The OECD warns that the underground economy concentrates 60% of the world's workforce

Fighting the underground economy continues to be one of the most complicated problems for all countries in the world to solve. Singularly, because it draws from the particular circumstances in which the workforce works, and, therefore, from the sociopolitical enclave that leads it to separate itself from the system. The result is a symbiosis so deep-rooted that it requires a complex global transformation. According to a study by the Organization for Economic Cooperation and Development (OECD) published this Tuesday, six out of ten workers today operate outside the law worldwide, most of them in developing and emerging economies. And what is worse for the future: their children are predestined to follow in the same footsteps. Only a reinforcement of the social shield and the implementation of policies for the development of skills can end this vicious circle, according to the organization.

In the document, 166 pages long and titled Breaking the vicious circles of informal employment and low-paid work, the international organization—which brings together 38 countries, mostly industrialized nations—warns that people who have informal work represent 60% of the world's workforce. Informal employment includes those who are within the underground economy, a niche of workers among whom the lowest paid are more likely to fall into poverty, and to have difficulties related to health and old age. Both them and the members of their households.

Along these lines, the document warns that it is “extremely rare” for workers in this situation to change sides and move on to regulated (or formal) employment, and warns of the negative conditions that this transfer has in many cases. “Even when these transitions occur, they do not necessarily translate into an improvement in the income of the poorest workers,” the text points out.

This is so, according to an extensive analysis, due to the low training profile that defines these workers: around 45% have, at most, a level of primary education —while they are only 7% of those who have a regulated job— . A deficit that prevents them from applying for regulated positions with higher salaries. “This hinders the adoption of new technologies and productivity, perpetuating informal employment and maintaining a vicious intragenerational cycle of informality,” she adds.

The predestination of children of irregular workers to replicate the situation of their parents is one of the main red lights highlighted by the work of the OECD. “This is because their school attendance, starting at the primary level, is less than that of other children,” the text explains, because their parents “dedicate fewer financial resources and time to their education.” Hence, the transitions from school to work “are longer and more uncertain for them.”

More chances

Along with the photograph of precarious employment, the OECD report also details what aspects countries should focus on to address this reality. And it especially delves into two: the reinforcement of the social shield and policies for the development of skills. It is possible to extend social protection to workers in the informal economy “with a combination of contributory and non-contributory regimes” and with the “mobilization of additional income […] by reinforcing compliance and application of tax obligations, so that the cost of formalization is not disproportionately increased.”

In accordance with skills development policies, the international organization considers it essential to “create more specific training opportunities […] and public skills development programs adapted to their needs.” That is, through ways of recognizing the skills acquired through informal work. The text concludes that policymakers must recognize that “some workers will never be able to leave low-paid informal jobs,” and, therefore, they must face this double burden through “remuneration policies that address inequality” such as the establishment “of effective minimum wages” and “measures to improve the bargaining power of these workers.”

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