Transition to formal economy

More than 6 workers among 10 and 4 enterprises among 5 in the world operate in the informal economy. Contrary to the old forecasts, informality has not diminished over time and is even increasing in many countries. Informal economies are typically characterized by a high incidence of poverty and severe decent work deficits. Without formalization, decent work for all and equity in society will remain an illusion. In 2015, the ILO adopted the Transition from the Informal to the Formal Economy Recommendation. The Recommendation is a powerful tool to advance towards the attainment of SDGs. During the last years, a growing number of countries worldwide have developed strategies and policies to facilitate transition to formality. Social partners are also developing their relations with workers and enterprises in the informal economy.

Formalization of the economy is a complex and long term process that often requires to combine interventions on laws and regulations with those aiming to foster productivity and the ability to generate wealth. For part of the workforce, the reduction of decent work deficits is the first step toward a progressive formalization in the longer term. The significant reduction of informality in some countries illustrates that achieving results is largely possible.