Trade Unions in the Informal Sector: Finding Their Bearings Nine Country Papers

Trade unions in the informal sector: Finding their bearings Nine country papers

Labour Education 1999/3 No.116 Contents

Editorial V Africa Ghana Organizing informal sector workers requires nurturing dynamic links with the relevant public authorities and institutions, both national and international, that can provide the necessary support, by Kwasi Adu-Amankwah 1 Kenya To represent informal sector workers, the trade unions need to set in place an enabling legal environment by using their channels of communication with the Government to bring the plight of these workers to the attention of those in authority, by Noah Chune and Lawrence Egulu 15

Asia India The interests of the organized and the informal sectors are considered conﬂictual: organized labour, privileged and protected, sees unorganized labour in the informal sector as a threat to the perpetuation of their current position, by C. S. Venkata Ratnam 25 The Philippines Trade unions can play an important role in bridging the informal sector and policy bodies and institutions and at the same time develop the sector’s capacity to understand pertinent issues and to negotiate with the proper authorities, by Sandra Yu 48

Europe Bulgaria In conditions of declining industries, inefficient social dialogue and falling membership, trade unions need to mobilize potential local actors, social partners and interest groups and draw support from central policies which could provide the necessary dynamics for change at the local level, by Grigor Gradev 67 Hungary The major difficulty in addressing the issue lies in the broad alliance of strong interests to maintain the informal sector in place: while it undermines public services, weakens social protection, interferes with economic competition and enfeebles trade union strength, it also contributes to the survival of the most vulnerable groups of labour who have lost their positions in the labour market, by L. Héthy 84 Italy It is apparent that trade unions need to take steps to secure the representation and protection of workers engaged in the many new patterns of work which have come to the fore in order to avoid improper competition in worker- recruitment methods leading to segmentation and conﬂict in the representation of the federal trade union, by B. Angeloni; M. Giovine; M. Marocco; A. Mocavini; V. Parisi; C. Prestileo; C. Tagliavia 95

III Latin America Colombia For Colombia’s trade union national centres, the organization and claims of informal sector workers have not so far been a priority in their present platform and day-to-day business, but they must take prompt action to set up activities aimed at organizing and training informal sector workers and responding to their claims, by Ofelia Londoño Urrego 117 El Salvador Trade union organizations must understand the important contribution of the informal sector to the country’s social and economic life, the trend towards informalization of work, and hence the need to organize the sector, not only because of their role in improving the living conditions of workers, but also because the very future of the trade union movement largely depends on organizing in this sector, by José Víctor Aguilar Guillén 135

IV Editorial

For a long time, the informal sector has been regarded as a passing phenomenon linked to the cycle of economic development. Current statistical data representing the product of over 30 years’ analysis and experience have proved this not to be the case. Throughout recent decades, instead of disappearing as the modern economy expanded, the informal sector has actually grown in the rural and urban areas of most developing countries. At the same time, the industrialized countries have witnessed a gradual evolution of the informal sector within their labour markets. This process has manifested itself in the burgeoning of more vulnerable forms of employment and income erosion in traditional sectors. Lauded by some experts for its job potential and the dynamism it brings to the economy, tolerated by others for its role as a social stabilizer, and often criminalized as a source of exploitation and social exclusion, the informal sector has not become any less of a reality in the context of globalization, which holds great promises as the century draws to a close. Since the beginning of the 1970s the informal sector has been the focus of increasing attention in international discussion on economic development. The International Labour Organization has undoubtedly played a major role in understanding the phenomenon and in formulating policies governing the sector. The traditional policy advocated and implemented by the International Labour Office adopts a positive and integrated approach, combining the promotion of productive potential and employment in the sector and the improvement in the welfare of the groups concerned through the establishment of appropriate protective measures. Thirty years of ILO experience have demonstrated that the two above-mentioned objectives are not irreconcilable. It is worthy of note, however, that taking the developments on the international labour market in recent years into account, the ultimate goal of the ILO, namely, the gradual integration of the informal sector into the modern economy, is far from being achieved. This calls for reﬂection on the policies affecting the sector, on the part of the parties involved, including workers’ organizations, and reinforcement of those policies. The recent ILO report entitled “Decent Work”, presented by the Director-General at the 87th Session of the International Labour Confer- ence in June 1999, has once again sanctioned the constitutional mandate of the Organization with regard to the improvement of working conditions in both formal and informal economies. The informal sector therefore occupies a key position in the ILO policy agenda and will be at the core of the work of the Organization in the years to come. For several years the discussions and work of trade union organizations have displayed heightened interest in the informal sector, both nationally and internationally. There has been more and more agreement within the trade union movement on the need to provide appropriate responses to the problems facing workers in the informal sector and this

V need is a pressing concern for many trade unions in developing countries. Despite broad recognition of this fact, there remains some doubt, within the trade union movement, as to the most appropriate measures to be implemented. It goes without saying that the informal sector presents several challenges to the movement. From a strictly economic point of view, the existence of the informal sector is more of a survival strategy, in the absence of employment alternatives, than a viable response to poverty and unemployment. In spite of its often significant contribution to the GNP of developing countries, an economic sector operating in general outside the legal, administrative and social framework would be an obsta- cle rather than a vector for growth and sustainable development. On the other hand, the deplorable conditions under which workers in the informal sector operate violate the very principles which trade unions strive to uphold. For a long time, some commentators have suggested that the unionization of workers in the informal sector is not within the competence of trade unions. Past and recent history disproves this claim: the situation facing most workers during the industrial revolution was strikingly similar to the plight of workers in the informal sector in developing countries today. They suffer all forms of abuse, long work days, unstable employment, low and irregular wages, and have neither rights nor protection. The argument in favour of the creation of trade unions is inspired by the desire to grant these workers a “voice”, to represent their interests and thereby lift the yoke of exploitation. This can be achieved only through the establishment of a legal framework, based principally on labour codes and industrial relations systems as we know them today. Clearly, the environment in which informal sector workers operate is considerably different from the prevailing environment in the modern economy. Traditionally, trade unions have targeted workers in a relationship of net dependence with respect to their employers, in a fixed workplace, with contracts which were more or less stable. In reality, none of these features usually apply to workers in the informal sector. This is a partial explanation for the difficulties now facing trade unions in organizing workers in the informal sector. The rigidity of the regulatory framework, heterogeneousness of work relationships, mobility and often invis- ibility of the workforce, inadequacy of union structures, and a dearth of human and financial resources are some of the factors which impede the work of traditional unions in the informal sector. Nevertheless, as stated in the following pages, union experience in this area is now multiplying and developing somewhat all over the world. Experience seems to show that the capacity of unions to take into account the needs and interests of these “new” workers can only expand through change at the level of policy, strategy, service, and even through changes of a structural or statutory nature. It is indeed a long-term process, but one which will ultimately reap benefits for the workers concerned, trade unions and for society as a whole. A provisional edition of this issue appeared on the eve of the ILO International Symposium on Trade Unions and the Informal Sector (Geneva, 18-22 October 1999), aimed at workers’ organizations to discuss the unionization of the informal sector. The ILO Bureau for Workers’ Activities promoted discussion among the participants and, at the same time, stimulated broad thinking within the trade union movement with a view to formulating policies which respond effectively to the needs of workers in the informal sector. Through its wealth of information on actual

VI and diverse experiences, this publication complemented the more strategic document prepared by the Bureau to serve as a working paper at the Symposium. The following nine national studies cover four regions of the world and reveal the stakes and problems which the multifaceted informal sector poses for the trade union movement, irrespective of the level of development in the countries under consideration. Without necessarily reﬂect- ing our position, the studies are based on the information available and represent testimonies which are worthy of consideration and exploration. On the whole, these studies convey a positive and encouraging message, which in practice illustrates the extent to which the involvement of unions in the struggle for the improvement of working conditions in the informal sector is much more advanced than many have imagined. We hope they will serve as reference material for the trade union organizations which decide to venture into relatively unknown territory on the route to a society founded on social justice and equity.

Manuel Simón Velasco Director ILO Bureau for Workers’Activities

VII Africa

Ghana

Organizing informal sector workers requires nurturing dynamic links with the relevant public authorities and institutions, both national and international, that can provide the necessary support.

Kwasi Adu-Amankwah Deputy Secretary-General Ghana Trades Union Congress

1. The informal sector in Ghana by certain governmental and non-governmen- 1.1. Origins and recent expansion tal institutions and organizations, including the trade unions. The attention to the sector at the The origin of the informal sector1 in Ghana’s intellectual and policy levels has arisen out of economy can be traced back to the very begin- the realization that the sector has not only per- nings of colonial capitalism in the then Gold sisted from the making of Ghana as a new Coast. Right from the outset, a dualistic econo- nation state, but has also been dramatically my with two distinct sub-economies emerged expanding. alongside each other. The key features of the One of the overriding consequences of colonial economy included primary commod- structural adjustment in Ghana since the mid- ity production for export, investments in 1980s has been the shrinking formal sector and mining, transportation and related services, the expansion of the informal sector. This has infrastructure and public works, and social arisen particularly as a result of public sector development. reform that had massive retrenchment of On the one hand, a small formal sector cov- labour as an important component. ered essentially capital investment in mining, While labour retrenchment was pervasive transportation, infrastructure, commerce, in the public sector as a whole, it is interesting social services and administration with wage to note that there was a decline in formal pri- employment characterizing the existence and vate sector employment as well. operations of labour therein. On the other hand, The table below demonstrates trends in for- the promotion of primary commodities pro- mal sector employment between 1960 and 1991. duction for export and the import of consumer According to Table 1, total formal sector goods for domestic trade gave rise to large con- employment fell from 464,000 in 1985 to 186,000 tingents of the labour force in both agriculture in 1991, demonstrating a loss of 278,000 jobs and petty trading who were either self- over a six-year period. Apart from the relatively employed or hired under traditional or infor- few persons who opted for voluntary retire- mal arrangements. Even at such an early stage ment or redeployment, the majority of those an essential feature of labour in the informal who were retrenched included young workers, sector was its heterogeneous character that pro- labourers, cleaners, drivers, sweepers, messen- vided for varieties of peasant proprietors and gers and workers in the lower grades of the agricultural labourers, distribution agents, public sector. Part of the reason for the compo- buyers, transport owners and employees, sition of those who were retrenched was the porters, repairers, etc. (Ninsin, 1991). application of the principle of “last in ﬁrst out”. The informal sector has received increasing Among them were also many women workers attention in the development discourse of because of their particularly low skills. Ghana since the middle of the 1980s and the Although women accounted for only 23.5 per beginning of the 1990s. It has, in effect, been the cent of the total formal sector employment, target of some policy initiatives and activities 31.7per cent of those who lost their jobs in 1987

1 Table 1. Trends in formal sector employment, 1960 to 1991 (thousands)

Year Public sector formal Private sector formal Total formal sector employment employment employment 1960 184 149 333 1965 278 118 396 1970 288 110 398 1975 318 137 455 1980 291 146 337 1985 397 167 464 1986 347 166 414 1987 315 179 394 1988 252 155 307 1989 177 138 215 1990 189 140 229 1991 156 131 186 Source: See Gockel, 1998, p.18.

were women (ILO/JASPA (Jobs and Skills Pro- de g r ee in the construction and manufacturing gramme for Africa), quoted in Galarraga and sectors. But in the last couple of years, interes t Gogue, 1997; Boateng, 1998). has also grown in the rural informal sub-sector. While formal sector employment was A la r ge part of that interest has been generated falling fast, the economically active population by the work of the General Agricultural Wor k - was estimated to be increasing as well. One ers’ Union (GAWU) of the Ghana Trades Union hundred thousand persons were estimated to Co n g r ess (GTUC) in organizing rural workers, be graduating annually from the educational as well as through the intervention of some other institutions within the same period and enter- non-governmental organizations (NGOs). Inter- ing the labour market. Of Ghana’s labour force, est in the sub-sector is also underlined by the fact 16.1 per cent is currently estimated to be in that among Ghana’s relatively large labour force waged employment, with the remaining being of self-employed workers, two-thirds are in self-employment, including the informal sec- engaged in agriculture which is pred o m i n a n t l y tor. Meanwhile, the size of Ghana’s informal rural based (Adu-Amankwah and Tutu, 1997). sector is placed at 80per cent of the total labour force (Hormeku, 1998). 1.2.1. Rural informal labour The large-scale retrenchment of labour, coupled with the inability to provide employment A GTUC leadership group survey in 1995 for the emerging labour force has created a la rg e produced an interesting panorama of informal pool of unemployed persons who have natu- sector activities in Ghana. For the rural sector, rally gravitated towards the informal sector. the following were identiﬁed: (i) Agricultural activities. These are predomi- 1.2. Features and characteristics nantly farming units dependent on family of informal sector workers labour and are made up of a large number of small farmers in the rural and semi- The decline in formal sector employment urban areas. The farmers are mostly illiter- during the 1980s and 1990s and the expansion ate or semi-illiterate and have no formal of the informal sector during the same period training. Farming skills are acquired have together constituted one of the most through apprenticeship. enduring features of the structural adjustment programmes that have been implemented in (ii) Fishing and ﬁsh processing activities. These Ghana. are found mostly along Ghana’s coastline Most of the studies on the informal sector in and are mainly composed of married males the 1990s focus on the urban component which aged between 18 and 40 years. These pre- pr ovides a haven for the working poor. They dominantly illiterate workers acquired include aged, young and women workers who their swimming skills through experience ar e essentially low-skilled and are involved from their early childhood. The value mainly in the services sector, and only to a lesser added and processing activities that

