Creating jobs, reducing poverty III: Barriers to entry and growth in the informal sector – and business cycle vulnerabilities
In this extract from a new REDI3x3 book, the focus is on the constraints faced by informal enterprises in trying to enter, survive, grow, or increase employment. A lower tier of ‘survivalist’ enterprises and an upper tier of ‘growth-oriented’ enterprises is apparent, with barriers limiting entry into the upper tier. Selling into higher-value or formal-sector markets and value chains encounter significant structural barriers. And the sector is particularly vulnerable to severe cyclical downturns.
The debate on unemployment is fragmented into at least three sub-discourses, i.e. those of macroeconomists, labour economists and poverty analysts. This results in inconclusive analyses and narrow, flawed proposals to address the problem. This fragmentation feeds into the policy field. Sustainable and consistent remedies for unemployment and poverty will require an integrated analysis that covers the formal sector, the informal economy and survivalist activities – and especially linkages and barriers between these segments.