Editing Informal economy (section)

==Characteristics==
[[File:Jakarta_slumlife62.JPG|thumb|[[Waste picker]] in [[Indonesia]]]]
[[File:Butifarrero.jpg|thumb|[[Street vendor]] in [[Colombia]]]] 
[[File:Handkerchief_vendor,_Mysore.jpg|thumb|Street vendor in [[India]]]]
The informal sector is largely characterized by several qualities: skills gained outside of a formal education, [[Free entry|easy entry]] (meaning anyone who wishes to join the sector can find some sort of work which will result in cash earnings), a lack of stable employer-employee relationships,<ref name="Meier 371-375" /> and a small scale of operations.<ref name="www.rrojasdatabank.info" /> Workers who participate in the informal economy are typically classified as employed. The type of work that makes up the informal economy is diverse, particularly in terms of capital invested, technology used, and income generated.<ref name="www.rrojasdatabank.info" /><ref name="Meier 371-375" />

The spectrum ranges from self-employment or unpaid family labor<ref name="Meier 371-375" /> to street vendors, shoe shiners, and junk collectors.<ref name="www.rrojasdatabank.info" /> On the higher end of the spectrum are upper-tier informal activities such as small-scale service or manufacturing businesses, which have more limited entry.<ref name="www.rrojasdatabank.info" /><ref name="Meier 371-375" /> The upper-tier informal activities have higher set-up costs, which might include complicated licensing regulations, and irregular hours of operation.<ref name="Meier 371-375" /> However, most workers in the informal sector, even those are self-employed or wage workers, do not have access to secure work, benefits, welfare protection, or representation.<ref name="ilo" />
These features differ from businesses and employees in the formal sector which have regular hours of operation, a regular location and other structured benefits.<ref name="Meier 371-375">{{cite book|last1=Meier|first1=Gerald M.|last2=Rauch|first2=James E.|title=Leading Issues in Economic Development|date=2005|publisher=Oxford University Press|location=New York|pages=371–375|edition=8}}</ref>

According to a 2018 study on informality in Brazil, there are three views to explain the causes of informality. The first view argues that the informal sector is a reservoir of potentially productive entrepreneurs who are kept out of formality by high regulatory costs, most notably entry regulation. The second sees informal forms as "parasitic forms" which are productive enough to survive in the formal sector but choose to remain informal to earn higher profits from the cost advantages of not complying with taxes and regulations. The third argues that informality is a survival strategy for low-skill individuals, who are too unproductive to ever become formal. According to the study the first view corresponds to 9.3 percent of all informal forms, while the second corresponds to 41.9 percent. The remaining forms correspond to low-skill entrepreneurs who are too unproductive to ever become formal. The author suggests that informal forms are to a large extent "parasitic" and therefore eradicating them (e.g., through tighter enforcement) could produce positive effects on the economy.
<ref>{{cite journal |doi=10.1257/aer.20141745|title=Firms, Informality, and Development: Theory and Evidence from Brazil|journal=American Economic Review|volume=108|issue=8|pages=2015–2047|year=2018|last1=Ulyssea|first1=Gabriel|hdl=10419/176115|s2cid=42566174|url=http://www.econ.puc-rio.br/uploads/adm/trabalhos/files/td632.pdf}}</ref>

The most prevalent types of work in the informal economy are home-based workers and [[street vendors]]. Home-based workers are more numerous while street vendors are more visible. Combined, the two fields make up about 10–15% of the non-agricultural workforce in developing countries and over 5% of the workforce in developed countries.<ref name="ilo" />

While participation in the informal sector can be stigmatized, many workers engage in informal ventures by choice, for either economic or non-economic reasons. Economic motivations include the ability to evade taxes, the freedom to circumvent regulations and licensing requirements, and the capacity to maintain certain government benefits.<ref name="Gerxhani">{{cite journal|last1=Gërxhani|first1=Klarita|title=The Informal Sector in Developed and Less Developed Countries: A Literature Review|journal=Public Choice|volume=120|issue=3/4|pages=267–300|doi=10.1023/b:puch.0000044287.88147.5e|year=2004|citeseerx=10.1.1.17.2818|s2cid=15775874}}</ref> A study of informal workers in Costa Rica illustrated other economic reasons for staying in the informal sector, as well as non-economic factors. First, they felt they would earn more money through their informal sector work than at a job in the formal economy. Second, even if workers made less money, working in the informal sector offered them more independence, the chance to select their own hours, the opportunity to work outside and near friends, etc. While jobs in the formal economy might bring more security and regularity, or even pay better, the combination of monetary and psychological rewards from working in the informal sector proves appealing for many workers.<ref>{{cite book|last1=Meier|first1=Gerald M.|last2=Rauch|first2=James E.|title=Leading Issues in Economic Development|date=2005|publisher=Oxford University Press|location=New York|page=373|edition=8}}</ref>

The informal sector was historically recognized as an opposition to formal economy, meaning it included all income earning activities beyond legally regulated enterprises. However, this understanding is too inclusive and vague, and certain activities that could be included by that definition are not considered part of the informal economy. As the [[International Labour Organization]] defined the informal sector in 2002, the informal sector does not include the criminal economy. While production or employment arrangements in the informal economy may not be strictly legal, the sector produces and distributes legal goods and services. The criminal economy produces illegal goods and services.<ref name="ilo" />  The informal economy also does not include the reproductive or care economy, which is made up of unpaid domestic work and care activities. The informal economy is part of the market economy, meaning it produces goods and services for sale and profit. Unpaid domestic work and care activities do not contribute to that, and as a result, are not a part of the informal economy.<ref name="ilo" />