2 include smoking and marketing the fish is have their own farms where they grow basically undertaken by women. crops for subsistence. Payment for casual workers is in cash, but can also be in kind. (i i i ) Rural agro-based processing activities. These include processing cassava into ga r i , cassava (iii) Apprenticeship. Systems of apprenticeship dough, of palm kernel, groundnut and exist within the fisheries and the agro-pro- copra oils, palm wine tapping, local pito cessing sub-sectors – especially in oil palm bre w e r y , local gin distillery, and traditional extraction, coconut oil extraction and shea soap-making. These activities are domi- butter processing. Apprentices are nor- nated by married female workers, mostly mally not paid, but they may receive cash over 30, and predominantly illiterate. Their as pocket money or, as in fishing, be proskills are acquired from within the family. vided for in kind, for example fish. Their experience of seasonal underem p l o y - (iv) Permanent labour. This constitutes a rela- ment is pronounced. Mostly married, with tively small proportion of the rural agri- ch i l d r en, they lack social security prot e c - cultural labour force. The size of the farm tion. There are also the forest product work- and the degree of permanence of the crop ers, mostly male, namely, carpenters, rattan type determines to a large extent the per- and bamboo craftsmen, wood carvers and manence of labour. Perennial tree crops like woodworking machine operators. cocoa, oil palm, coconut and rubber pro- In a case study on the informal rural agri- duce permanent workers. cultural sector (APADEP, 1998), six distinctive (v) Communal labour. This is an arrangement by types of rural labour were identified as follows: which farmers within an area bound by (i) Family labour.Adistinctive characteristic of common agreement pool their labour rural informal labour. It permeates all the together to assist each other in turns. sub-sectors within rural agriculture. It is (v i ) Child labour. This form of labour is an predominant in both food and cash crop important component of the informal sec- farming, and in fishing and agro-process- tor workforce. It is an integral part of fami- ing. From a labour market and economic ly labour, especially in the rural set-up. Dif- standpoint, family labour is considered fe r ent categories of children were crucial for the survival and viability of the id e n t i fi ed: those who had never been to enterprise. It is also used as a kind of school, those who had dropped out of apprenticeship for the transfer of skills school and those who were still in school from one generation to the next. but assisted their parents. Some children (ii) Casual labour. Known in local parlance as we r e engaged by a parent or a close family “by-day”, it is the next major type of labour member and may be paid or not. They in the rural informal sector. It is prevalent ranged between 8 and 10 years and more. in the food and cash crop sub-sector where Th e r e were also children employed by non- it is needed to carry out work including relatives. Such children, aged between 10 land clearing, preparation of mounds, and 15 years, were usually out of school and planting, weeding, fertilizer and chemical fully on the labour market. Child workers application, and harvesting. Casual labour ar e engaged in a wide range of economic exists under different kinds of contract, activities. In the fisheries sub-sector acros s and has a high level of mobility migrating the coastal belt, these include mending nets, from the northern half of the country and net dragging, scooping water out of a even from beyond the northern borders canoe, cleaning canoes and portage. In the (from Burkina Faso) to work on cocoa, farming areas, noticeably in the Northern coconut and oil palm farms in the Asante, and Upper East regions, child workers are Eastern and Western regions of Ghana. In engaged in land preparation, planting, the Brong-Ahafo region, these workers are weeding, harvesting, shea nut picking and engaged on maize and yam farms and per- pr ocessing. In the rice farms, both in the form a variety of assignments, such as north and at Dawhenya in Greater Ac c r a , land-clearing and preparation, the making ch i l d r en, especially girls, act as bird scarer s of mounds, and planting. They return to and operate from sunrise to sunset. their regions of origin to make use of the farming season there also. Where they are The different kinds of employment contract not migrant, many casual workers also under which the various types of labour are

3 engaged constitute their distinguishing feature. workers under 45 and have either received A separate study on contract labour in the agri- some basic education or are drop-outs, but cultural sector in Ghana demonstrated the per- among whom are to be found skilled work- sistence and growth of non-standard patterns ers whose skills are largely acquired of employment relations in the agricultural sec- through years of apprenticeship; tor. The study showed differences in the condi- • garages – auto mechanics, sprayers, tions of employment of different groups of agri- welders, vulcanizers, auto electricians, cultural workers. Factors that accounted for the many of whom received some basic formal differentiation included: nature of contract education alongside many drop-outs, and (written or verbal); employer responsibility to acquired their skills through years of the work process in terms of provision of work apprenticeship; tools; protective clothing and general health • graphic designers, mostly males between and safety; levels of skill of workers; levels of 25 and 50, about two to six workers in each remuneration; and access to social security pro- unit who acquired their skills through lim- tection and other beneﬁts. Health and safety as ited vocational training and apprentice- an aspect of working conditions is particularly ship; singled out for poor showing. The labour market reasons that are adduced • audio-visual workers – photographers, for the growth of contract labour include cinema/video operators, performers, employer concerns for productivity gains and musicians, ﬁlm-makers – are skilled work- cost effectiveness. As for the workers who ers who have received basic formal educa- labour under contract agreements, they essen- tion but limited formal vocational training tially acknowledge them as rare opportunities and apprenticeship – who are mostly male for securing wage employment. but among whom the number of females is increasing; 1.2.2. Urban informal workers • hairdressers and barbers/private security men who are aged workers with very low The urban informal sector in Ghana, as else- educational standards, ill-equipped, lack where in Africa (ILO, 1997), is remarkable for job security and opportunities for career its heterogeneity and variety. Studies on the advancement, and without any social secu- urban informal sector in Ghana reveal a wide rity protection. range of operations in the urban informal sector that can be grouped under (i) services; (ii) (ii) Construction: construction; and (iii) manufacturing. Construction workers – masons, carpenters, steel benders, small-scale plumbers, (i) Services: house-wiring electricians, and carpenters • urban food traders and processors include who are mostly male, aged between 20 and food sellers in the market, itinerant whole- 40 and are mostly school drop-outs. Elec- salers and retailers, bakers, caterers and tricians often have some basic training, cooked-food sellers. These workers are while all the other groups go through years mostly women, predominantly illiterate or of apprenticeship. semi-illiterate. They acquire their knowledge and skills largely from family. They (iii) Manufacturing: are also low-income earners and have no In this sub-sector of the informal sector, the social security protection; predominant activities cover food processing, textile and garments, wood processing • health and sanitation workers – chemical and metal works. Women dominate food sellers, drugstore operators, funeral under- processing while men constitute a clear takers, night soil carriers, refuse collectors, majority in metal works and wood pro- traditional/herbal healers, attendants in cessing. Apprenticeship is the most com- private maternity homes, and traditional mon form of skill acquisition and employ- birth attendants; ment in urban informal manufacturing • domestic workers, who are also predomi- units. nantly women; • repairers of watches, refrigeration equipment, radios, mechanical or electrical/electronic equipment, mostly young male

4 1.2.3. Common needs of rural and 1.3. Institutions and programmes urban informal workers relating to the informal sector

In general, it can be said that labour stan- Over the last 20 years, as the informal sector dards in the informal sector are not in confor- has expanded, so have a variety of institutions mity with those that apply in the formal sector. and programmes that relate to the sector been Informal sector workers lack social security, born. The plethora of established institutions economic support and legal protection. and programmes include the National Board for There are common needs that are differen- Small-Scale Industries (NBSSI, see Box 1), the tiated among various groups of informal sector Fund for Small and Medium Enterprises Devel- workers, rural and urban. They include: opment (FUSMED), the Programme of Ac t i o n (i) social needs – job security, health care facil- for the Mitigation of the Social Costs of Ad j u s t - ities and the promotion of occupational ment (PAMSCAD), the Ghana Regional Ap p r o- health and safety, protective clothing, pro- priate Technology Industrial Service (GRATI S , tection against income losses during sick- see Box 2), TECHNOSERVE (see Box 3) and the ness, annual leave and maternity rights, Council for Indigenous Business As s o c i a t i o n s minimum wage, general infrastructure and (CIBA). Institutions like the Internal Revenue environmental sanitation; and Service as well as the Metropolitan and District Assemblies provide the regulatory framework (ii) economic needs – training and education for for the operations of the sector. skills development, basic tools, business The range of institutions and prog r a m m e s premises, financial credit, marketing oppor- that are geared to the informal sector provide dif- tunities. fe r ent forms of credit and technical support to While labour legislation and practice widely the sector. While the Government has rec o g - pr ovide for the interests of all workers, they none nized the importance of the informal sector and the less reveal some limitations with reg a r d to its potential contribution to employment, informal sector workers. Labour legislation does incomes and even a domestic industrial base, it not adequately cater for casual labour with has not demonstrated the corresponding fina n - respect to written contracts, worker’s compen- cial commitment to it. The Government’s bud- sation, labour inspection, annual and maternity get for supporting the informal sector is at best leave. With reg a r d to regulatory institutions, the in a d e q u a t e . in e f fective functioning, where they existed at all, On the other hand, non-governmental orga- of Public Employment Centres, Labour Inspec- nizations also intervene in the informal sector, torate and Minimum Wage-Fixing and Monitor- but again, inadequate finance is their overriding Machinery have been noted. Similarly, the ing constraint. marked disuse of the wide discretionary powers of the public authorities for labour protection has been cited (Adu-Amankwah, 1997).

Box 1. National Board for Small-Scale Industries (NBSSI) The National Board for Small-Scale Industries (NBSSI) is the apex organization set up by the Government to promote and develop the small-scale industrial sector. The NBSSI was established by an Act of Parliament in 1981, Act 434, and is governed by a Board of Directors. The Govern- ment makes nominations to the Board, headed by an Executive Director who sees to the day-today running of the organization. It is subsidized and funded mainly by the Government of Ghana. Act 434 gave the NBSSI the speciﬁc function to promote and develop micro- and small-scale enterprises because of the contribution that they can make to the economic development of Ghana. The NBSSI, however, lacks the funds to achieve its aims. The organization is poorly funded by its overall meagre budget allocations. There is also political interference, sometimes, with the management of the organization. Besides, workers are poorly remunerated, leading to low morale among its staff. It collaborates with and receives support from the Friedrich Ebert Foundation, the German Development Services, GRATIS, the World Bank, the International Labour Office (ILO) and the United Nations Development Programme (UNDP).

5 Box 2. Ghana Regional Appropriate Technology Industrial Service (GRATIS) GRATIS was established as a project in 1987 by the Government of Ghana under the Ministry of Environment, Science and Technology to promote small-scale industrialization and provide employment opportunities, improve incomes and enhance the development of Ghana. This is done through the dissemination of appropriate technologies by developing and demonstrating marketable products and processes for micro- and small-scale enterprises. It operates through a network of Intermediate Technology Transfer Units (ITTU) established in the ten regions of Ghana. GRATIS is managed by a Board of Directors which is responsible for formulating major policies and guidelines for implementation. An Executive Director provides general coordination, supervision and guidance to the GRATIS/ITTU network. The project is funded by the Government of Ghana, which provides buildings for GRATIS and the ITTU in the ten regions. Government also employs and pays employees and bears all administrative costs. GRATIS provides training and technical assistance to artisans. Since 1987, 22,221 persons have beneﬁted from GRATIS/ITTU training. Out of this number over 4,000, including women, have ben- eﬁted from the four-year technical apprentice training programme. During the same period, 452 students from the university and technical and vocational institutions, including 134 women, were attached to the ITTUs to gain practical experience. Training is provided in metal machin- ing, foundry works, welding and fabrication, basket-weaving, and batik tie-and-dye. GRATIS experiences a high rate of labour turnover in the project as a result of low remuneration and motivation for the workers. There is high level of worker dissatisfaction with poor conditions of employment. Many workers think that once GRATIS is a project they should have hand- some packages in terms of salary and other emoluments. GRATIS collaborates with the European Union (EU), the Canadian International Development Agency (CIDA) and TECHNOSERVE who provide equipment, computers and other inputs and logis- tic support.

Box 3. TECHNOSERVE TECHNOSERVE Ghana is a subsidiary of TECHNOSERVE Incorporated, an international non- profit, non-governmental organization with headquarters in Connecticut, USA. TECHNOSERVE was established in 1971 by Edward Bullard, who worked in Ghana for two years as a hospital manager at Adidome in the Volta Region. It is governed by a Board of Directors drawn from the private sector in the United States. In Ghana there is a Country Director who manages the country programmes. TECHNOSERVE is funded by individuals, USAID and also monies accruing from contract projects undertaken for the Ghana Government and the World Bank. TECHNOSERVE went into the informal sector because it was convinced that rural Ghanaians needed professional management skills and the technical means to generate more income from their hard labour. TECHNOSERVE collaborates with extension officers of the Ministry of Agriculture and with various cooperatives and self-help foundations. Limited finances is the most basic problem in a situation where many people expect gifts and handouts as against TECHNOSERVE’s stated objective to train them to acquire the required managerial skills for their field work.

2. Trade unions in the informal form or join trade unions or other associations, sector in Ghana national and international for the protection of 2.1. Trade union organization their interests. in Ghana Ghana applies to international labour standards a considerable extent, particularly those All categories of workers in Ghana have a concerning freedom of association and the pro- right to organize in trade unions. The 1992 Con- tection of the right to organize as well as to bar- stitution of the Republic of Ghana guarantees gain collectively. this right. Article 21 on general fundamental By March 1999, the Government of Ghana freedoms provides for the freedom of associa- had ratiﬁed six of the seven ILO Core Conven- tion, which includes freedom for the people to tions. The Core Conventions adopted refer to

6 freedom of association and collective bargain- 2.2.1. The Ghana Private Road ing rights (Conventions Nos. 87 and 98), forced Transport Union (GPRTU) labour (Conventions Nos. 29 and 105), and equality of opportunity and treatment (Con- The GPRTU is composed mainly of hired ventions Nos. 100 and 111). The official process drivers, owner-drivers and vehicle owners. The of ratification of the Convention on Minimum union also engages paramilitary personnel that Age of Employment (Convention No. 138) had it employs as guards with responsibility for already commenced. monitoring the payment of daily income tax by In spite of the solid democratic and legal private road transport operators. framework for the realization of workers’ hopes The union provides a peculiar framework and aspirations, informal sector workers in for the pursuit of the interests of its varied Ghana, reg a r dless of their numerical strength in membership. It operates structures at branch, relation to the entire workforce, lack rep re s e n - regional and national levels. The national and tation in the policy process and have no pres - regional structures are dominated by the vehi- ence in the corridors of decision-making and cle owners’ component of the union while the po w e r . They have neither the facilities nor the presence of the owner-drivers in the union is possibilities to influence the conditions and established mainly at branch level. GPRTU decisions that affect them in any systematic branches cover virtually all the districts of the manner; nor do they have any access to the ser- country. Hired drivers (and their apprentices) vices they need to operate effectively and effi - largely make up the numbers in the union. ci e n t l y . Al re a d y , the issues at stake in relation to The GPRTU serves as a medium for the road informal sector workers have been identified in transport owners and operators who belong to terms of the nature of their relationship with the it to relate to the public authorities. With the government, social institutions, trade unions support of government, the union has been able and employers’ organizations. There also to secure facilities to acquire vehicles for its remains the related question of the rec o g n i t i o n members on credit. This has helped to improve of informal sector associations as legal entities, the income-earning capacity and economic which is necessary to affo r d them access to gov- security of some members. (The perception, ernment authorities and services (ILO, 1997). however, is that this facility has benefited more the vehicle owners and to a lesser degree the 2.2. Trade union organization owner-drivers than the drivers.) The union also in the informal sector serves as the framework for determining private road transport fares. It also negotiates the It has been noted that workers in the infor- fees to be paid for operating at road transport mal sector usually organize to overcome busi- terminals. The GPRTU is also consulted by ness constraints which include: high prices for the public authorities on many operational inputs; low prices for the goods produced; dif- issues pertaining to the road transport sector. ficulties in gaining access to credit and service; The GPRTU is reputed to enjoy considerable threats of eviction by city authorities; and the patronage from the ruling party and Govern- risk of income losses deriving from unexpected ment in return for the loyalty and support of events such as death or illness (ILO, 1997). the union. In Ghana, the origins of trade unionism are The union further provides a framework for rooted in organizing in the informal sector. resolving problems between hired drivers and Unionization in the then Gold Coast was found the owners of the vehicles they operate. How- to be widespread among agricultural labourers, ever, the persistent absence of social security cooks, motor-drivers, mechanics, goldsmiths protection for drivers – job security, health care and several other artisans, especially after the facilities and the promotion of occupational First World War (Adu-Amankwah, 1998). When health and safety, protection against income trade unionism became consolidated in Ghana, losses during sickness, annual leave, minimum however, most members were found in the for- wage, etc. – is a telling indication of which mal sector, especially urban. Even so, one affil- members’ interests the union does not ade- iate of the Ghanaian Trades Union Congress quately serve. The balance of power in the (GTUC), the Ghana Private Road Transport union weighs in favour of the owners against Union (GPRTU), is a fully-fledged informal sec- the drivers. tor union. Besides, since the end of the 1970s, The union operates a welfare fund for mem- Ghanaian trade unions have been organizing bers in distress. The fund is normally accessed consciously in the informal sector. upon bereavement of members.

