Labor Market, Informal
Labor Market, Informal
PARTICIPANTS IN THE INFORMAL LABOR MARKET
SOCIAL RAMIFICATIONS IN THE INFORMAL MARKET
In the contemporary global capitalist economy, labor represents a commodity that is bought and sold. The labor market can be divided into two distinct spheres: the formal labor and the informal. State agencies monitor the formal labor market by tracking all income-generating activities that require routine censuses, regulation, and taxation. However, when the formal market fails and unemployment rises the informal sector can become the best available option for people, who either lack credentials (e.g., education, legal status) or have other types of barriers to entering the formal labor market (e.g., discrimination, age, care-work responsibilities). In Affluent Players in the Informal Economy (1997), Pierrette Hondagneu-Sotelo found that the informal economy is “synonymous with survival strategies used by the poor, the underprivileged, and those outside of the class system” (p. 134). Hence, the growth of the informal labor market becomes a survival mechanism for disenfranchised and vulnerable groups, such as people of color, undocumented immigrants and women.
Also known as the shadow economy, sub-economy or underground economy, the informal sector involves the production of legal goods and services in an unregulated system. It usually involves indiscretions such as tax evasion and unlicensed businesses, given that most transactions involve cash exchange to escape detection or records. Manuel Castells and Alejandro Portes posit that the informal labor market constitutes “the process of production and income-generating activity outside of regulatory institutions and the formal market system” (1989, p. 12). The informal economy is distinct, however, from the illegal economy, which includes activities such as prostitution, gambling, and drug-dealing. People labor in the informal labor market for a variety of reasons. Informal workers often do not have the legal means of obtaining secure employment or earning a living wage in the formal sector because they do not have legal documents or a valid social security card to secure employment. Nevertheless, the formal and informal labor markets function interdependently and are co-dependent. At times, an increased share of informality derives from subcontracts from the formal market, resulting in a greater need for informal workers increased profit.
The informal labor market is both an overt and covert activity where cash becomes the standard of exchange. This is commonly referred to as being “off the books” and “under the table.” Some people who labor in the informal sector work within the private sphere of their own homes. This allows them to conceal offering services (e.g., babysitting) or the production and selling of goods, while at the same time minimizing detection. In the public sphere businesses are visible to the public eye and income generation takes place in open locations, such as the streets. In other instances people participate in the informal sector barter in exchange for goods and services. For example, an auto mechanic may barter labor expended on a vehicle in exchange for landscaping work on his or her yard. Ivan Light and Steven J. Gold characterize the informal labor market as “an industry that lacks a permanent mailing address, a telephone, regular business hours, tax identities, and inventory” (2000, p. 40). Day labor, housecleaning, gardening and landscaping, street vending (food and merchandise), and child care are all forms of work within the informal labor market. The changing face of the informal sector derives from the state’s imposed constraints and opportunities enforced by the formal labor market. The formal economy rarely generates sufficient employment, which funnels surplus laborers into the informal labor market; this, in part, explains the persistence and expansion of the informal sector. There are three critical themes within the broad area of the informal labor market: self-employment, participants, and the social ramifications.
SELF-EMPLOYMENT
In the informal labor market, numerous individuals are self-employed in a range of activities. Informal enterprise often allows laborers and vendors to achieve a sense of agency, autonomy, and self-sufficiency by giving them the full control of their business operations. Some self-employed persons sell prepared fruits, clothes, crafts, pillows, or jewelry at conventional street locations by setting up stands on sidewalks or empty parking lots, or by transporting and peddling goods. Other vendors establish unlicensed businesses at local flea markets or swap meets that charge a daily fee for the use of an assigned space. Still others convert their living room spaces into pseudo-convenience stores where chips, sodas, and candies are sold. Taken together, self-employment in the informal sector takes various shapes and involves multiple forms of income-generation activities.
For some participants in the informal sector, self-employment is the principal source of income for people who are unauthorized to work in the United States. For others, informal income-generating activities are a viable way of supplementing wages from unstable jobs (e.g., temporary and part-time employment) in the formal sector. In this way, some people participate in both labor markets. In some instances, workers have regular employment in the formal sector and sell sodas and seafood cocktails at the local park to help them make a living. The formal economy often does not generate economic opportunities for all workers, and surplus labor gets funneled into the informal labor market, which contributes to the persistence and expansion of the informal sector. The informal sector is central to the economic subsistence of undocumented migrants, whose particular circumstances hinge upon a sort of anonymity, especially with regard to immigration and law enforcement officials, and to government agencies generally. Abel Valenzuela explains that some undocumented laborers undertake self-employment to regular wage work as a due to “labor force disadvantages such as physical disability, ethno-racial discrimination, unrecognized educational credentials, and exclusion from referral networks” (2001, p.349). In the same vein, Elaine L. Edgcomb and Maria Medrano Armington argue that “working in one’s own business allows one to be more invisible. There is no need to be constantly showing documents to agencies or other prospective employers, and be at risk of being discovered to have fraudulent ones” (2003, p. 27). Therefore, the informal market empowers people to become economically sufficient without adhering to formal employment conventions.
PARTICIPANTS IN THE INFORMAL LABOR MARKET
While the formal labor market benefits those who control and own the means of production, the informal labor market attracts marginalized people of color, women, and undocumented immigrants who must innovate to achieve subsistence. In many instances the formal sector excludes undocumented laborers by forcing them to negotiate with employers for job provisions and pay without a contract. Immigrants often lack legal documentation required by employers. In other situations, corporations and businesses subcontract their labor to intermediaries, who later employ unauthorized workers for low wages. This arrangement is pivotal in the accumulation of huge profits for it allows people to do business in cash and to avoid taxes and record-keeping. Edna Bonacich and Richard Appelbaum in Behind the Label (2000) show how apparel industry elites contract small Korean garment factory (sweatshop) owners, who hire numerous undocumented Latinas, especially Mexicans, “under the table,” thus avoiding both paying federal and state taxes and providing health and unemployment benefits that are more readily available to workers from the formal sector. This type of informal employment is actually connected to the formal sector but it can reduce labor costs and achieve higher profit margins, while also providing a cheap and expandable labor force. This organization of labor shows the interdependence between the informal and formal labor markets, which becomes central to the profit making machinery of certain industries.
