Micro-Determinants of Informal Employment in the Middle East and North Africa Region

Abstract

This note assesses the main micro-determinants of informal employment in the Middle East and North Africa (MENA) region from a human development stand point. It's main purpose is to quantify the patterns of labor informality (defined as the share of all employment with no access to social security) according to age, gender, education level, employment sector, profession, marital status, employment status, and geographic area in a selected group of countries in the region. Results indicate that the size of the public sector and the size of the agriculture sector are perhaps the main correlates of informality in the region. Countries where agricultural employment still constitutes a large share of overall employment (such as Morocco and Yemen) are associated with higher levels of overall informality. On the contrary, countries with larger public sectors and more urbanized such as Egypt, Syria, and Lebanon, display lower levels of overall informality. The existence of a large public sector, still associated with generous benefits and better employment quality, creates an important segmentation between public and private employment in many MENA countries. Informality rates are very high among youth between ages fifteen and twenty-four. After age twenty-four, informality decreases rapidly until individuals reach prime working age (forty to forty-five years). This rapid decrease in informality rates goes hand in hand with a rapid increase in public sector employment, suggesting that informal workers enter into public sector jobs as they move from youth into adulthood. Results also indicate that the average worker in the informal sector is disadvantaged versus the average worker in the formal sector, as they are uncovered against social risks and are generally employed in low-productivity/low pay jobs.

Who Is Covered and Who Under‐reports: An Empirical Analysis of Access to Social Insurance in Egypt

“…We carry the analysis distinguishing between these different types of workers because, as discussed earlier, the SI laws and regulations vary by workers' wage/sector status, which in turn may have important implications on the likelihood of access to SI among each type of worker. We control for the set of covariates commonly used in the informality and access to SI literature and available in our datasets (Auerbach et al, 2007;Pagés & Madrigal, 2008;Angel-Urdinola & Tanabe, 2012). The worker-specific characteristics vector, X i , consists of a dummy for being a woman, a dummy for being ever married (never married being the reference category), age and its square, the education level [categorically as illiterate and read and write (the reference), less than secondary, secondary and above secondary], years of experience and its square, and the occupation level [categorically as white collar high skilled (the reference), white collar low skilled, blue collar high skilled and blue collar low skilled].…”

“…This high cost of SI causes many employers to negotiate higher pay, with their potential employees, in return of not having SI coverage or to report lower basic wage and then the actual salary of their worker to the SI authority (Sieverding & Selwaness, 2012;Roushdy & Selwaness, 2015). These factors resulted in the expansion of informal wage work, which lacks any type of social protection benefits, in Egypt as in similar developing countries (Perry et al, 2007;Angel-Urdinola & Tanabe, 2012;Gatti, Bodor, Angel-Urdinola, & Silva, 2014). Furthermore, the SI coverage gap among non-wage workers has been even larger.…”

Accounting for failures to reform in the Arab world

“…The wider environment for innovation has been unpropitious. The informal economy has remained very large – a recent estimate suggested that over two‐thirds of the labour force is in informality (Angel‐Urdinola and Tanabe, ) – but has operated at generally low levels of productivity and with poor incentives to make the transition to the formal economy. Consequently, productivity levels in the Arab world have on average remained relatively low…”

Urban Informality and Small Scale Enterprise (SME) Development in Zambia: An Exploration of Theory and Practice

“…They perceive informality from the point of view of firms, workers and untaxed activities [19]. They assert that informality constitute of small unregistered firms, with employers and employees as well as the self-employed individuals working on their own or in family businesses.…”

“…They assert that informality constitute of small unregistered firms, with employers and employees as well as the self-employed individuals working on their own or in family businesses. With respect to taxation, they argue that informality consists of activities that are hidden from taxation [19].…”