7 The GPRTU is a member of the West African However, the absence again of social secu- Road Transport Union and the International rity protection for rural workers like guaran- Transport Workers’ Federation (ITF). teed incomes, annual leave, minimum wage and health care facilities underscores the enor- 2.2.2. General Agricultural Workers’ mous distance yet to be covered by the union Union (GAWU) in assuring the enjoyment of minimum labour standards by rural workers. Because of the low GAWU organized its Rural Workers’ Organ- incomes in the rural sector, the union has to isation Division (RWOD) as early as 1979. invest more finances in organizing the rural The membership is national, with a higher workers than it can hope to realize from dues concentration in the Volta and Greater (rural workers pay dues of 1,200 cedis annually, Accra Regions, and the Northern, Upper East approximately US$ 0.50). Finance constitutes a and West regions. By 1998 total member- major limitation on GAWU’s organizational ship was over 12,000, with 60 per cent being capabilities. women. The members are peasant and landless The union collaborates with the Ministry of farmers, farmers who hire out their labour, fly- Food and Agriculture (MOFA), the Interna- wheel tractor operators, stone-quarrying work- tional Union of Food, Agricultural, Hotel, ers and other self-employed rural workers. Restaurant, Catering, Tobacco and Allied Apart from the flywheel tractor operators who Workers’ Associations (IUF), the International have their own association which is in turn affil- Federation of Building and Wood Workers iated to the union, all the others have direct (IFBWW), the Netherlands Federation of Trade membership of the union and pay dues directly Unions (FNV), and others that address rural to it. workers. GAWU supports members, particularly women, with revolving loans, and also facili- 2.2.3. Timber and Woodworkers tates members’ access to other forms of institu- Union (TWU) tional credit. It further assists with the provision of access of members to basic tools and TWU began its organizational efforts in the inputs like cutlasses, fertilizer and other mate- informal sector in 1988. This was after the TWU rials, as well as basic necessities like lanterns quadrennial conference in 1987 which adopted and kerosene. GAWU has further set the exam- a resolution for organizing self-employed ple in the Upper East region of Ghana by pro- woodworkers in the informal sector. The objec- viding sewing machines to a group of female tives for organizing were: members to assist their efforts at providing • to promote the interests of all the self- clothing for their families. employed and to secure united action on all The union also puts up building structures issues affecting or likely to affect those inter- to be used as storage facilities and classrooms ests; for literacy classes that it organizes for members. It also provides education and training for • to regulate their operations through educa- its members through seminars and workshops tion; and on the following topics: bee-keeping, food pro- • to secure both national and international cessing, bookkeeping and trade union finance, recognition of their socio-economic role in ploughing techniques to reduce soil erosion, national development. equipment maintenance, health and safety on how to handle chemicals, and environmentally The first group of the self-employed tar- sound farming practices. geted for organization included the power Rural workers who are members of the chainsaw operators, firewood cutters, charcoal union can now mobilize themselves to speak up burners and the canoe carvers whose activities for their rights in their communities as well as are carried out right in the forest. The TWU undertake joint efforts at self-help projects. organized the National Sawyers Association They demonstrate a considerable degree of con- (NSA) to cover all of them. Since 1991 the NSA fidence in the union. They can invite GAWU to has been on its own in terms of organization. It give them advice and sometimes lead them in is affiliated to the TWU and is represented on negotiations, for example, over the acquisition its National Executive Council by two persons. of land. The union also indicates that it will not The union has employed one of its members as hesitate to provide legal assistance to members a full-time official responsible for the informal should the need arise. sector. There are 12,000 members spread over

8 six regions in the southern sector of the coun- years because of a new regulation which limits try. Few are, however, found in the Northern their operation. However, woodcarvers and Region. cane/rattan workers’ incomes have increased. The union provides training and education Their products are largely patronized by to members. This has enhanced their ability to tourists who offer high prices. Some carpenters register their businesses with the Registrar have also been exposed to the international General’s Department, the Internal Revenue market through trade fairs. Service, the District Assemblies and the The bargaining strength and representative- Forestry Department as a prerequisite to ness of the TWU have gone up even though obtaining a felling permit to operate. The TWU there exists no direct relationship between the finances conferences of the NSA(pays for food, union and members. The union, however, accommodation and organizational costs) and accepts members who try to access it directly; the printing of membership cards. but generally it deals with members through Small-scale carpenters are also organized in their associations. Since the unionization of the the Small-Scale Carpenters’Association. They informal sector workers by TWU, anybody are the users of the products of the chainsaw who wishes to deal with the workers therein operators – the carpentry, joinery and furniture involves the union. Examples of such bodies are workers. According to the union, a recent the Timber Export Development Board (TEDB), national survey estimated the number of these the Ministry of Lands and Forestry, and Parlia- workers at 1.5 million. The union has organized ment. TWU negotiates with District Assemblies 30,000 of them nationwide, concentrated in and the Internal Revenue Service (IRS) on tax Kumasi and Accra. They are spread in all the rates for members. It also negotiates with Dis- ten regions at local, district and regional levels. trict Assemblies for land to resettle carpenters. The Wood Working Machine Owners’ The TWU intervenes to settle members’ Association is the third group of self- employed cases out of court. For instance, when a chain- operators to be organized. Their operations are saw operator was implicated in an illegal opera- centred in the six forest regions of Ghana. While tion of felling of timber, the union intervened approximately 6,000 workers are estimated to to have the case settled outside court. Similar be in the sector, the union’s efforts at organiz- assistance was given to carpenters when a con- ing them is proceeding steadily with 3,000 tractor refused to pay the cost of jobs he sublet already under coverage. to them. The union also provides members with The Cane and Rattan Workers’Association education and training on tree planting, felling, is made up of suppliers and weavers in the sec- harvesting and extracting techniques, health tor. The union’s organizational activities and safety, timber laws and regulations, forest started in this sector in February 1996, and are management, marketing, and financial and ongoing. The union now covers the Greater business management. Accra and Eastern Regions where about 1,000 The major constraint to the organizing effo r t s workers have been signed on. The union is also of the TWU is the fact that most of their poten- looking forward to organizing wood carvers tial membership have no previous experience of who are concentrated in Accra and Aburi. union organization and do not readily see the Informal sector members of TWU have a value of organization. The other significant con- sense of recognition. They support the union in straint with reg a r d to the organizational effo r t s their fight against government legislation and of the union is the absence of a ready package of policies that run counter to their perceived be n e fi ts to attract members. interests. The union on many occasions helped The TWU collaborates with the IFBWW and them to retrieve some of their tools seized by the TEDB. the public authorities. This contributes to instil in them a sense of social protection. In terms of 2.2.4. The Industrial and Commercial working conditions and standards of living, the Workers Union (ICU) operators have fared differently. Some members have improved their working conditions The most organized informal sector group through better arrangement of tools and of workers in the ICU is the Ghana Hairdressers benches in their shops (e.g. carpenters), wear- and Beauticians’ Association (GHABA). They ing of nose masks, aprons and boots. Electrical include hairdressers, beauticians and barbers. arrangements and fittings have also improved. GHABA has a membership of 4,000 spread all For the chainsaw operators, on the other hand, over Ghana with special concentration in their level of income has dropped in the last two Accra, Kumasi and Takoradi. The association

9 has its own structure from district through leads negotiations with the IRS and the Accra regional to national levels. In Accra, the district Metropolitan Assembly (AMA) on tax rates and is divided into zones because of the density of rents to be paid on shops. However, GHABA the population and range of activities. Each members of the ICU have developed confi- member of the association pays 200 cedis per dence to express their views at meetings. The month to the national executive committee who district zones and regions hold their own meet- collect dues and in turn pay an affiliation fee to ings with or without assistance from union offi- the ICU. The association has a representation of cials. Some of the members can now chair meet- three persons on the National Executive Coun- ings and write reports. For welfare, the union cil (NEC) and on the women’s wing of the ICU. also makes donations upon the death of mem- ICU conducts elections of officers for bers of the associations. GHABAat zonal, district, regional and national The organization of GHABAhas had its dif- levels which always result in free and fair out- ficulties. There have been some problems with comes. Although GHABA does not receive internal democracy and accountability that direct financial support from ICU, the union tended to undermine confidence and lowered meets the secretarial and organizational cost of the morale of members. Among executive their conferences and provides legal services members who had had no prior organizational for members when they run into problems in experience of accounting for their activities, the the course of performing their duties. The ICU demand of accountability to members has not also organizes workshops and seminars on been easy to accommodate. On the other hand, basic trade union subjects, bookkeeping, health default in accountability of executives affected and safety, and how to protect clients. Training members’ willingness to pay dues and even led is also provided in leadership roles and rights to poor attendance at meetings and with- and responsibilities both within the union and drawals from the association. the society at large. There are also some members who continue For GHABA, working conditions entail the to feel socially insecure because they are not setting up of a shop – provision of equipment, able to get financial assistance. products, sanitation, environment of the shop, Tie-and-dye workers as well as domestic and health and safety. Members’ working con- cooks and stewards have also been recently ditions have improved to some extent since organized into the ICU. The ICU collaborates joining the union. They now wear gloves when with the International Federation of Commer- handling chemicals. They have also improved cial, Clerical, Professional and Technical Em- the ventilation of their shops. GHABA also ployees (FIET) and the Women Workers’ Union organizes entrance examinations for those (KKD) of Denmark in furthering its initiatives wishing to operate as hairdressers, and with the in the informal sector. support of the public authorities has instituted regulation that allows hairdressers’ salons to be 2.2.5. Other trade union initiatives sited at least 50 metres apart. in organizing informal sector Executive members of GHABA visit their workers members’ shops regularly to ensure that they keep their environment clean and also have the Other trade union initiatives in organizing required number of combs, towels and the right informal sector workers include the Ghana types of cream. Members have improved upon Union of Professional Photographers (GUPP). their human relations with their clients and Constituted into a body in 1987 with a mem- apprentices. GHABAhas also helped members bership of 1,150, it became affiliated to the Pub- to acquire equipment and tools for their shops. lic Services Workers’ Union (PSWU). GUPP is The living standards of members of GHABA national in character but has high membership have not, however, improved significantly in concentrations in Kumasi, Takoradi and Accra. spite of increased income levels. This is because It operates regional and national executive not too many people visit the salons nowadays. structures. Members pay dues through GUPP Because of the general high cost of living most to PSWU but they are not represented in the clients prefer to style their hair by themselves in structures of the PSWU, e.g. the National Exec- their homes. utive Council (NEC) or the Regional Councils. Undoubtedly, the informal sector has The GUPP has unrealized expectations increased the numerical strength of the ICU, fro m its affiliation to the PSWU. It expects edu- but the union has no close relationship with the cation, training and exposure through photo members. The ICU represents the workers and exhibitions from its association with the PSWU.

10 It also expects the PSWU to assist with direc t expectation of union support for marketing or ganizational work in contacting potential promotion through photo exhibitions. GAWU members around the country. Membership of and TWU negotiate for land as part of the gen- GU P P has dropped to 400 because of low morale eral infrastructure. and absence of recognition of the value of In terms of social protection, a number of the belonging to the association. GUPP has a wel- unions have raised awareness of rights and fa r e scheme for compensation in times of standards among their members. TWU, ICU, be r eavement, but this has so far only benefite d GAWU and GPRTU have raised awareness a few persons. among their members of the potential for orga- The other group of informal sector workers nization and collective bargaining. ICU, LGWU to be organized by a trade union in Ghana is the and TWU have provided legal support to mem- Butchers’ Association. It is affiliated to the bers. TWU has protected its members from Local Government Workers’ Union (LGWU) harassment by the public authorities. LGWU and currently has membership only at the has encouraged its members to join the national Kumasi Abattoir. The LGWU provides legal social security and pension scheme. Work con- advice and assistance. For instance, when the ditions, particularly health and safety, have Butchers’ Association went to court over their improved among ICU, TWU, GAWU and right to join the LGWU rather than the Coop- LGWU members in varying degrees. erative Butchers’ Association as proposed by The main obstacles to union organization as the Ashanti Regional Minister, the union paid they have emerged from the initiatives in the their legal fees. The LGWU has organized informal sector have to do with, firstly, the low members of the association to join the Social financial returns from the sector as against what Security and National Insurance Trust (SSNIT) unions have to spend organizing there; and, Pension Scheme. The union is also supporting secondly, the absence of ready packages of ben- the association to develop a pension scheme to efits to attract informal sector operating units supplement the SSNIT Pension Scheme. The coupled with their absence of previous experi- association has also been assisted by the union ence of union organization. to form a credit scheme from which members The trade unions in the informal sector have take loans to finance their business. The LGWU served as the medium for representing the collaborates with the Kumasi Metropolitan workers in negotiating for tax rates, rents, fees Authority (KMA) in organizing the butchers in or fares. The GPRTU is widely consulted, while the metropolis. GAWU and TWU make themselves heard on a wide range of issues before different public bodies. The unions all show evidence of acting 3. Recommendations for future as channels for collective bargaining with the trade union action public authorities or any other body on one 3.1. Products of trade union matter of interest or the other. These, however, intervention in the informal only open the window on to the existing oppor- sector tunities for different groups of informal sector workers to intervene in and influence the pol- The discussion of trade union organiza- icy process. tional efforts in the preceding section provides The examples of trade union organization in interesting evidence of differentiated support the informal sector, though impressive, do not for economic outcomes, social protection and yet measure up to the sector’s demands for the provision of a voice for informal sector clear support for its growth as well as the pro- workers. vision of social protection for the workers and GAWU, GPRTU and the LGWU facilitate the application of minimum standards thereof. varying degrees of credit and financial support The possibilities for trade union organization in for informal sector workers who belong to or the informal sector that have been demon- are associated with them. This is through loan strated by the existence and operations of guarantees or credit facilities. GAWU also facil- unions signal the need to pursue vigorously the itates access to inputs for its members. GAWU, quest for further organization of the sector. TWU and ICU provide education and training This should contribute to the creation of the that improve the skills and capabilities of their conditions for the elimination of child labour members in the informal sector. TWU facilitates and discrimination in employment as well participation in fairs as market promotion for as the attainment of social protection for all its members, while the GUPP pronounces its workers.

