In South Asia and sub-Saharan Africa, “ubiquitous” moonlighting is largely the result of low human capital and large agricultural sectors.
(Washington) Undeclared work represents more than 70% of total employment in emerging and developing countries, a level such that it compromises their growth and accentuates poverty especially in the context of the pandemic, warns the World Bank.
In these countries, “far too many people and far too many small businesses are operating outside the sight of governments in an area where little help is available to them in an emergency such as the COVID crisis. -19 ”, underlines Mari Pangestu, director general of development policy and partnerships of the World Bank, in a report published Tuesday devoted to this phenomenon.
The “informal” sector represents about a third of the gross domestic product (GDP) of these countries, she explains.
In this study, entitled “The Long Shadow of Informality: Challenges and Policies”, presented as the first comprehensive analysis carried out by the Washington institution, the authors demonstrate that moonlighting greatly undermines the recovery and development of these countries.
All indicators are thus affected by a very high informal sector: lower per capita income, greater poverty, greater income inequality, less developed financial markets and lower investments.
These economies are also further removed from achieving the Sustainable Development Goals.
Because it is “surprisingly high”, moonlighting “decreases the capacity (of these countries) to mobilize the budgetary resources necessary to support the economy in times of crisis, to conduct effective macroeconomic policies and to strengthen capital. human for long-term development ”, summarize the authors of the study.
The public revenues of emerging and developing countries with above-average moonlighting represent around 20% of GDP, or 5 to 12 percentage points below the level observed in other countries.
A discriminatory phenomenon
Public spending is also 10 percentage points of GDP lower.
In addition, moonlighting is also discriminating since it affects women and young people with little qualifications more.
“In the midst of the COVID-19 crisis, they are often left behind, with little reliance on social safety nets when they lose their jobs or experience severe loss of income,” said Mari Pangestu.
The degree of the informal sector varies “considerably” across regions and countries.
As a percentage of GDP, it is thus highest in sub-Saharan Africa, at 36%, and lowest in the Middle East and North Africa, at 22%.
In South Asia and sub-Saharan Africa, “ubiquitous” moonlighting is largely the result of low human capital and large agricultural sectors.
In Europe and Central Asia, Latin America and the Caribbean, as well as the Middle East and North Africa, heavy regulatory and fiscal burdens and weak institutions have played an important role in its development.
Yet the informal sector had been on a downward trend for three decades before the pandemic.
Between 1990 and 2018, on average, it fell by around 7 percentage points of GDP to 32% of GDP.
This decline partly reflected political reforms.
The authors of the report therefore make five main general recommendations to policy makers to reverse this downward trend.
They advocate first of all adopting a “comprehensive approach” insofar as informality reflects widespread underdevelopment while adapting measures to the situation of each country.
They further recommend improving access to education, markets and finance “so that workers and enterprises in the informal sector become sufficiently productive” not to resort to moonlighting.
They invite countries to improve the business climate and finally, “to rationalize tax regulations” to reduce the cost of legal labor and increase that of black labor.
