Informal workers’ vulnerability risks are passed on to their children: OECD

New report calls on governments to extend social protections to break the cycle of low-paying work

By Madhumita Paul
Published: Thursday 18 January 2024
Photo: iStock

The majority of the world’s employed population works in informal settings, according to a new report by international policy advisor Organisation for Economic Co-operation and Development (OECD). These workers face high poverty and occupational risks and the lack of adequate social protection arrangements leaves workers and their families in the informal economy especially vulnerable.

In households where all family members are informally employed, children inherit their parents’ vulnerabilities in the workplace, said the report Breaking the Vicious Circles of Informal Employment and Low-Paying Work released January 15, 2024

On average, around 60 per cent of all children aged under 15 years in developing and emerging economies live in completely informal households. The figure is 80 per cent or higher in some African countries, the OECD found.

The report identified four ways in which children inherit vulnerabilities when their parents work in informal settings: 

  • More children live in fully informal households, meaning direct exposure to informal employment
  • School attendance gaps between children from fully informal, mixed, and formal households widen as they progress to higher levels of education
  • Their education receives less financial resources and parental time
  • Transitioning from school to work takes longer and is more uncertain for them.

An individual’s likelihood of landing a formal job is positively and significantly influenced not only by their own level of education, but also by their parents’ education and employment. Children from fully informal households are more likely to work informally as adults, simply because they were raised in an informal household, the OECD said.

Children’s school attendance is another indicator of parental informality. Children from fully informal households have significantly lower school attendance rates than those from mixed or fully formal households.

In some countries, differences in school attendance between children from fully informal households and those from mixed or fully formal households can be seen as early as primary and lower secondary schooling and they widen significantly at the upper secondary and post-secondary non-tertiary education levels. The difference is 15.7 percentage points between children from fully formal and fully informal households and 9 percentage points between fully formal and mixed households.

In addition, formal households spend more on education per child than informal households. Earnings disparities among parents and household types lead to educational disparities early in their children’s lives. The COVID-19 crisis exacerbated these existing inequalities by limiting access to parental assistance.

The educational disadvantage of children from informal households translates into a clear disadvantage for young people. The share of ‘not in education, employment or training’ or NEET is higher for those from informal households than for those from mixed and fully formal households. A NEET is an unemployed person who does not receive any education or vocational training.

These young people are also more likely to participate in informal apprenticeships. In sub-Saharan Africa, informal arrangements are the most common. They usually take the form of acquiring trade or craft skills in a micro or small business or workshop, where they can learn and work alongside an experienced practitioner.

According to the International Labour Organization’s School-to-Work Transition Surveys, more than three-quarters of young people in developing and emerging economies begin their employment in informal settings. 

Young workers have the best chances of finding formal work in Europe and Central Asia, as well as, to a lesser extent, Latin America and the Caribbean (except for El Salvador and Peru). In contrast, in sub-Saharan African countries, up to 95 per cent of young workers are in informal employment.

To strengthen foundational skills as a foundation for all workers’ future learning, the report proposed policies such as investing in accessible quality education to equip future workers with solid foundational skills, preventing school dropouts, and smoothing school-to-work transitions for young people, particularly those from informal households.

But, the effective implementation and co-ordination of these policies requires collaboration between government agencies, educational institutions, employers and civil societies. 

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