11 3.2. Trade union perspectives effective functioning of regulatory institu- on informal sector organization tions to assure the application of labour standards. In its policy on organization and internal democracy, the GTUC acknowledged in 1996 In laying out the needs of the informal sec- that the informal sector is an important part of tor that required servicing, the GTUC also out- Ghana’s economy and that the trade unions lined how the trade union stood to gain by need to step up organizational work there. organizing informal sector workers. Such gains The policy objective was set to pursue vigor- were evaluated in terms of membership, ously the organization of workers in the infor- finances, greater legitimacy as representing the mal sector. constituencies of both formal and informal Already in 1995, the GTUC had identified sector workers, and therefore a chance for the needs of the informal sector that required stronger intervention in national development. servicing. They included: By organizing informal sector workers, it was • organization – to promote the self-organi- agreed that the trade union could achieve the zation of informal sector workers and following: encourage them to: organize within existing • help build up membership, particularly at a trade unions; organize and affiliate to exist- time when trade unions are losing members ing trade unions; organize and affiliate to through retrenchment and deregulation; the GTUC; organize on their own and • make trade unions more representative; develop relations with the trade unions and the GTUC; • strengthen the bargaining position of trade • capital – to provide information on existing unions; credit and financial schemes for the infor- • acquire broader appeal and increase trade mal sector; help develop group collateral for union capacity for mass action; credit from financial institutions; promote • extend trade union recognition and enhance savings and credit schemes; undertake union image both nationally and interna- campaigns and advocacy for increased tionally; financial opportunities for informal sector operatives; • improve the human power base of the trade union; • training and education – to investigate and provide information about existing facilities • improve the union’s financial and resource and opportunities; facilitate access to exist- base; and ing programmes; facilitate the institution of • reduce ignorance about trade unions and relevant programmes and appropriate their role. schemes where they do not exist; utilize adult education methods through the print 3.3. Approach to organizing and electronic media; • the market – to promote high standards; In October 1997, the Pan-African Confer- undertake market surveys and information ence on Democratic Participation organized by dissemination; undertake marketing pro- the African Workers’ Participation Develop- motion through trade fairs; ment Programme (APADEP) in Arusha, Tanza- • social protection – to explore the possibil- nia, affirmed the need to organize informal sec- ities of the Social Security and National tor workers. The conference undertook an Insurance Trust (SSNIT) as well as other overview of African workers and the trade insurance schemes as the framework for union situation in the light of structural adjust- guarantee against income losses during ment programmes that have been implemented sickness, and for workers’ compensation in a number of African countries since the 1980s and pension; and throughout the 1990s as well as the current trend of globalization. • input supplies – to promote cooperatives as The workers’ situation was characterized by a means of improving access to inputs; and rising unemployment and the attendant in- • legal protection – to undertake advocacy security for most workers, low and insufficient and a campaign to secure a legislative incomes for workers, poor working conditions framework that guarantees minimum stan- in terms of hygiene and health and safety, the dards for all workers, and campaign for the absence of canteens and poor transportation

12 facilities, unsatisfactory grading and promo- • the GTUC should identify existing informal tion, inadequate provision for training and sector organizations and seek to develop education, and deficient workplace manage- relations with them; ment. As for the trade union situation itself, the • existing informal sector organizations shrinking base of the trade unions raised ques- should be encouraged to affiliate either to tions about the unions’ legitimacy as the most national unions or directly to the GTUC; and representative organizations of workers. Fur- thermore, there was a grim record of inaccessi- • the GTUC and affiliated unions should bility of many workers to labour laws and trade identify specific informal sector workers union statutes, inadequate budgets for the and undertake pilot organizational projects functioning of trade union committees, espe- to draw lessons for further organizational cially at local levels, inadequate provision work. oftrade union education, marked under-repre- The GTUC has also underlined the need for sentation of women in trade union struc- a redefinition of trade union membership and tures, and weakness of internal trade union the introduction of different categories and lev- democracy. els of membership to introduce flexibility that The emergent challenges facing the move- accommodates informal sector workers. ment raised a set of policy options including the following: 3.4. Relevant initiatives • improving internal democracy and the representation of women within trade union Trade unions in Ghana have some impor- structures; tant activities to undertake to fulfil the needs of servicing the informal sector in a meaningful • strengthening collective bargaining and and consistent manner. The two main elements workplace negotiation; of the strategy for building organizations in the • promoting workplace participation; informal sector include, firstly, building the • expanding organization to cover the infor- capacity of the trade unions to function appro- mal sector; and priately and, secondly, coordinating the initia- • developing workers’ participation beyond tives pertaining to the informal sector. Specific the workplace. activities for the GTUC and the trade unions in Ghana include: The strategy for strengthening the trade • setting up a database on the informal sector union movement combines the appropriate which would encompass features, needs, mix of building on and consolidating the exist- composition and geographical profile; set- ing functions of trade unionism as well as ting up another database on existing insti- extending the boundaries of trade union exis- tutions and programmes and their profile tence and operations. The injunction to organ- for assisting the sector; ize informal sector workers that emerged from • linking informal sector organization to the Arusha Conference was based on the recog- national development, which would mean nition of informal sector workers as a new part- paying particular attention to agriculture ner in the workforce community. Because the and manufacturing, and demonstrating how informal sector is a new area for trade union organization of workers therein can con- organization, the conference called for a crea- tribute to the growth of those sub-sectors, tive approach that took account of the differ- and developing a policy for intervention in ences between the informal sector and the the informal sector as part of the strategy for formal which so far had been the traditional national development, focusing on the sup- domain for trade union organization. port of the State and others for business Already, the GTUC has laid out its own growth and for social protection for work- approach for organizing workers in the infor- ers and the generalized application of mal sector as follows: labour standards; • affiliated unions that have already started • implementing trade union education for organizing informal sector workers should cadre development, i.e. organizers, publi- be encouraged and supported by the GTUC; cists and campaigners; and • af filiated unions that have not started organ- • developing financial and credit schemes; izing in the sector should be encouraged to training and education programmes for explore possibilities; interpersonal and vocational skill develop-

13 ment; insurance schemes to promote social New Project Approach to Structural Adjustment in protection; and campaigns for the applica- Africa, October. tion of labour standards. GTUC. 1996. GTUC Policy on organisation and internal democracy. The consistent pursuit by the trade unions —. 1998. Democratic Participation for Economic and Social Devel- opment, Working document for GTUC leadership work- in Ghana of the challenge of organizing infor- shop, Koforidua, May. mal sector workers requires the nurturing and Hormeku, T. 1998. The Transformation and Development of the conscious development of links with the rele- Informal Sector and the Role of Trade Unions, Paper pre- vant public authorities and institutions, both p a red for an OATUU/ILO/ETUF Seminar on “Tr a d e national and international, that can provide the unions and the informal sector”, Cairo, Egypt, 4-6 May. necessary support. To be most effective, such ILO. 1991. The dilemma of the informal sector, Report of the relations must be dynamic, and must move Director-General (Part 1), International Labour Confer- ence, 78th Session, Geneva. essentially towards policy support that is both —. 1993. Fifteenth International Conference of Labour Statisti- technical and ﬁnancial. cians, Geneva, 19-28 January, Report of the Conference, Geneva. —. 1997. World Labour Report 1997-1998. Industrial relations, Bibliography democracy and social stability, Geneva. —. Convention No. 29 concerning Forced Labour. APADEP. 1998. Informal sector in the agricultural sector in Ghana, a case study. —. Convention No. 87 concerning Freedom of Association and Protection of the Right to Organize. Adu-Amankwah, K. 1997. Contract Labour in the Agricultural Sector in Ghana, a study conducted for the ILO. —. Convention No. 98 concerning the Application of the Principles of the Right to Organize and to Bargain Col- —. 1998. The Informal Sector in Ghana – Challenge for Trade lectively. Union Organisation, Paper presented to a GTUC leadership workshop, August. —. Convention No. 100 concerning Equal Remuneration. —; Kester, G. (eds.). 1997. Africa for Democratic Participation, —. Convention No. 105 concerning the Abolition of Forced APA D E P , Bamako/Dar es Salaam/The Hague. Labour. —; Kester, G. 1998. Democratic workers’participation: Atrade —. Convention No. 111 concerning Discrimination in union challenge, Working document prepared for the respect of Employment and Occupation. national seminar on “Current trends in workplace —. Convention No. 138 concerning Minimum Age for democracy”, Elijah Barayi Training Centre, Yeoville, Admission to Employment. Johannesburg, 24-25 February. ILO-GTUC. 1995. Trade Unions and the Informal Sector, Report —; Tutu, K. 1997. “Going Beyond Politics”, in G. Kester and of an ILO-GTUC Workshop, Koforidua, 15-18 Au g u s t . O. O. Sidibe (eds.), Trade Unions and Sustainable Democ- racy in Africa, Ashgate: Aldershot. Kester, G. Beyond the twentieth century: Beyond Tripartism. An African and European trade union challenge for democracy Boateng, K. 1998. Impact of structural adjustment on public and (forthcoming). private sector employment and incomes in Ghana, Paper presented within the framework of the GTUC/ICFTU- Ninsin, Kwame A. 1991. The informal sector in Ghana’s politi- AFRO New Project Approach to Structural Adjustment cal economy, Freedom Publication, Accra, Ghana. in Africa, October. UN D P . 1997. Ghana Human Development Report, Accra, Ghana. Constitution of the Republic of Ghana, 1992. Galarraga, R.; Gogue, A. 1997. “Africa in a Period of Adjust- ment”, in G. Kester and O. O. Sidibe (eds.), Trade Unions Note and Sustainable Democracy in Africa, Ashgate: Aldershot. Ghana Statistical Service. March 1996. Measuring Informal Sec- 1 This paper will take the deﬁnition of the “informal sector Activity in Ghana. tor” as the range of economic units in both urban and rural Gockel, Augustine F. 1998. Urban informal sector in Ghana: areas which are largely owned and operated by individuals F e a t u res and implications for unionisation, Paper pre s e n t- with little capital and labour, and which produce goods and e d within the framework of the GTUC/ICFTU-AFRO services to generate income and employment.

14 Kenya

To represent informal sector workers, the trade unions need to set in place an enabling legal environment by using their channels of communication with the Government to bring the plight of these workers to the attention of those in authority.

Noah Chune Central Organization of Trade Unions, Kenya (COTUK) Lawrence Egulu African Regional Organization International Confederation of Free Trade Unions (ICFTU-AFRO)

The ILO Bureau for Workers’ Activities has the Central Organization of Trade Unions undertaken a number of research/case studies (COTU) and its affiliates could do to reach whose findings are to be discussed in an Inter- out to the informal sector workers. The role, national Symposium on Trade Unions and the contribution, means and alternative strategies Informal Sector in Geneva, Switzerland, sched- sum up the tasks ahead for the trade union uled for October 1999. The findings shall be movement. applied in developing trade union capacity, within their existing and planned policies and 1. Characteristics of the informal programmes, to extend assistance to workers in sector in Kenya the urban and rural informal sector, homeworkers and those engaged under contract 1.1. General background labour. The following report on Kenya gives a Today, the informal sector is recognized for national situational analysis of the informal sec- its significant contribution to Kenya’s economy. tor and indicates some strategies trade unions The small-scale enterprise sector (jua kali) pro- might adopt to reach out to the sector. vides goods and services; creates jobs; develops This study is divided into three parts. The skills; strengthens forward and backward link- first part provides an overview of the extent ages; creates demand as well as supply; facili- and characteristics of employment in the infor- tates indigenous entrepreneurship; supports mal sector in Kenya as well as factors con- industrialization policies; increases savings tributing to its expansion, while also clarifying and investments; and uses local resources and the upstream reasons for the existing process quickly adapts to market changes (see Repub- and trends prevailing in the sector. Institutional lic of Kenya, 1992). and legal aspects form part of this section which When the informal sector first came under ends with an analysis of the major problems scrutiny following an ILO mission to Kenya in faced by workers, the level of their organization 1972, it accounted for only 10 per cent of total and the extent of government and non-gov- employment. By 1996, 63 per cent was in the ernmental organization (NGO) involvement. informal sector. It is now estimated that the The second part concentrates on the conse- informal sector is absorbing about two-thirds quences the expansion of the informal sector of annual new employment opportunities in has had on trade unions in Kenya and on their Kenya. responses. Institutional, organizational, legal, The informal sector in Kenya, principally financial and attitudinal obstacles that prevent defined as “all enterprises employing between actions by trade unions in the informal sector one and 50 workers”, comprises small-scale are identified. Examples of attempts by the units characterized by very little capital, low trade unions to reach out to the informal sector levels of technology and skills, low productiv- are given. ity, and poor if any access to services. The work- The third part points the way forward and ers are mainly engaged in manufacturing, provides guidelines for the future action that construction, retail trade and transport. By

15 1995, retail trade engaged some 62 per cent of of the irrelevant skills which found their way the workers followed by manufacturing with into the informal sector. 28.5 per cent. The emergence of the informal sector has also been attributed to the sheer need for sur- 1.2. High proportion of women vival combined with the relative ease with which one can enter the sector. In effect, the The sector is also dominated by women informal sector gained prominence not just for operators. The proportion of women in the those who were full time in the sector but even informal sector rose from 39 per cent to 56 per to part-timers from the formal sector. As the cent between 1977 and 1986 respectively (ILO, cost of living began to escalate, formal sector 1997). Women are traditionally found in retail workers discovered that their salaries could no trading (for mainly second-hand clothes, veg- longer cater for all of their many needs. etables and fruits), food processing and services such as hairdressing and dressmaking. 1.4. Major problems facing In terms of geographical distribution, the informal sector in Kenya Nairobi Province has always had the highest number of informal sector workers with the Rift The informal sector is currently beset by a Valley and Central Province coming second number of problems which hinder its develop- and third respectively. The majority of informal ment. In the first place, failure by the Govern- sector workers have been in the urban areas. ment to coordinate effectively activities related to the informal sector among government- 1.3. Factors for the expansion implementing institutions and departments, of the informal sector aid agencies, the business community, NGOs, etc., constitute a major bottleneck to the sector Several factors have been adduced to (Republic of Kenya, 1992). Consequently, much explain the declining importance of formal sec- of the growth of the small-scale sector has been tor employment and the increasing dominance spontaneous. of the informal sector. The main reasons have Other factors inhibiting the development of been the inability of the Kenyan formal sector the sector include lack of capital, limited mar- economy to absorb labour and the failure of kets for the sector’s products, complaints about the Kenyan economy to improve the incomes the quality of products, harsh and hazardous and living standards of the population. For working conditions for informal sector opera- instance, it is estimated that, in the 15-year tors, constant harassment by the authorities, period between 1982 and 1996, overall wage tedious licensing procedures, poor and deteri- employment increased by only 561,000 against orating infrastructure and deficient skills. the labour force which was expanding at almost While in many respects the problems, chal- 500,000 per year. lenges and opportunities are similar for male There has been a noticeable dramatic fall in and female entrepreneurs, women face a num- public sector employment which fell from 36 ber of special constraints. For example, most do per cent in the 1970s to 20.5 per cent in 1994 not own land, which is a prerequisite for access (ILO, 1998). The same downward trend has to credit. Women borrowing money need their been taking place in parastatals and some pri- husbands’ clearance if they are to borrow easily. vate companies, under the guise of restructur- Women lack the necessary skills to enable them ing. Against the background of an economy to engage in business effectively. All the above which has failed to create adequate jobs, a large constraints make it more difficult for women proportion of the retrenched workers in the to operate in either the formal or informal economy continued to join the expanding sector. informal sector (Ngusi, 1994). Coupled with the fact that deliberate poli- 1.5. Government and NGO interven- cies towards rural development were not ade- tion in the informal sector quately articulated, people found opportunities in the informal sector of the urban centres. Sim- The most comprehensive and specific gov- ilarly, lack of coordinated policies and pro- ernment initiative on the informal sector was grammes for human resource development Sessional Paper No. 2 of 1992 which provided have led to a mismatch between the demands a policy framework for promoting small-scale of the economy and output from the education and jua kali development in Kenya. The policy system. This mismatch led to the non-absorption document extensively dwelt on the role of the

