Lesson learnt: Formalization vs precarious employment: informal economy and secondary labour market

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The formalization of informal workers is often presented as a means of improving the living conditions of these individuals, characterized by a very high degree of uncertainty and exposure to the risk of falling into extreme poverty.

The project "Her right to decent work: Arab and Ethiopian women in secondary schemes of employment in Israel" implemented by a group of Israeli civil society organizations, aimed at improving the socio-economic situation of Arab and Ethiopian women workers. and to promote their rights to decent work.

The project has demonstrated the limits of this approach because of the phenomenon of the secondary labour market. As theorized by economists Doeringer and Piore [1]there is a dual labour market: one, characterized by a higher level of skills, social recognition and a higher salary level; and another, characterized by high turnover, low wages and precarious employment. In addition, mobility between these two markets is limited.

However, the formalization of informal workers leads them most often to operate on the second type of labour market because of their low qualifications. Consequently, despite their formalization, these workers continue to be exposed to social risks: in fact, although they can benefit from social security coverage, workers in the secondary labour market are exposed to strong competition and high levels of precariousness, which prevents them from fully enjoying their rights.

Thus, implementing "formalization of informal workers" projects does not always mean to improve their lives. In this sense, when providing informal workers with TVET and entrepreneurship programs, it is important to take into account the labour market opportunities to which they lead.

More detailed information on this good practice is available at the page 53 of the volume 4.3 “Good Practices and Lessons Learned – Case studies of 15 EC-funded projects”

[1] “Internal Labor Markets and Manpower Analysis”, Peter B. Doeringer, Michael J. Piore . M.E. Sharpe, 1985