Employment and activity in the informal economy

In last week’s column, I wrote about the inability of many workers to find employment in the modern (otherwise often called, “organized” or “formal”) economy where the good jobs are found.

The informal sector. It is in the informal sector where those who cannot find good jobs in the modern sector are absorbed. Here the rules and regulations of work and employment are ignored, or simply do not apply.

The informal sector is filled with people who toil hard for a living. Yet, in general, they receive incomes that are often far less than those received within the modern, or organized, sector.

Rather than define the characteristics of informal activities, we can really fully appreciate their wide coverage by citing the range of examples we encounter daily.

Many informal activities are found in crowded local communities where trading abounds. Generally, they are in services – simple retail and singular offers of specific services.

Food stalls abound where there are people who need to eat outside their homes and when at work.

We see communities that satisfy the needs of students in a university area. Thus, small shops and services meet the needs of students for books, stationery, ID photos, photocopying, eating, printing, computer, internet, quick food stalls, houses turned into dormitories and bed-spaces, etc.

Where populations live crowded together with some purchasing power, sub-communities thrive to meet their needs. Along with bigger, organized establishments that serve the same purposes, small, competing and substitute activities grow.

In the wet markets which cater to daily family needs, the establishments are mostly small, owner-run, and most of the selling is by very busy merchants who are self-employed.

The same is true in dry goods markets that consumers and producers go to for the satisfaction of their own needs.

These are active industries that arise because there is a need. Often, these establishments are in competition with organized economic activities by providing a service that is comparable, but available at very low prices.

At the extreme, we see retail traders that ply their activities along the traffic-clogged and crowded streets and avenues.

Manila Mayor Isko Moreno might be scoring big points by getting rid of sidewalk vendors that have clogged the city’s thoroughfares and walkways. He is likely to be conflicted by the problem of where the vendors will earn their livelihoods if they are driven off their places of work since they are, after all, residents of the city.

We have inexhaustible examples. Those who do self-employment, no matter how low the income are part of the informal sector.

We could even go to more extreme examples. Those who go into crime for lack of jobs are part of the informal sector. There are 10 percenter corruptors for facilitations of actions. Near city slums that are close to main thoroughfares, we see beggars among the old and the young. And young children are sent to sell sampaguitas, to do carwash or car watch by their parents who are poor. Think garbage collectors and recyclers, Payatas, etc.

Example of the Banawe St. automotive repair trade market. I end by describing an informal economic activity that is a thriving component of a growing economy.

It is a market for the repair of second hand vehicles of all types, where practically any problem could be attended to by an industry that has sprung out of the need to repair and maintain a large population of old vehicles of different brands (mostly Japanese, Korean, and Asian made vehicles).

I had a direct experience with the Banawe car repair industry. My 10-year-old car had an air-conditioning problem that had become serious.

My driver suggested Banawe car repair establishments instead of the car dealer’s shop. I was facing the ultimate car problem: to repair or to replace.

Once at Banawe, the drivers of cars who are shopping for repair needs face an endless number of agents, facilitators, and repairmen who compete for the chance to make a living.

These are persons with tie-ups with spare parts sellers and/ or repair shops. They earn commissions on the jobs and on the cost of parts that they procure for the repair. Sometimes, they themselves participate in the repair jobs.

Once the repair need was diagnosed, we agreed on a price and a contract to repair. That price included the parts and the labor for fixing the problem.

My needs were specific.

Both jobs were done within the same day, in fact, within three hours. The cost of the repairs turned out to be a small fraction of what it would have set me back if I went to my car dealer to repair. At the latter’s price, I would probably surely junk my car.

So far, the car works well again. My wonder is how long the repairs would last even with the warranty for the job done at Banawe.

The main point of this story, however, is related to the labor that works in the informal industry that is Banawe.

I asked the workers who did the job what they had done before. They used to be employed in big establishments. Some of them decided to go on their own, others were probably released from their jobs.

They work seven days a week. The weekends are the busiest. But they earn best in those days. Some of the workers are very skilled and well-compensated. Their incomes are, however, dependent on jobs being made available only. Others, however, are helpers at very low and variable subsistence pay per job.

My email is: [email protected]. For archives of previous Crossroads essays, go to: https://www.philstar.com/authors/1336383/gerardo-p-sicat. Visit this site for more information, feedback and commentary: http://econ.upd.edu.p h/gpsicat/