16 informal sector in Kenya’s economy, improving Institutions like the Kenya Industrial the enabling environment, gender-specific Research Development Institute (KIRDI), uni- issues, credit for the sector, non-financial pro- versities, UNDPand UNIDO have contributed motional programmes and agenda for action. to financing promoting, marketing and product Before this major landmark, past govern- development in these areas. In its Sixth Coun- ment interventions did not yield any satisfac- try Programme for Kenya extended through to tory results, due to poor coordination among December 1998, UNDP sought to support implementing agencies and failure to base pro- employment creation through small enter- grammes on adequate needs assessment. Gov- prises’ development (jua kali) as one of the three ernment documents, until the Sessional Paper, programme areas. This was on the strength of only made mention of the informal sector in the its relevance to theattainment of the objectives context of the overall employment problem in outlined in Kenya’s Eighth National Develop- Kenya. Among these were: ment Plan (1997-2001). The Federation of 1. the Report of the Parliamentary Select Com- Kenya Employers (FKE), too, is interested in the mittee on Unemployment of 1990; activities of the informal sector, sometimes 2. the Sessional Paper No. 10 of 1973 on viewing them as a likely source of membership, employment – as a response to the ILO 1972 especially so since they are regarded as entre- mission report; preneurs. The Federation of Jua Kali Entrepre- neurs continues to benefit from the ILO project 3. the National Development Plans (various); “Improve Your Business” being implemented 4. the Presidential Committee on Unemploy- by the FKE. Interventions by COTU and its affil- ment of 1983; and iates will form part of the next section. 5. the Sessional Paper No. 2 of 1983 on Unem- ployment. 2. Level of organization and trade union interventions in the informal Sessional paper No. 1 of 1986 and the Sixth sector National Development Plan (1989-1993) highlighted the development of the small enterprise 2.1. Organizing the informal sector sector as a primary means of stren g t h e n i n g in Kenya Kenya’s economy. Following these, the Govern- Prevalent problems facing the development ment launched the Small-Scale Enterprise and growth of the informal sector reflect either Development Programme with the intention of the lack of any organizational structures in the ad d r essing the problems of lack of diversity, easy sector or the very fragile structures existing saturation of the market, lack of market infor- within the sector. This may partly be due to the mation, low capacity to adapt to changing cir- history of the sector including the negative cumstances, and inherent uncertainty in general. stigma that has characterized it. Prior to the launching of the above pro- In whatever respect, the informal sector gramme, the Government’s support (mainly came into being as a spontaneous response to training and skill formation) for various small the need for survival. In most cases enterprises and jua kali enterprises, especially women’s in the sector have been the result of individual gr oups through the Women’s Bureau, was mini- and highly personalized decision-making. mal. In terms of financial support there exist Coupled with the fact that it has a history of suf- several financial institutions, some of which fering discrimination and is perceived as an have been specifically designed for lending to unhealthy, dangerous, precarious, insecure and the small and medium enterprise sector. They vulnerable sector of the economy, it has been include Kenya Industrial Estates (KIE), the Joint severely marginalized and exploited. Loan Board Scheme (JLBS) and the Small Finance Company (SEFCO). In addition, other 2.2. Obstacles to the emergence institutions have developed within their port- of organizational structures folio special credit programmes for the small sector: Industrial and Commercial Develop- Fi r s t l y , owing to the survival motive of the ment Corporation (ICDC), Kenya Commercial informal sector activities and the resilience of Bank Limited, Barclays Bank of Kenya Limited, the persons owning these businesses, orga n i z a - and National Bank of Kenya Limited. Other tions have been very slow to evolve. Secondly, sources of credit have been provided by over as they are seen as operating outside the la w , 600 NGOs like K-MAP and PRIDE and a few they were not ready to expose themselves to small enterprise associations. or ganizations which would make them easily

17 id e n t i fi able for victimization. Thirdl y , they do comprises all hawkers such as vegetable sellers, not wish to be taxed: being organized would kiosk operators, “mi t u m b a ” (second-hand goods) make it difficult for them to evade taxes. Al s o dealers, tailors, textile sellers, open-air garages, militating against the evolution of orga n i z a - woodcarvers, watch repairers, furniture mak- tional struc t u r es is the fact that most people ers/carpenters; charcoal dealers, etc. involved in this sector had until recently very little formal education, so their access to infor- 2.4. Donor-funded activities mation was always limited, let alone the fact in formative stages that their comprehension of the values of being or ganized was equally poor. Added to this list Workers in the informal sector organize to of unfavourable factors against the emerge n c e overcome business constraints and to over- of organizational struc t u r es is that those oper- come problems that threaten their very exis- ating had/have no registration or licence which tence. A survey (Ngusi, 1994) identified the would have speeded up the process of orga n i z - following informal sector organizations in ing activities in the sector. Kenya: Nairobi Hawkers’ Association, Matatu Operators’ Association, Malindi Boards Asso- 2.3. No legal force to compel ciation, the Young Farmers’ Clubs and the membership Small Traders and Entrepreneurs Society. These associations are still predominantly urban. Notwithstanding the foregoing, there have The ILO project gave rise to the emerge n c e emerged several organizations representing of the Kenya National Federation of Informal various groups of informal sector operators Sector Associations as the apex organization of and workers. Some of these came to the fore as informal sector associations in Kenya. Similar a reaction against the oppression perpetrated or ganizations exist in other East African coun- by the establishment, and others have been tries: FISA (Uganda), and the Tanzania Federa- encouraged to develop so that they can be tion of Informal Sector Organisations (TAF I S O ) . assisted by the authorities. The majority of the The three organizations are all members of the organizational structures referred to are found East African Confederation of Informal Sector mostly among informal sector activities within Or ganisations, based in Mombasa, Kenya. urban centres and have their origins in Nairobi. These organizations are still in their forma- Branch development in other towns and urban tive stages and their activities are donor-f u n d e d . centres has started and is still rudimentary at Ho w e v e r , it is a positive step forward in terms these levels. This is due largely to the fact that of addressing and coordinating informal sector organizations are still in their infancy, have low issues at national and subregional levels. levels of membership, limited resources at their disposal and in any case it is left to an individ- 2.5. Trade union intervention ual to enrol as a member. In other words, most in the informal sector of those organizations do not have any legal force to compel membership from those in the As already mentioned above, the growth of relevant sectors they represent, underlining the the sector was spontaneous and in response to need to sensitize and create awareness among factors mostly beyond the control of the larger the informal sector participants. economy as a whole. As such, its complexities Given that most of the workers found in this and dynamism dictated the rejoinders, as it sector have low levels of education, the quality were, from government and other institutions of leadership is still low compared with lead- that studied it. The trade union movement’s ership representing workers in the formal trade response to this scenario was not an exception. unions in Kenya. Most of the leadership is com- On this account, one British academic observed posed of workers with at best primary school as follows: education, i.e. standard eight/KCPE. Others Indian buildings are not the only ones to are self-made leaders. This implies that the have been surrounded by the rising flood quality of leadership in this sector leaves a lot waters of African jua kali development. Just to be desired. down the road from the Gujarati stone gateway Another important feature to be noted about stands the headquarters of the ... (Central the nature of the informal sector organizations Organisation of Trade Unions). Doubtless, is that they are heterogeneous organizations when it was built ... it was seen as a very appro- which combine many shades of trade. For priate site. Now, its compound is surrounded example, the Nairobi Hawkers’ Association on the one side by a sea of second-hand clothes

18 sellers, with their wooden stalls, and their enues and develop linkages with the informal s p ecial trade cries ... sector (see Box 1). The Central Organization of Trade Unions – Kenya (COTU) is the sole national trade union 2.6. Definition of “trade union” federation in Kenya to which all industrial unions must affiliate. Currently, 30 unions are The Trade Unions (Revised Edition, 1984) affiliated to COTU, comprising a total mem- Act defines a trade union as “an association or bership of 240,000 workers down from a peak combination, whether temporary or permanent of 350,000 in 1986. of more than six persons, the principal objects COTU was formed in 1965 and constitutes of which are the regulation of relations between trade unions registered under the Trade Union employees and employers”. It also defines an Act whose membership consists of non-mana- employee as a “person who has entered into or gerial employees of companies and local works under contract with an employer”. This authorities but excludes casual employees and means that only workers bound to an employer those in the informal sector. Since its inception, can form or belong to a union and hence claim COTU’s role has remained traditional. It has membership of COTU. focused on negotiating for improvement in Apparently COTU has so far been content salaries, safety in the workplace, fringe benefits with the legal status quo since at any time it and, generally, better working terms and con- could draw on a large pool of unorganized ditions. COTU has not been able to adapt to the workers. The formal sector provided a mass of newly forming working class, let alone to the potential members for the unions to organize. trends in the development of new economic Therefore, as long as the formal sector had systems which have been responsible for the secure and well-paying jobs, the unions were informal sector in Kenya. not inclined to organize the informal sector, Due to current economic reforms including choosing to consider it as disorganized, outside massive retrenchments, the trade union move- the pale of “organized labour”. ment has experienced a severe decline in its membership. Yet, other than donor support, 2.7. COTU reviews position COTU’s financial resource base has remained the membership fees collected from its mem- Retrenchments in the formal sector led bers. Against such a background COTU has to unions to review their position. Their members reorient its sources of membership and rev- were losing jobs by the hour in a sector that sup-

Box 1. COTU (K) and organizing the informal sector

It was only in the early 1990s that COTU (K) initiated efforts aimed at organizing the informal sector. The overall aim of COTU has been to convert the informal sector organizations into formal recognition by the authorities. In 1993, COTU initiated an arrangement to sensitize the informal sector on the need for the sector to support the overall activities of the trade union movement. COTU opened an office for the commuter minibus (matatu) operators at its headquarters (the Solidarity Building) in Nairobi. However, this initiative proved shortlived. COTU also arranged a workshop for trade union organizers in an effort to encourage them to approach the informal sector operators. Most of the national centre affiliates are now in the process of reviewing their constitutions to allow the membership of those operating in the informal sector. To date the Kenya Union of Food, Commercial and Allied Workers have organized 9,000 informal sector enterprises employing approximately 18,000 workers. Similarly, the Kenya Shoe and Leather Workers’ Union has brought to its fold over 5,000 informal sector entrepreneurs with 10,000 workers. In addition, the Kenya Tailors and Textile Workers’ Union has 20,000 informal sector entrepreneurs employing some 150,000 workers, while the Kenya Building and Construction Union has 10,000 establishments in the informal sector with 2,000 operators. Since the majority of the workers in the informal sector are women, COTU has supported income-generating informal sector activities through its Women’s Department. The main success stories lie with the Kenya Plantation and General Agricultural Workers’ Union with informal sector women running off-farm activities. The Kenya Electrical Trades Workers’ Union also runs a thrift organization where women borrow funds for investing in informal sector operations, such as selling vegetables in bulk, running posho (maize meal) mills, and grocery stores.

19 posedly provided permanent careers. Having But first it had to tackle the legal and attitudi- lost their jobs, such workers automatically nal obstacles in their way. ceased to be union members since the formal Despite the explicit nature of COTU’s con- contract binding them to an employer had stitution defining its obligations to workers of come to an end. Unions therefore watched their all categories as noted earlier, it could not over- membership dwindle in a situation where the come legal barriers: membership of a union is structural adjustment programmes (SAPs) dic- based on the existence of an employer- tated the future of the enterprise rather than the employee relationship which is not always existing industrial relations system. guaranteed in the informal sector. Besides, Dispute settlement was watered down, informal sector workers are not covered by the making trade unions unable to defend jobs. Labour Act nor by the Employment Act. The While trying (albeit unsuccessfully) to do their fact that the existing legislation bars informal jobs of ensuring that redundancies were not sector workers from unionization meant that carried out, the best they tried to settle for was the first task for the unions should be towards to ensure that those affected received compen- a change in the law itself opening up the infor- sation packages. Unions have argued that they mal sector to the established trade union move- should be part and parcel of the discussions on ment. To date, this has not been achieved. enterprise restructuring. In the event of any For instance, membership of the Kenya ret r enchments, counselling, retraining, or timely Union of Domestic, Hotels, Educational Insti- payment of adequate terminal benefits, avenues tutions, Hospitals and Allied Workers (KUD- for redeployment and a process of worker con- HEIHA) extends to, inter alia, all employees trol should be worked out. engaged in private houses or homes and all Having realized that they could no longer establishments providing foods and beverages. defend jobs and the fact that their membership By definition, therefore, housemaids and all was being reduced in the process, unions had food vendors (who are part of the informal sec- to adjust their attitude towards the informal tor) should be part of the union. The reality is sector. They were all the more compelled to do that no workers in this category are unionized. so because the same workers ejected from the The closest COTU ever got in forging an formal sector were actively involved in infor- alliance with the informal sector was in the run- mal activities, yet they could not reach out to up to the intended national strike scheduled for them. May 1993. With the severe economic difficulties The SAPs entailing privatization, closures facing their members, COTU had sought to and retrenchments brought to the fore the fail- provide leadership aimed at paralysing the ure of trade unions in Kenya to live up to their Kenyan economy and subsequently forcing the aspirations of “improving the economic and Government to meet COTU’s demands. As part social conditions of all workers in all parts of of the strategy, an alliance was forged with the Kenya and to render them assistance whether Matatu Operators’ Association (comprising or not such workers are employed or have taxi drivers and operators) in order to make ceased to be employed”. So it turned out, para- sure no worker turned up for work. A series of doxically, that the new economic systems were meetings were held, and an office provided for to bring the trade union leadership to terms the leadership of the association. On May Day with their cardinal objective of defending 1993, following a series of demands by the Sec- workers wherever they may be. COTU’s objec- retary-General of COTU, he and other labour tive is to assist in the complete organization of leaders were arrested and incarcerated. This, in all workers within the trade union movement. effect, marked the end of the COTU/informal SAPs and the prominence of the informal sec- sector alliance. tor provided further tests to this goal. The relationship between COTU and the informal sector workers was also observed by 2.8. Legal obstacles, arrests King (1996) as follows: and strategies “The real paradox of COTU’s location, however, is that they are now surrounded upon [sic] It was against the background of retrench- hundreds of small enterprises, many of which ments, dwindling membership and a reduced do have employees, and these micro-enter- financial base that the trade union movement prises cover many of the different categories of sought to develop trade union policies towards industry and commerce that COTU’s affiliated organizing workers in the informal sector as trade unions claim to represent. But almost cer- part of the mainstream trade union movement. tainly there may not be a single unionised

