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How Close Are Formal and Informal Work? International Journal of Sociology and Social Policy How close are formal and informal work? Joanna Shapland, Jason Heyes, Article information: To cite this document: Joanna Shapland, Jason Heyes, (2017) "How close are formal and informal work?", International Journal of Sociology and Social Policy, Vol. 37 Issue: 7/8, pp.374-386, https://doi.org/10.1108/ IJSSP-06-2016-0071 Permanent link to this document: https://doi.org/10.1108/IJSSP-06-2016-0071 Downloaded on: 07 September 2017, At: 03:16 (PT) References: this document contains references to 37 other documents. Access to this document was granted through an Emerald subscription provided by All users group For Authors If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.com Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services. Downloaded by University of Sheffield At 03:16 07 September 2017 (PT) Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. *Related content and download information correct at time of download. The current issue and full text archive of this journal is available on Emerald Insight at: www.emeraldinsight.com/0144-333X.htm IJSSP 37,7/8 How close are formal and informal work? Joanna Shapland 374 School of Law, University of Sheffield, Sheffield, UK, and Jason Heyes Received 20 June 2016 Management School, University of Sheffield, Sheffield, UK Accepted 24 June 2016 Abstract Purpose – Recent changes in the UK to the regulation and modes of work in the formal and informal economies are considered. Research in this field has tended to remain in silos (treating formal economy working conditions separately from research on the informal economy). The question is whether the means of work and benefits to the worker for formal and informal work are now as different as the former images of formal and informal economy work imply under a “jobs-for-life” economy. The purpose of this paper is to consider whether the current aim of government regulation of the informal economy – to formalise it – is actually of benefit to workers, as might be supposed. Design/methodology/approach – This paper considers recent research findings on the formal and informal economy, using official government statistics for the UK and more detailed European studies on the informal economy. Findings – This paper argues that formal employment in the UK is becoming more casualised, with less associated benefits to employees. Though it is still of benefit to the state to formalise informal work (to increase tax take), some of the links between formalisation and a good working environment for workers are being broken, which may lead to the informal economy becoming more popular and requiring different priorities in its regulation. Originality/value – This paper argues that we need to change our assumptions and image of work in the formal economy, compared to that in the informal economy. Keywords Informal economy, Employment conditions, Criminal economy, Formal economy Paper type Conceptual paper Introduction The most accepted definition of the informal economy sees it as the shadow, or other, of the formal economy. Hence, the informal economy has been defined as a productive activity that does not fall within the ambit of a country’s GDP (International Labour Organisation, 2002). There have been differences amongst scholars as to whether it should be measured in terms of individual workers, or work or firms. However, the key distinction Downloaded by University of Sheffield At 03:16 07 September 2017 (PT) is between paid work which is declared (normally by firms/employers but sometimes by employees) to the state and on which state dues, such as taxes and insurance or pension contributions, are paid, and paid work which is not declared and on which no such dues are paid (European Commission, 1998). In general, work has also been seen as falling into one of these two categories: formal or informal. It has often been assumed that a productive activity which is illegal, in the sense of being outside the criminal law, will then naturally fall within the informal sector. So, for example, it has been assumed that the importation, distribution and sale of illegal drugs and the illegal activities associated with prostitution (such as pimping, running a brothel or, in some countries, prostitution itself) will be in the informal economy. Doubt has been thrown International Journal of Sociology © Joanna Shapland and Jason Heyes. Published by Emerald Publishing Limited. This article is and Social Policy published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, Vol. 37 No. 7/8, 2017 pp. 374-386 distribute, translate and create derivative works of this article ( for both commercial & non-commercial Emerald Publishing Limited purposes), subject to full attribution to the original publication and authors. The full terms of this 0144-333X DOI 10.1108/IJSSP-06-2016-0071 licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode on this assumption by the recent instruction from the EU to its member countries, acted Formal and upon by the UK in 2014, that some of these criminal activities should be included within informal work GDP so that the measurement of GDP includes a better representation of work activity. In the UK, this has been done by the Home Office estimating the size of the illegal drug and prostitution markets (Monaghan, 2014). It is less clear whether the corollary is that drug importers and dealers and pimps are now expected to declare their income and pay the relevant dues (or whether, if they do so, they may then escape prosecution, though 375 presumably, they will not be pursued by the Revenue and Customs for VAT, etc.). There have been similar assumptions that, in return for declaration, workers in the formal economy receive benefits from the state and also some from their employers. In contrast, workers in the informal economy are not seen as benefiting from the regulation imposed by the state, so they will not automatically receive sick pay, holiday pay, good employment conditions inspected by workplace regulators, pensions, etc. Continuing in informal work over a period of time can leave workers (and their families) in poverty and without long-term rights (Katungi et al., 2006; Godefroy, 2003). Moreover, their employment is not normally subject to a written formal contract, so they can be fired without recourse to tribunals, subjected to physical enforcement methods if they are not performing (e.g. beaten up), not paid on time, etc. The contractual and regulatory framework for formal work is obviously different amongst different countries, so these benefits may be more or less applicable. These assumptions that workers in the formal economy receive greater benefits than those in the informal economy depend to some extent though, on equating “state” and “employer”. Hence, it tends to be assumed that if the state mandates or encourages particular aspects of employment law or employment relations, then employers will follow suit. Contractually, though, there is no such thing as a three-party contract, such that whatever one party requires, the other two obey. The state may wish for employer-employee relations to be of a certain order, but unless the state takes the powers to regulate that order and puts in mechanisms and funds to enforce the regulation of the order, it will not necessarily happen. As many have commented, regulation is only as good as its enforcement (Hawkins, 1984; Dickens, 2012). This implies a need for government agencies (i.e. labour inspectorates) that have the capacity to detect infringements of employment rights and take appropriate action against firms that are found to be non-compliant. Effective regulation also requires that workers (and other citizens) who suspect compliance failures are provided with means of alerting relevant authorities, and enforcement is much easier to attain for certain types of work and in certain types of environment. So, for example, there are clear standards for the guarding of machinery and holes in the ground, the pollution of rivers and the release of radioactive substances (see, e.g. Health and Safety Downloaded by University of Sheffield At 03:16 07 September 2017 (PT) Executive, 2015; Hawkins, 1984). It is much harder to measure and enforce the levels of stress in call centres or the risk of violence posed by the public in hospitals or shops (Health and Safety Executive, 2007). Furthermore, certain occupations, such as domestic workers and street vendors, and workplaces, such as family homes and micro-businesses, are particularly difficult to regulate effectively. In this paper, we wish to raise the possibility that the assumptions that workers in the formal sector are better regulated and receive more protection in employment are increasingly being placed into doubt in England and Wales and some other Western countries by the changes in employment and the ways in which work is done. The distinctions between formal and informal work have arisen economically and sociologically in the last half of the last century (Verhage and Shapland, 2013), a time at which centralised forms of work organisation with predominantly formal employment (the so-called Fordist model of employment and work) were well established.
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