1. Transition to formality 24 to 28 August 2015, Lima, Peru Regional forum for the exchange of knowledge between countries in Latin America and the Caribbean

2. Transition to formality in Latin America and the Caribbean: Trends, policies and challenges

3. Trends in informality Large-scale Declining trend Very heterogeneous

4. Context Economic The region experienced strong economic growth during the decade 2000-2009 Growth forecasts for the decade 2010-2019 are ever decreasing. For the year 2015, the most recent predictions indicate that the region will grow by less than 1%. Socio-political There is great political will on the part of various governments: application of policies designed to promote formalization Social actors and international discussion of R204 Annual variation of gross domestic product (GDP) in LAC per decade (%) Note: predictions for the period 2014-2019. Source: IMF (2015). World Economic Outlook Database. April 2015.

5. Notable improvements on employment indicators up to the year 2013: Employment grew and unemployment dropped to a historic low of 6.2%. Wage employment increased: this allowed social security to be extended, and reduced informality The context has changed Unemployment is expected to increase in 2015. Labour market LAC: Employment and unemployment rates (% )

6. Registered employment 200020052010201120122013 Argentina100.0118.7152.9160.3 163.3165.5 Brazil100.0115.7147.1154.8 159.7 162.4 Chile100.0118.2156.5165.5 175.4 181.3 Costa Rica100.0116.1147.8152.5 157.8 161.1 El Salvador100.0108.6121.7125.8 128.4 135.3 Guatemala100.0110.4121.9127.1 130.5 134.5 Mexico100.0102.8115.2120.1 125.6 130.1 Nicaragua100.0123.2173.3187.4 202.1 218.2 Panama100.0108.5158.2174.6 186.4 194.1 Peru100.0107.1142.2149.9 155.8 160.3 Uruguay100.0110.7153.8161.2 167.5 170.5 Source: Cepal (2014).

7. Reduction in the rates of non- agricultural informal employment 2009: 50.1% 2013: 46.8% Large-scale: At least 130 million informal workers in the region Very heterogeneous Informal employment in the informal sector (30.5%) Informal employment in the formal sector (11.4%) Informal employment in households (4.9%) Non-agricultural informal employment (%) Note: Based on data from 14 Latin American countries. Population of > 15 years old. Source: ILO (2014). Thematic Labour Overview: Transition to Formality in Latin America and the Caribbean. 50.1 48.0 47.8 46.8 Informal employment 2009-2013

8. Informality rate Contribution to total informal employment TOTAL 46.8100.0 Employers and employees 33.752.7 Public sector 15.9 4.3 Private sector 32.9 38.1 1 to 10 workers 58.6 27.8 More than 10 workers 14.4 9.4 Domestic workers 77.5 10.3 Own-account workers 82.3 40.9 Unpaid family members 100.0 5.3 Others 96.7 0.0 Trends in formalization 2009-2013 Scale Informal employment: 46.8% Informal wage employment: 32.9% Heterogeneous: Own-account workers + workers in domestic service + workers in micro- and small enterprises Comprise 80% of informal employment Note: Based on data from 14 Latin American countries. Population of > 15 years old. Source: ILO (2014). Thematic Labour Overview: Transition to Formality in Latin America and the Caribbean.

9. Characteristics of informal employment in Latin America (2013) Note: Based on data from 14 Latin American countries. Population of > 15 years old. Source: ILO (2014). Thematic Labour Overview: Transition to Formality in Latin America and the Caribbean. Informality rate SexSectors Male44.5 Mining28.3 Female49.7 Manufacturing38.8 Electricity, gas and water10 Age Construction68.6 15-24 years55.7 Commerce, restaurants, hotels55.7 > 25 years44.9 Transport & communication49.7 Financial services26.2 Income Financial services41.2 1st quintile72.5 2nd quintile59.7 Educational attainment 3rd quintile51.9 Primary education or less64.4 4th quintile41.9 Secondary education46.2 5th quintile29.8 Higher education26.3