20 worker in the whole area now surrounding • Union of Post and Telecommunications COTU headquarters, since most trade unions Employees (Kenya); have not yet come to terms with the massive, • Kenya Union of Commercial Food and and often highly exploitative, employment of Allied Workers; people in the informal sector, and COTU itself has failed to develop any policy on informal • Kenya Quarry and Mine Workers’ Union; employment.” • Kenya Electrical Trades Allied Workers’ The first most comprehensive trade union Union; initiative towards the informal sector was a • Bakery, Confectionery Manufacturing and subregional activity: strategies trade unions Allied Workers’ Union (Kenya); could employ in order to organize workers in the informal sector were discussed. The ensu- • Kenya Chemical and Allied Workers’ ing recommendations, to which COTU was a Union; and party, were, inter alia, that trade unions should: • Kenya Jockey and Betting Workers’ Union. • carry out more research on informal sector needs; The services identified that could be provided by the above unions included assisting • help to set up some kind of workers’ repre- informal sector workers to form groups and sentation structures in the informal sector; cooperatives and extending education pro- • campaign and/or lobby for reforms in var- grammes for the benefit of their own members. ious pieces of labour and social legislation; On the other hand, COTU was called upon to • extend their services in workers’ education develop and adopt a national policy and guide- and training in the informal sector; and lines for the informal sector in terms of workers’ organization. COTU was also expected to • convince governments and employers of the set up a department for the informal sector with necessity of setting up social security sys- the mandate to develop youth and women tems, pension funds and saving schemes to groups and cooperatives to engage in income- which both formal and informal sector generating activities, train informal sector par- workers would belong. ticipants in enterprise development and improving their business, address the sustain- Lack of meaningful follow-up actions at ability of the informal sector programme and national level in Kenya was blamed on inade- be at the forefront in agitating for the estab- quate resources – both human and financial – lishment of a workers’ bank. to support the recommendations. In the case of individual unions, the partici- Later at an ICFTU-AFRO-financed activity, pants recommended that they should provide the question of linkages between trade unions the human resources and support or cooperate and the informal sector was again discussed with COTU in articulating the policy, strategies and trade unions were urged to reach out to the and approaches to organizing workers in the informal sector. informal sector. More recently, in May 1996, the ILO jointly The ILO was called upon to provide techni- with COTU organized a one-week seminar on cal support and advisory services targeting the the informal sector, one of whose objectives was informal sector, and arrange study tours for to identify ways to organize the informal sec- Kenyan trade unionists and their informal sector in the context of trade unions. This activity tor counterparts to countries that have had suc- produced perhaps the best recommendations cess stories in terms of organizing workers in and strategies that were ever to form the basis the informal sector as part of the trade union for any future trade union role connected with movement. The Government was expected to the informal sector. review legislation that is relevant to the infor- The seminar recommended that the follow- mal sector, focusing on the creation of an ing COTU affiliates were best qualified to reach enabling legal framework. out to the informal sector: •Tailors and Textile Workers’ Union; 2.9. Minimum requirements • Kenya Shoe and Leather Workers’ Union; and strong kinship • Kenya Union of Printing, Publishing, Paper However, most of the initiatives have come Manufacturing and Allied Workers to naught. For instance, despite recent national (KUPRIPUPA); agitation for national law and constitutional

21 reforms, COTU did not float any idea which, if unknown territory. Such a position, of course, accepted, would have facilitated trade union is a result of failure to take risks and the gen- access to the informal sector. eral fear to experiment. Besides the existence of a legislative envi- Other trade unionists interviewed explicitly ronment that is biased towards the formal sec- stated that they were not comfortable working tor, the failure by the unions in Kenya to reach with “disorganization” of which the informal out to the informal sector is also attributable to sector reminds them. To them, trade unionism the small size of workers in the latter enter- involves organized labour and should function prises. Most are either family businesses or within its boundaries. Reminded of their employ less than five people. In this way most responsibility to defend workers’ rights, some of the units cannot therefore qualify to form responded that they would only be able to individual unions since the minimum require- respond if and when the said businesses ment to form a trade union is six employees. became formal and therefore readily accessible This seems to correspond to the observation to trade unions. that the informal sector is where family or eth- Another reason why unions in Kenya have nic loyalties count more than working class soli- not ventured into the informal sector is that darity. Being family businesses or those run by they find it awkward to face their former mem- close relatives, allegiance is first and foremost bers who were once gainfully employed and towards a family/relative. In Kenya, kinship is part and parcel of the trade union movement very strong and unions stand a very credible and now fully in the informal sector. To the opposition from the workers for whom collec- union leaders, this signified a weakness on their tive action would be interpreted to mean part as they had not been able to defend their rebelling against one’s family member/rel a tive. members against retrenchments. They there- Interviews with various union leaders have fore anticipated resentment from these workers alluded to insufficient funds as the cause of who would view them as associating with their failure to reach out to the informal sector. workers only during good times but who turn Given its segmented nature it would require a away when problems set in. lot of resources to organize activities for the It can be seen from the above that trade benefit of the informal sector operators. unions in Kenya have partly failed to addres s A related reason is that trade unions cannot the plight of workers in the informal sector readily meet the needs of the informal sector: owing to the national legislative environ m e n t unions have educational activities that are not which does not allow them access to the sector. necessarily related to the requirements of the Such failure, however, is largely imputed to the informal sector. Informal sector operators are conservative nature of the unions which have more concerned with day-to-day survival. The not lived up to their role of defending workers NGOs on the other hand have done better wh e r ever they are. Unions in Kenya have not because they have the funds and, sometimes, taken up the challenge of reaching out to the the political clout, and hence can provide the non-formal sector nor assuring the non-tradi- services that meet the everyday requirements tional roles that are being called for all over of the informal sector. th e world. So in terms of changing their internal policies to deal with the changing times, trade 2.10. Unions plead demands unions in Kenya have not risen to the challenges. of formal sector 3. Towards a new trade union A further excuse on the part of the unions agenda in the informal sector for not responding to the needs of the informal sector is that there is still a lot of work undone We have seen from the preceding sections in the formal sector. Union leaders plead that that the informalization of the Kenyan economy with the increasing globalization of the econo- is bound to continue. With the formal sector my and the ongoing structural reforms, there shrinking, formal wage employment is no are more urgent challenges that trade unions longer guaranteed. Each year, 500,000 new should address first rather than turn to non-tra- workers join the labour force and they cannot ditional membership recruitment bases like the find jobs in the formal sector. Retrenchments and informal sector. It would also mean over- the need to maintain a small workforce have stretching the few resources to the limit. Rather, become normal in Kenya. The traditional base of it is better to concentrate efforts on the “easy- the trade union movement is theref o r e no longer go” areas before venturing into hitherto as secure at it was. This poses a serious challenge

22 for unions which depend on membership for bring to the fore the problems of the infor- their numerical strength as well as fina n c e s . mal sector and declare explicitly its inten- Trade unions in Kenya have not risen up to tions towards that sector. COTU will only be the challenges and to opportunities that the successful in reaching out to the informal informal sector offers. Trade unions recognize sector workers if it can bring the plight of that organization remains the ongoing task of these workers to the attention of those in any trade union. It has time and again been authority. suggested that trade unions venture into non- •Trade unions in Kenya have floated the idea traditional areas and try to organize workers in of having a high-level national stakeholders’ the informal sector, rural areas, export-process- forum. Such a forum, akin to the National ing zones, as well as contract workers, home- Economic and Labour Advisory Council workers, etc. Even if trade unions were willing (NEDLAC) in South Africa, would comprise to reach out to these groups, a massive org a- all stakeholders, and would advise the Gov- n izational effort would be required to bring ernment on pertinent economic and social these workers into the ranks of the trade union issues. The need to have a high-level forum movement. should also be taken up within the frame- The following recommendations could sig- work of the Labour Commission of the nal the way for trade unions in their future Organization of African Unity and the actions in the informal sector: United Nations Economic Commission for Africa. It is important that COTU continues • There is no doubt that the legal environment with this debate and ensures that the infor- is a serious limiting factor in developing mal sector, too, is represented on this organ trade union strategies in the informal sector. in order for them to speak for themselves. The Trade Union Act, the Employment Act and the Labour Act make no reference to the • The existence of an apex national organization informal sector, so it remains unrecognized representing the informal sector – the Kenya and unprotected by any legal instrument. National Federation of Informal Sector The workers in the sector do not belong to Associations – is an opportunity COTU any trade union, nor are any other industrial should grasp. An alliance should be sought relations systems applicable to them. Any between this federation and COTU to progress in terms of unions representing enable the two organizations to assess their informal sector workers has to be backed up needs, problems and strategies. The ILO by an enabling legal environment. The defi- should be instrumental in facilitating such nition of who an employee is and what con- an alliance. National unions could then give stitutes a trade union has to be changed, effect to any recommendations adopted making unionization open to all categories which would guide them in dealing with of workers without making it conditional on national sectoral associations of informal number of members or an employer- sector workers. At subregional level, there employee relationship. The leadership exists the East African Confederation of required to achieve these ends should be Informal Sector Organisations and the East provided by COTU. African Trade Union Council (EATUC). COTU, however, cannot afford to stand These two bodies are best suited to address by and wait for a change in the relevant workers’ – formal and informal – issues at labour laws. Even before this is done, such East African level. The ILO and the two a change should be seen to be of importance workers’ organizations in the African conti- and relevance to the informal sector. COTU nent, i.e. ICFTU-AFRO (International Con- should be the spokesperson for all workers federation of Free Trade Unions – African whether they are unionized or not. COTU Regional Office) and OATUU (Organization has channels of communications with the of African Trade Union Unity) could play a Government which the informal sector does stimulating role in this endeavour. not. The Kenya Local Government Workers’ • What the informal sector needs are credit, Union, for example, has as its counterpart skills, markets for their products, etc. The the city/municipal authorities that are very unions may not be in the best position to instrumental in making life better or worse provide them but are best suited to be the for the informal sector. COTU is represented link between those that can do so and the on all existing tripartite institutions. These informal sector. Trade unions can link up are avenues through which COTU could with financial institutions and NGOs pro-

23 viding credit and skills training and can trade union education to enable members to help informal sector producers identify decide for themselves. Unions should take markets for their products. Access by trade the first step to alter their constitutions and unions to the boards of some training insti- so acquire the freedom to reach out to the tutions can be of assistance to the informal informal sector. Even then unions – COTU sector insofar as they can influence the con- and its affiliates – should be encouraged to tent of the curricula for the benefit of the make their membership applicable to all cat- informal sector. egories of workers. • Mo b i l i z i n g is a great asset from which the informal sector could benefit as a result of its association with trade unions. Other forms Bibliography of action like picketing and organizing, as Aryee, G. 1996. Promoting Productivity and social protection in well as the acquisition of bargaining skills, the urban informal sector – An integrated approach, Geneva, respect for democratic values, leadership ILO. skills, accounting skills, etc., are areas where COTU. Constitution and Rules of the Central Organisation of trade unions excel and these areas could be Trade Unions Kenya. ma s t e r ed by the informal sector as we l l . COTU/ICFTU-AFRO. 1995. Background document for the National Conference on Building Democratic and Equitable • Unions complain that they lack the neces- Adjustment and Development in Kenya, Nairobi. sary funds and human resources to assume —. 1995. Conclusions and Recommendations of the National Con- further responsibilities. While this is true to ference on Building Democratic and Equitable Adjustment some extent given the fact that some unions and Development in Kenya, Nairobi. are barely able to survive on their own, they COTU/ILO. 1996. Recommendations of the Seminar on Trade should also be aware that investing in the Unions and the Informal Sector, Nairobi. informal sector will yield returns in terms of ILO. Conventions and Recommendations (various), Geneva. larger membership with a bigger voice, let —. 1998. Kenya: Meeting the employment challenges of the 21st alone the financial implications involved. century, Addis Ababa. —. 1996. The informal sector: Legalisation or laissez-faire? by Car- This means that unions must find ways to los Maldonaldo, Geneva. strengthen their financial base, for instance —. 1997. World Employment Report 1997-98, Geneva. by organizing payment of adequate mem- —. 1993. Report of the 15th International Conference of Labour bership dues and engagement in small-scale Statisticians, Geneva, 19-28 January. enterprise development for income genera- —. 1991. The Dilemma of the Informal Sector, Report of Direc- tion. Technical assistance from the ILO, tor General (Part I) to the 78th Session of the International OATUU and ICFTU-AFRO is important in Labour Conference, Geneva. this regard. ILO/ICFTU-AFRO. 1993. Recommendations of the Sub-Regional Seminar on Organising Workers in the Informal Sector, • It is also important that the capacities of the Lusaka. unions be enhanced in order to enable them King, Kenneth. 1996. Jua Kali Kenya: Change and Development to play a more active role in the informal sec- in an Informal Economy, 1970-95, London, James Curry to r . Some unions have not taken up the issue and Nairobi, East African Educational Publishers. because they do not know much about the KUDHEIHA. 1998. Memorandum of Agreement between the informal sector. Unions have to be sensitized Kenya Union of Domestic, Hotels, Educational Institutions, Hospitals and Allied Workers and the Kenya Association of on the importance of the sector not only in Hotel keepers and Caterers. terms of the potential membership and —. 1998. Constitution of the Kenya Union of Domestic, Hotels, finances it offers, but also in terms of its con- Educational Institutions, Hospitals and Allied Workers, Reg- tribution to general national development. istered on 20 February. Study tours for trade union leaders and infor- Mwamadzingo, M. 1997. Technological Capabilities and Perfor- mal sector workers should be organized to mance of Small- and Medium- Sized Enterprises in Kenya, countries like Ghana, Benin, Burkina Faso Nairobi. and Zambia where unions are already orga - Ngusi, James. 1994. Country Study on Kenya on the Informal Sector. nizing workers in the informal sector. Republic of Kenya: Economic Survey(Various issues), Nairobi. •Trade union constitutions are usually very —. Budget Speech for fiscal year 1997/98, Nairobi. rigid. Furthermore, members are often igno- —. Labour Act, Nairobi. rant of their obligations as stipulated in their —. National Development Plan (Various issues), Nairobi. union constitutions. The same is true with —. 1992. Small Enterprise and Jua Kali Development in Kenya, regard to national labour laws. It is therefore Sessional Paper No. 2, March. important that labour legislation and —. 1984. The Trade Union Act, Chapter 233, revised edition, democracy be given more prominence in Nairobi.

24 Asia

India

The interests of the organized and the informal sectors are considered conﬂictual: organized labour, privileged and protected, sees unorganized labour in the informal sector as a threat to the perpetuation of their current position.