Informal work often takes place in remote areas that are predominantly unregulated and in the private sector (e.g., homes), where detection is unlikely and the opportunity to benefit from an exploitable workforce increases. The sociologist Ivan Light argues that discriminatory practices in the labor market can force recently arrived immigrants to accept undesirable jobs with little lucrative payoff. Some of these jobs are also occupied by U.S. natives who have little human capital (e.g., education, job skills). Thus, the informal sector pits people of color, women, and undocumented immigrants against each other in fierce competition for low-status jobs.
It is important to keep in mind that the informal market provides economic opportunities for people from different backgrounds. For example, in his book Day Laborers in Southern California (1999), Abel Valenzuela notes that the overwhelming majority of day laborers in Los Angeles are undocumented male Latinos, with Mexicans being the single largest group of informal workers. Most of these unauthorized laborers experience overwhelming discrimination on the job. They wait on street corners or hiring sites hoping that employers will pick them up for work in construction, roofing, or landscaping. Undocumented Latinas and Chicanas participate in the informal labor markets as well. Pierrette Hondagneu-Sotello (2001) observes that Mexican undocumented immigrant women often become employed in the domestic sector of the informal economy, performing live-in and live-out housekeeping or nanny duties. Most domestic work is obtained through informal and personal networks consisting of family, friends, or acquaintances. Some women who participate in the informal sector prefer the flexible schedule that gives them ample time to perform household chores and spend time with their families. Both Valenzuela and Hondagneu-Sotelo demonstrate how undocumented Latinos become part of an exploitable and racialized enclave in both the public and private sphere.
Similarly, African-Americans are another racialized and exploited group within the informal sector. Mitch Duneier, in his book Sidewalk (1999), highlights how a group of low-income, often homeless black men participate in the informal labor market by selling used books and magazines on the sidewalks of Greenwich Village, New York City. For these men, the informal labor market has become a survival strategy and coping mechanism. Likewise, Yvonne V. Jones (1988) depicts how inner-city African-American men engage in two forms of street peddling involving the sale of clothes, food items, and household products. Jones found that peddlers relied on mobile peddling, in which their vehicles became a means of transporting products to communities of color, and sedentary peddling, in which they stay in one location and rely on pedestrian traffic. Most business transactions involving sedentary activities take place in different busy sectors of the community. In this case, informality is a viable and necessary option that benefits the vendor and the larger community. Finally, Paul Stoller and Jasmin Tahmaseb McConatha (2001) focus on undocumented West African traders who participated in the informal sector by selling counterfeit goods. Taken together, the informal labor market becomes instrumental in helping disenfranchised men and women achieve economic betterment in a system that traditionally keeps them in the fringes of society.
SOCIAL RAMIFICATIONS IN THE INFORMAL MARKET
For participants in the informal labor market, achieving economic success is too often accompanied by substantial risk factors for undocumented immigrants, women, and people of color. Thus, achieving economic success in the informal sector comes with consequences. In particular, informal sector work does not provide health or disability benefits, and continued employment is dependent on remaining injury-free. The informal labor market makes undocumented men and women run the risk of injury due to their participation in poorly paid, unskilled, physical and hazardous jobs where occupational regulations are often disregarded and workers receive inadequate training. In such settings, certain workers perform work that fails to conform to health and safety standards. The lack of social protections corresponds to the risks of injury, disability and untimely death. When an undocumented worker becomes injured on the job, the incident is often not reported because the worker’s family depends on the day-to-day earnings. Other informal sector workers who get injured on the job may refuse services in order to conceal their undocumented status; these persons do not want to be stigmatized as “illegal aliens,” and they fear deportation. Finally, informal sector workers may not have enough income to pay for services and medication, and they may instead turn to unconventional means of healing.
Some informal sector workers run the risk of not getting paid at all because most transactions are established through verbal agreements. In certain situations, the worker may complete a shift or assignment, but the employer will not pay the worker because there is no paper trail or timesheet that proves work was performed. The worker has little recourse in such a situation. Harassment and humiliation is also commonplace occurrence for street vendors as a result of clashes with local merchants and law enforcement personnel. Public displays of humiliation, as well as the destruction or confiscation of processed goods and materials are means by which law enforcement attempt to expel vendors from certain public spaces. People participating in the informal sector encounter constant threats from the Immigration and Naturalization Service (INS) officials and police repression because they are seen as a law-breaking and uncivilized group. The constant dehumanization of undocumented workers influences law enforcement personnel to react with repulsion and conflict.
With the continued expansion of a global economy, the displacement of people from peripheral nations, and the oppression of American ethnic and racial communities, most developed-capitalist nations will continue to simultaneously experience both increased migration and informal economic activities. In fact, formal and informal labor markets can not survive without an exploitable workforce of immigrants and people of color. It is likely, however, that anti-immigrant and nativist groups will continue to publicly express opposition to immigrants and people of color who participate in the informal sector by scapegoating these marginalized groups. Thus, U.S. society will maintain and reproduce a racialized labor force and rhetoric that legitimizes hate and inequality.
SEE ALSO Capitalism; Day Laborers, Latino; Immigrant Domestic Workers.
BIBLIOGRAPHY
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Xuan Santos