skills - particularly in high growth industries like manufacturing and tourism. Experts reported that current education and training programs, where they do exist, too often focus solely on technical skills without integrating non-cognitive skills. Across industries, abilities to communicate effectively, organise efficiently, and solve unanticipated problems are desired, and often required, in a valuable worker. Similarly, workers who remain informally-employed would benefit greatly from improved business and entrepreneurial skills. On the employer side, employers reported dissatisfaction with the qualifications they found within many pools of potential workers, and expressed desire for improved skills development programs. Unfortunately, this study found that school-based education and training programs seldom penetrate the informal economy, resulting in weak cognitive skills among most informal workers. This study found that while improving skills training is a necessity, it is only one component among many that are required to foster a thriving and inclusive economy. Increasing the overall productivity of the informal economy in developing nations will require holistic approaches that complement training interventions with new government policies, regulations, and incentives.
Excerpts from executive summary.
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