C. S. Venkata Ratnam Professor and Dean International Management Institute, New Delhi

1. Unorganized labour neurs. Some of them engage family members or hired labour and are therefore considered The terms “unorganized sector” and “infor- employers. mal sector” are often used interchangeably. The distinction between the two is easy to describe, 1.1. The subtleties of definition but difficult to define. The Employment Mar- ket Information (EMI) Programme of the Direc- Considering the heterogeneity of the sector torate General of Employment and Training in question, it is difficult to arrive at a uniform (DGET), Government of India, defines the orga- definition even within India. Such a definition nized sector as comprising all establishments in would also need to be formulated around the the public sector and those establishments in objective of the search for definition. From a sta- the private sector which employ ten or more tistical and accounting point of view, the unor- persons on any day of the reference period ganized sector may refer to activities which are (usually three months). All other economic not reported or for which systematic data is not activities, by implication, could be considered collected on a regular basis. From a regulatory unorganized. In common parlance, informal point of view, it refers to activities which are not sector activities comprise those which are not covered by the existing laws of registration, etc. (a) organized systematically; (b) made formal From the point of view of labour market seg- through mandatory registration or licence; (c) mentation, it refers to unprotected (casual and covered by legislation to protect minimum contract labour) and non-unionized labour. labour standards in employment; and (d) Even in this regard, precise definitions are dif- unionized. ficult because senior managers may not be In reality, however, all activities in the orga- unionized, but engaged in formal sector activ- nized sector are not necessarily organized sys- ities. From a public policy point of view, defi- tematically and employment beyond a certain nitions become necessary when the State has a number in any one enterprise does not auto- clear-cut policy. In India, however, although the matically guarantee protection or better labour State explicitly refers to the unorganized or the standards. Many illegal activities can also be informal sector in its Five-Year Plan documents considered to be informal even if highly orga- and elsewhere, it still does not have a clear-cut nized, like the underworld mafia. Micro-enter- policy as such. It may therefore be concluded prises and the activities of a variety of self- that in India, whatever the point of view or pur- employed persons are also usually considered pose for referring to the informal sector, no pre- to belong to the domain of the unorganized cise definition is provided. Baxi (1993) adds that and/or informal sector. Those engaged in work unorganized labour is often divested of natu- in the unorganized and/or informal sector ralistic overtones because attributes such as could be considered workers, but they could “bonded”, “child” and “landless” to the word also be considered self-employed entrepre- “labour” highlight the terrible reality of the

25 material conditions of existence of the impov- 2. The role of the unorganized erished masses which become even worse due sector in generating wage to their obscene exploitation. and self-employment and alleviating poverty 1.2. Characteristics of The estimate of the extent of the role of the the informal sector unorganized sector in the Indian economy is While India’s population has been growing based on the residual method. From the total in recent years at an average rate of 2.1 per cent, employment estimates based on the National the labour force has been increasing at 2.5 per Sample Survey on Employment and Unem- cent. However, the informal sector labour force ployment, the employment estimates of the has been increasing at 4 per cent, but without DGET of the Ministry of Labour for the orga- any corresponding increase in productivity, nized sector are deducted and the balance is real wages, or working/living conditions of taken as the estimated employment in the unor- workers in that sector (Mishra, 1999). It has ganized sector (Papola, 1998). On this basis, the become a competitive and low-cost device to employment rate in the unorganized sector is absorb labour which cannot otherwise be estimated to be around 92 per cent. The orga- absorbed elsewhere, whereas any attempt to nized sector’s share in employment has fallen bring it into a legal and institutional framework from 9 per cent in 1981 to 8 per cent according may impair its absorptive capacity. to the 1991 Census. In the rural areas, it is even The Report of the Working Group on Labour higher but estimated at around 65 per cent in Policy for the Ninth Five-Year Plan, 1997-2002 the urban areas. In the non-agricultural sector, (India, 1997) observed that “the unorganized rural and urban taken together, about 79 per sector which represents 93 per cent of the total cent of total employment is in the unorganized workforce is characterized by excessive sea- sector. sonality of employment, the problem of denial The foregoing ﬁgures leave no doubt that of minimum wages, ... of indebtedness and the unorganized sector is the main provider of bondage, the dislocation of home and family both wage workers and self-employed. The life caused on account of migration (inter-dis- drop-outs from the formal education system trict, inter-state and inter-country) and the constitute the bulk of those engaged in the attendant problem caused on account of unorganized sector.Yet they are the very ones unplanned and unregulated urbanization and who provide a major source of skill in the coun- overcrowding, congestion and increase in try. Although they comprise the bulk of the human misery, privation and suffering.” working poor, yet they help to reduce unem- The report also refers to agricultural work- ployment, alleviate poverty and contribute to ers who account for almost 25 per cent of the the survival of the family. total workforce in India and are largely non- The share of the unorganized sector in Gross unionized and unorganized. It underlines Domestic Product (GDP) is estimated to be the need to provide such workers with at least around 63 per cent. About 47 per cent of the the barest minimum of health and safety value added in the non-agricultural sector and protection and social security and welfare ben- 35 per cent of the total value added in the urban eﬁts, and guarantee a minimum number of economy come from unorganized sector activ- days of employment and the enforcement of ities which are much higher in agriculture and minimum wage regulations. It also refers to also high in construction and trade. home-based workers “who continue to be the victims of social exclusion, deprivation and 2.1. Statistical sources of information exploitation.” about the unorganized sector The same report proposed the following The following are some of the major sources activities in respect of the unorganized sector of data and information about the informal sec- for the 9th Plan: (a) undertake a survey of the tor in India: unorganized sector; (b) conduct a study of the impact of structural adjustment on labour in the • The decennial Economic Census conducted unorganized sector; and (c) set up a research by the Central Statistical Organization wing in the Labour Bureau for providing com- (CSO) of the Government of India since prehensive information on the needs and 1971. requirements of social security for workers in • The periodic surveys of unorganized sector the unorganized sector. activities in own-account enterprises and

26 non-directory establishments conducted by di ff e r ent states. The coverage of various sectors the National Sample Survey Organization in diff e rent rounds of the National Sample Sur- (NSSO) in the interim period between the vey has been varied (Table 2). There is a sig- decennial Economic Census. n i ﬁcant correlation between urbanization and • The surveys on Working and Living Condi- informal sector employment (Table 3), and tions of Workers in different industries con- between industrialization and informal sector ducted by the Labour Bureau of the Ministry unemployment (Table 4). As the proportion of of Labour, Government of India. the workforce in non-household manufacturing increases, the size of the informal sector • Independent surveys by re s e a rchers and seems to shrink. The incidence of poverty has institutions in selected métiers and occupa- been higher in rural areas than in urban are a s tions, for instance: Biplab Dasgupta (1973) ( Table 5), in mining, manufacturing and mis- and A.N. Bose (1974) in Calcutta; T.S. Pap- cellaneous activities. The converse seems to be ola (1977) in Ahmedabad; Satya Raju (1984) t rue in respect of workers in agriculture, con- in Visakhapatnam; Sarathi Acharya and s t ruction, trade and transport. The incidence of A . V. Jose (1991) in Mumbai; M.S. Ramanu- poverty has been the lowest in the agricultur- jam and I. C. Awasthi (1994) in ﬁve towns; ally (Haryana, Punjab and Andhra Pradesh) the Institute of Social Studies Trust; and T. S . and industrially (Gujarat and Maharashtra) Sankaran and V.R. Rao (1997) in New Delhi. pro s p e r ous states (Table 6). The incidence of poverty has been the highest in Orissa and The quality of data concerning the informal B i h a r. sector is a problem. For instance, as shown in Table 1, the proportion of informal sector 2.2. Anomalies in the way of making employment in total non-agricultural employ- comparative assessments ment was 61 per cent as per 1991 Economic Census and 72 per cent as per the estimate of Considering the underreporting in India’s the DGET. There is considerable variation – o rganized sector activities, the data on the con- less than 50 per cent to over 70 per cent accord- tribution of the informal sector to employment ing to both the sources mentioned above – in and GDP could be considered moderate over- the extent of informal sector employment in estimates. Various papers published in the

Table 1. Informal sector employment

State % of total employment % of total employment in in non-agriculture (Economic Census) in non-agriculture (DGET) Andhra Pradesh (AP) 64.80 79.48 Assam (ASS) 51.20 44.79 Bihar (BH) 63.09 65.74 Gujarat (GUJ) 47.92 71.58 Haryana (HAR) 55.20 70.03 Karnataka (KAR) 61.27 75.56 Kerala (KER) 60.54 74.49 Madhya Pradesh (MP) 66.27 71.97 Maharashtra (MAH) 51.91 69.80 Orissa (OR) 71.05 71.66 Punjab (PUN) 58.62 71.12 Rajasthan (RAJ) 68.16 71.75 Tamil Nadu (TN) 63.34 74.47 Uttar Pradesh (UP) 67.59 76.12 West Bengal (WB) 64.46 73.12 India 61.03 72.36 Notes: 1. These ﬁgures for India exclude Jammu and Kashmir. 2. Total employment in the non-agricultural sector comprises employment in own-account enterprises and employment in the establishments. Sources: Employment Review, 1989-90, DGET, Ministry of Labour, Government of India, 1996.

27 Table 2. Coverage of various sectors in different rounds of the National Sample Survey

Round Period Segments of the informal sector included among subjects covered in the round 1 10/1950-3/1951 Household enterprises 3 8/1951-11/1951 Small-scale manufacture, handicrafts, transport, trade and ﬁnancial operations 4 4/1952-9/1952 idem 14 7/1958-6/1959 Small-scale manufacturing and handicrafts 15 7/1959-6/1960 Non-mechanized transport and non-registered trade 24 7/1969-6/1970 Rural building construction, non-registered distributed trade Source: Indian Journal of Labour Economics, Vol. 41, No. 3, July-Sep., 1998.

Table 3. Urbanization and informal sector employment

Urbanization Informal sector employment (%), 1990 level (%) 1991 Less than 50 50-54.99 55-59.99 60-64.99 65 and above 10 – 14.99 ASS BH OR 15 – 19.99 UP 20 – 24.99 HAR MP, RAJ 25 – 29.99 PUN AP, KER, WB 30 – 34.99 GUJ KAR, TN 35 and above MAH Sources: Economic Census, 1990; and Population Census, 1991.

Table 4. Industrialization and informal sector employment

Workforce in Informal sector employment 1990 non-household Less than 50 50-54.99 55-59.99 60-64.99 65 and above manufacturing (%) 1991

0 – 4.99 ASSAM BIHAR ORISSA, MP 5 – 7.99 AP RAJ, UP 8.0 – 9.99 HAR KAR 10 – 12.49 MAH PUN KER, TN, WB 12.5 – 14.99 GUJ 15 and above Sources: Economic Census, 1990; and Population Census, 1991.

Table 5. Incidence of poverty across activities (1993-94)

% of households below the poverty line Rural Urban Agriculture 36.30 51.00 Mining 30.00 23.26 Manufacturing 28.50 24.88 Electricity 10.60 12.70 Construction 34.12 41.49 Trade 21.70 29.11 Transport 23.85 30.00 Services 17.06 18.72 Others 31.13 22.03 All activities combined 33.00 27.00 Note: The poverty line for the year 1993-94 is taken as per the estimate of the Expert Committee appointed by the Government. Source: Based on NSSO (1993-94).

28 Table 6. Informal sector employment and poverty

Incidence of poverty Informal sector employment (%), 1990 (%) 1987-88 Less than 50 50-54.99 55-59.99 60-64.99 65 and above Less than 30 HAR, PUN AP 30.0 – 34.99 GUJ KER RAJ 35.0 – 39.99 ASS KAR 40.0 – 44.99 MAH WB MP, UP 45.0 – 49.99 TN 50.0 – 54.99 BH 55 and above OR Sources: Economic Census, 1990; Population Census, 1991; and Planning Commission (1993).

special issues on the informal sector in the 3. Organized capital and unorganized Indian Journal of Labour Economics and Manpower labour? Journal explain the sources of data, provide analyses and highlight their limitations. As M. Singh (1990) argues that the “unorga- Kundu (1998) argues, some of the avoidable nized industry of India is a misnomer as far as anomalies in the scope and coverage of the capital is concerned; it is well organized and its data-generating agencies at the national level various detailed, independent processes are have destructed making comparative assess- connected either through the mediation of the ments. He notes a strong bias in favour of the market or through the introduction of various organized sector in the present statistical sys- levels of intermediaries… The seemingly scat- tem and stresses that the myriad surveys on the tered production is well organized from within, informal sector often lack temporal compara- progressively coming within the folds of world bility due to non-standardization of concepts division of labour.” He cites several studies of and data presentation. a number of industries to support this thesis: Suryanarayanan (1998) observes that seri- garment (Kalpagam, 1981), lace (Mies, 1982), ous efforts to collect data on the informal sec- beedi (Avachat, 1978, Abraham, 1980, Mohan- tor began in 1977. He identiﬁes the following das, 1980), sandal and cotton hosiery (Basu, three major limitations in the present data base 1977), coir (Issac, 1982), and carpet (Singh, 1979). in India: M. Singh identiﬁes the following as the common key characteristics of all the industries (a) the Economic Census provides information mentioned above: on industries only for a limited number of indicators e.g. number of units, those using (a) a very low organic composition of capital; power or not using it, employment therein, (b) no clear differentiation between merchant etc.; and industrial capital; (b)there is a considerable time lag; (c) dispersion of constant capital over a (c) the coverage under Employment Market large number of small producers and wage Information being limited, it grossly under- workers; estimates the organized sector; (d) the range of production extends from the petty-commodity to the small factory; (d) The National Sample Survey data is available for the State and the country, but not at (e) a scattered production process connected the sub-state level. through a hierarchy of intermediaries; (f) payment of wages predominantly through Mishra (1999) concurs that the existing data- piece-rates; base in the informal sector has not been of much help in understanding the pattern or nature of (g) very low wage-rates, especially for women interdependence or the sector’s dynamics. He and children; and concedes that the estimates on the size of this (h) poor growth of the trade union movement. sector and its correlates vary widely and ir- reconcilably and even suggests opposing Table 7 draws a comparison between the trends/directions. organized and the informal sectors in terms of

29 Table 7. Compensation and contribution in the organized and unorganized sectors

Aspect Organized sector Unorganized sector 1990-91 1994-95 1990-91 1994-95 Compensation to employees 105 198 177 626 158 253 199 400 Rs. crores Operating surplus and mixed income 148 749 111 250 213 419 375 422 Rs. crores Ratio of operating surplus and mixed income to compensation to employees 46.3% 62.3% 366.36% 377.69% Source: CMIE (1998). National Income Statistics. Mumbai. Feb. 1998 (Chapter 14: Factor incomes).