10. Informality and GDP Scale – 130 million workers in the informal employment Heterogeneity – Countries with similar levels of per capita GDP have different levels of informal employment

11. Integrated approaches as a response in LAC R204 Multidimensional responses Diversity in points of entry Institutional leadership and coordination Tripartite commitments

12. COUNTRIESINDICATORPERIODEvolution ArgentinaUnregistered wage employment2003 – 2012↓ 14.5 Brazil Informal employment (% of total employment) 2002 - 2012↓ 13.9 Colombia Informal employment (% of total employment) 2009 - 2013↓ 3.0 Ecuador Informal employment (% of total employment) 2009 - 2012↓ 10.8 Jamaica Informal employment (% of total employment) 2008 - 2012↓ 3.1 Mexico Informal employment (% of total employment) 2010 - 2013↓ 0.7 Paraguay Informal employment (% of total employment) 2001 - 2011↓ 5.8 Peru Informal employment (% of total employment) 2004 - 2012↓ 6.6 Dominican RepublicUrban informal employment2005 - 2010↓ 10.7 Uruguay Employment not registered with Social Security 2004 - 2012↓ 15.1 Source: ILO (2014). Recent experiences of formalization in countries in Latin America and the Caribbean. FORLAC Notes. Lima: ILO. FORLAC: Some experiences in reducing informality

13. ProductivityStandardsIncentivesInspection Macro (environment) Meso (sectors, chains) Micro (business level) Information Training Simplification Social dialogue (improvement, change) Link to business formalization (registry, taxes) Link to social security (focus on hard- to- reach groups and non-conventional methods) Specific approaches (formalization standards, specific agreements, etc.) Culture of compliance Institutional strengthening (advocacy management, automation) Specific approaches (substitution of fines with training, formalization agreements, etc). WAGE WORKERS OWN-ACCOUNT WORKERS DOMESTIC WORKERS INTEGRATED APPROACH Integrated approach: R204

14. Argentina National Plan for Employment Regularization National Plan to Combat Unregistered Employment Law to Promote Registered Employment and Prevent Employment Fraud Brazil SIMPLES SIMEI National Plan to Combat Informality in Wage Workers Colombia Law 1429 Formalization networks Formalization agreements Sectorial initiatives Mexico Programme for the Formalization of Employment Programme to Support Productivity Crezcamos Juntos (Let’s Grow Together) Some multidimensional experiences

15. Notes on MSE formalization (regional and for 4 countries) MSEs. – Approximately 60% of employment is informal. – More than 80% among own- account workers Some achievements – The formalization of enterprises does not necessarily leads the formalization of labour. Deelen 2015

16. Formalization and inspections (six countries + regional note) Inspections usually focus on wage employment Some countries have modernized the inspection services and in some cases they incorporate flexible criteria on compliance DIMENSIONINITIATIVES Culture of compliance Dissemination of standards Awareness-raising Tools to promote compliance Greater inspection capacity Greater number of inspectors Increased use of information and computing Specific approaches Simplification of procedures Technological solutions Flexible criteria on compliance Work in households Specific standards Specific solutions

17. Questions for participants How can a point of entry to formalization be transformed into multidimensional interventions? Institutional agreements? Plan, standard or resources? Leadership, coordination? Expected impacts? Deadlines?

18. Questions…: Some challenges in implementing integrated approaches Articulation between the macro level and sectorial/territorial levels Institutional mechanisms for policy processes Transition for non-wage forms of employment Closing quality and coverage gaps in services Representation and social dialogue in the informal economy Formalization in times of economic slowdown? Others

19. Objective FORLAC is the ILO’s Programme for the Promotion of Formalization in Latin America and the Caribbean launched at the end of 2013. Its goal is to contribute to the development and consolidation of processes of formalization in the region in coordination with governments and social actors. Strategic themes: – Generation and dissemination of knowledge, statistics and analysis on the informal economy and options in terms of policies to promote formalization – Technical assistance for tripartite constituents of the ILO and interventions applied in specific countries and sectors – Awareness-raising and capacity-building in institutions and among social actors to promote formalization.