compensation and contribution. Compensa- plus income, the organized sector fared much tion is the total remuneration paid to the better than the informal sector. employees in the respective sectors. Contribu- tion is measured in terms of operating surplus 3.1. The Government and income generated in the respective sectors. unorganized labour In the intervals 1990-91 and 1994-95, the percentage change in compensation to workers in The National Commission on Labour both the organized (168.5 per cent) and the (1969), the National Commission on Women informal sector (170 per cent) was more or less (1987), and the National Commission on Rural similar. The informal sector fared marginally Labour (1992) have highlighted the problems of better. Contribution, as measured by the oper- workers in the informal sector and of women ating surplus income, has, however, increased workers and rural workers in the informal sec- by 228 per cent in the organized sector and tor respectively. These National Commissions 176 per cent in the informal sector. Compensa- have also made valuable recommendations for tion to the employees in the organized sector action by both governmental and non-govern- was 2.16 times and 1.55 times the operating sur- mental organizations (NGOs). plus income generated in the organized sector India has ratified ILO Convention on the during the periods 1990-91 and 1994-95 respec- Right of Association (Agriculture) Convention, tively. The corresponding figures for the infor- (1921), No. 11 concerning Freedom of Associa- mal sector were 0.27 and 0.26. tion (Agriculture), but neither ILO Conventions On average, 28 million employees in the on Freedom of Association and Protection of or ganized sector received, annually, Rs. 20,805 the Right to Organise (1948), No. 87 nor the and 35,500 in 1990-91 and 1994-95 res p e c t i v e l y . Right to Organise and Collective Bargaining Their counterparts in the informal sector, who (1949), No. 98. ap p r oximately number 282 million, rec e i v e d Rs . 9,297 and Rs.17,257 respectively during the 3.1.1. Legislation co r r esponding years. The compensation gap between the organized and the informal sector The Directive Principles of State Policy, has been narrowing during the five-year period enshrined in article 39 of the Constitution of 1990-1995. In the 1990-91 period, employees in India, envisage that the State shall, in particu- the informal sector received 44.69 per cent of the lar, direct its policy towards securing: compensation received by the employees in the (a) that the citizens, men and women equally, or ganized sector. By 1994-95, the perce n t a g e have the right to an adequate means of rose to 48.6 per cent (CMIE, 1998). livelihood; It appears from the data shown in Table 7 that: (a) compensation to employees in the (b ) that the ownership and control of the mater- informal sector was less than half that paid to ial res o u r ces of the community are so distrib- their counterparts in the organized sector; (b) uted as best to subserve the common good; the percentage increase in compensation for the (c) that the operation of the economic system unprotected employees in the informal sector does not result in the concentration of was higher than their counterparts in the orga- wealth and means of production to the com- nized sector; and (c) in terms of operating sur- mon detriment;

30 (d) that there is equal pay for equal work for secure the protection of the legal provisions if both men and women; they exceed the threshold limits imposed in law (e ) that the health and strength of workers, men (such as the numbers test whereby unless work- and women, and the tender age of children ers cross a critical mass size, they would not ar e not abused and that citizens are not force d have adequate bargaining power; or in by economic necessity to enter avocations instances where wages are low in smaller/tiny unsuited to their age and strength; and establishments but usually higher than the minimum wages for the regular workers in the (f) that children are given opportunities and larger establishments). Those who are within facilities to develop in a healthy manner and the threshold limit are unable to realize the benin conditions of freedom and dignity and eﬁts under the law in view of the adverse labour that childhood and youth are protected market situation where, for every worker who against exploitation and against moral and is refusing to work for less than the minimum material abandonment. wage, there are many who are willing to work whatever the wage, because the very poor can- The legislative intent and content of the not afford to be unemployed. Even the Plan- Government should be seen against the back- ning Commission data concedes that the inci- ground of the Directive Principles of State Pol- dence of poverty is higher among the employed icy. The Government of India and some state than among the unemployed! governments have enacted separate legisla- The plethora of laws have thus not been able tions for several categories/subcategories of to rid the informal sector of its negative charac- workers in the informal sector in both urban teristics such as lack of stability, durability or and rural areas. Some of the most important security of employment, low wages, the absence legislative provisions covering unorganized of social security, exploitative conditions of labour include the Workmen’s Compensation work, non-payment of overtime wages, unhy- Act, 1923; Payment of Wages Act, 1936; Mini- gienic and unsafe working and living conditions, mum Wages Act, 1948; Beedi and Cigar Work- and vulnerability to various occupational dis- ers (Conditions of Employment) Act, 1966; eases, accidents and injuries. Low unionization Bonded Labour System (Abolition) Act, 1976; and high unemployment render the instrum e n - and Inter- State Migrant Workmen (Regulation tality of the State and other agencies inadequate. of Employment and Conditions of Service) Act, Legal compliance/enforcement remains an 1979 (Box 1). As the years of enactment of sev- ar ea of concern even when the State is the eral of these laws indicate, the articulation of em p l o y e r . Baxi (1993) refers to this as the phe- the intent of the State to protect the unorga- nomenon of the lawless state: “The State, nized came rather late in the day. Several other whether acting as an economically prod u c t i v e laws such as the Provident Fund Act, etc., apply enterprise or for public works or for develop- to the informal sector. ment projects (whether through [a] government As D’Souza (1994) notes: “Having laid department, government companies or statu- down basic regulations governing conditions tory corporations) typically either exempts itself on labour and collective bargaining rights, fr om the operation of laws protective of ‘unor- extensive exemptions are made to exclude cat- ganized’ labour or acts as a chief saboteur of its egories of employment from these legislations. own legislatively enunciated aspirations. This In the case of certain exempted categories, fur- has a multiplier impact on civil society. The ther special legislations have been enacted to Indian State has failed to fulﬁl the fundamental govern the conditions of service at different lev- duties of just governance as an economic agent; els and the others have been left outside the to this extent, the State is, in effect, an unconsti- scope of all legislative protection.” As D’Souza tutional employer – whether the domain is that stresses, the legal basis of such segmentation in of contract or migrant labour, gender-based dis- the legislation is founded on various tests or cri- crimination, child labour or safety of the weak.” teria such as: (a) numbers employed; (b) activ- Compliance with laws is even poorer in sec- ity; (c) agency test, i.e. whether workers are tors where labour is small (in terms of a critical directly employed or otherwise; (d) region test, mass being present in a single establishment at i.e. laws applied to particular areas, regions or a given location), scattered and unorganized localities; and (e) wage limit test, i.e. applica- (such as, for instance, brick kiln, stone quarries, bility restricted to workers earning below a cer- minor forest produce, etc.). In recent years, the tain income. Ironically, in some cases, workers judiciary has become activist, has admitted are best able to safeguard their interest and public interest litigation, has been giving deci-

31 Box 1. Select labour laws applicable to the unorganized sector

No. Enactments Objectives

1. Minimum Wages Act, 1948 To ﬁx and revise minimum rates of wages in scheduled employments. (There are 40 such types of scheduled employment.)

2. Payment of Wages Act, 1936 To regulate payment of wages to certain classes of workers. It seeks to provide speedy and effective remedy to employees arising out of illegal wage deductions or unjustiﬁed delays in payment of wages. Wage periods and methods and modes of payment are also stipulated.

3. Contract Labour (Regulation The act seeks to regulate employment of contract labour in and Abolition) Act, 1970 certain establishments and provides for registration of establishments engaging contract labour, licensing of contractors, provision of welfare and health amenities for contract workers and stipulation of liabilities of principal employers.

4. Inter-State Migrant Workmen This law regulates employment of inter-state migrant work- (Regulation of Employment men and provides for their conditions of service, registration and Conditions of Services) of principal employers, licensing contractors engaging inter- Act, 1979 state migrant workmen, and lays down the manner of regulation of wages, provision of welfare and other facilities.

5. Bonded Labour System (Aboli- Provides for the abolition of the bonded labour system so as tion) Act, 1976 to prevent economic and physical exploitation of the workers; termination of liabilities to repay bonded debts; libera- tion of encumbered properties from encumbrance; and protection against eviction from homesteads, etc.

6. Child Labour (Prohibition and Provides for prohibiting employment of children in haz- Regulation) Act, 1986 ardous occupations and processes and regulates conditions of work in all others.

7. Children (Pledging of Labour) Prohibits pledging of the labour of children. Act, 1933

8. Beedi and Cigar Workers’ Provides for the welfare of workers in beedi and cigar estab- (Conditions of Employment) lishments and regulates all conditions of their work. Act, 1966

9. Welfare Cess and Fund Acts Provide for collection of cess and creation of funds out of (Covering Workers in Beedi such collections to provide welfare for the respective cate- Industry, Cine Industry and in gories of workers. Iron Ore, Manganese Ore, Chrome Ore, Limestone, Dolomite and Mica Mines)

10. The Building and other Con- Regulate employment and conditions of service of building struction Workers (Regulation and other construction workers and provide for welfare mat- of Employment and Conditions ters connected therewith or incidental thereto. of Service) Act, 1996 and Build- ing and other Construction Workers’ Welfare Cess Act, 1996

Source: Annual Report 1996-97, Ministry of Labour, Government of India, p.82

32 sive rulings, and has been directing the con- (c) unauthorized use of force by private militia cerned authorities to act fast as per time limits and landlords of dominant interests; and and directions prescribed. Still, “practical” dif- (d) open complicity by local officials with the ficulties came in the way of bringing these vested interests operating in violation of the directives to their logical conclusion. law. However, the 73rd Amendment to the Con- stitution of India has entrusted powers, duties 4. The informal sector and responsibilities to local self-government and wage policy institutions at the village level. Such empowerment of grass-roots level democratic institu- If there is at least one legislative provision tions should eventually lead to the betterment which should have benefited workers in the of the conditions of life and work in the infor- informal sector, it is the Minimum Wages Act mal sector. of 1948. Yet in many situations compliance and enforcement are weak; but even when the act is 3.1.2. Child labour enforced the minimum wages declared became the maximum wages in the informal sector. The problem of child labour is pervasive in Anant and Sundaram (1998) observe that: India. According to the 43rd Round of Survey “From a purely ethical consideration, better conducted by the National Sample Survey enforcement of minimum wage laws and the Organisation, the total number of working chil- possibility of extension of legislative protection dren was 17.02 million in the early 1990s. The would enhance the returns to labour. However, Government, and workers’ and employers’ as the case of Kerala – which is probably the organizations in recent years, have been taking only State where collective bargaining is seen several measures to eliminate child labour pro- to occur at the farm level – suggests, better gressively, first and most urgently in hazardous enforcement of law or unionization without the forms of work. The Government is implement- corresponding rise in the demand for employing the ILO’s International Programme for the ment may only serve to shift disguised unem- Elimination of Child Labour and has enacted ployment into more open forms.” the Child Labour (Prohibition and Regulation) There is considerable evidence to substanti- Act, 1986. Child labour cannot be organized/ ate the fact that compliance with the minimum unionized because minors are not allowed to wage legislation has been minimal. The mini- become members of a trade union. mum wages in many cases have also been below poverty level. In several cases, they were 3.1.3. Legal aid barely revised. Real wages in the informal sector have been declining over the years. There Mishra (1997) suggests that legal aid centres has, however, been a change in the Govern- be established with the following objectives: ment’s approach to minimum wages; while the (a) to make, remake and unmake the law and Third Five-Year Plan (1960-65) stressed the ensure people’s participation in the enforce- need for strengthening labour inspection, the ment of the law and the administration of Eighth Five-Year Plan (1992-97) called for a justice; greater role for workers’ organizations and non-governmental voluntary organizations in (b) to provide better access to legal information ensuring the implementation of minimum which in turn would mean more justice for wages instead of enlarging any of the minimum workers; wage inspections for the purpose. Similar (c) to create alternative institutions of people’s views were expressed by the National Com- law; and mission on Rural Labour (1992). (d) to combat increased abuse of power and The wage differentials between the orga- authority. nized and the informal sectors have been widening over the years. There is also consid- Mishra further suggests that such legal aid erable evidence to suggest that the workers in centres should prevent/deter: the organized sector have gained at the expense of the workers in the informal sector. (a) instances where false cases are filed by the Brahmananda (1999) argues, based on the police; analysis of data presented by the Finance Min- (b) instances of torture and violence by law isters of India in their Economic Surveys since enforcement agencies; 1990-91, that whereas per capita real income

33 in c r eased by about 254 per cent from 1990-91 to cleaning of furnaces, maintenance works, load- 1996-97, the real wages of unskilled agricultural ing, unloading, and transport of goods, chemi- labour increased by about 6 per cent. The pro- cals, etc.). The trade unions have expressed portional growth rate of the real wages of grave concern over the growth of this unskilled unskilled labour divided by the prop o r t i o n a l workforce which is ill-equipped to handle the gr owth rate of per capita real income is the cru- tasks that they are supposed to perform; nor are cial elasticity of real wage rate to per capita rea l the employers investing in the training and income. The elasticity for the period ref e r r ed to skills development of these workers as a result was about 0.28. Brahamanda suggests that to of which avoidable accidents have happened at the extent that farm labour puts pres s u r e on many worksites or in transportation from one employment opportunities in rural areas, the place to another. The trade unions have now real wage per day in this sector is also pulled begun to question the need for such forms of down. Even if money wages did not decline, the flexibility which entrusts hazardous jobs to real wages often became negative in several unskilled casual labour. states, and by a high percentage point over the pr evious year throughout 1990-97 due largely to 6. Social security in fl ation. He also asserts that “by its very nature, unskilled agricultural labour cannot orga n i z e The concept of social security is codified in itself into powerful trade unions. This means terms of minimum standards in ILO Conven- that, given the aggregate wages fund, when the tion No. 102 (1952). The National Commission or ganized trade unions raise their share, less on Rural Labour (1987) had recommended old- remains for unorganized labour. This is a con- age pension, life insurance, maternity benefit, cealed form of exploitation at the national level disability benefit and minimum health care and by the powerful organized trade unions. The lat- sickness benefits to be provided to all as a matter obtain a higher share for themselves by ter of high priority. pushing unorganized labour to the wall.” The social security legislative provisions in Collective bargaining is rare in the informal India (see Box 2) basically cater to the needs of sector. In a climate of vast unemployment and the organized urban labour force whose share widespread poverty, bipartite collective agree- is less than 8 per cent in the total labour force ments in the informal sector meant, in many in the country. Workers in several informal sec- cases, workers agreeing for less than the mini- tor establishments are supposedly covered mum wages in order to protect their jobs. This under the five basic social security legislative is so even in West Bengal and Kerala, where provisions mentioned in the box. However, out union density and union strength are supposed of about a 350 million strong labour force, only to be higher. Tripartite settlements arrived at 22 million are covered by the Employees’ Prov- during conciliation were considered to be more ident Fund Scheme, 9 million under the beneficial to workers because such agreements Employees’ State Insurance Scheme, 4.5 million would not be registered if the terms were less under the Workers’ Compensation Scheme and favourable than the applicable labour laws. Das 0.5 million under the Maternity Benefits Act. (1998) argues that the tendency to fix minimum Public provision of social security benefits is wages at unrealistically high levels should be rather scant in India. The expenditure on social checked. He further argues that wage rates security in India accounts for only 2.4 per cent should be different for different groups of of the GDP as against 6 to 7 per cent in Latin employment. He also suggests uniform wage America and 25 to 30 per cent in Scandinavian rates for a cluster of small firms in a region countries. Though there is no dearth of social through collective bargaining to take wages out security and welfare schemes, low budgetary of competition. In such situations, he argues, allocation, inefficient budget utilization, poor the competition will be based on quality and motivation, poor administration and other productivity rather than on low wages/low weaknesses further dilute the marginal nature wage costs. of social security benefits even in the organized sector. 5. Occupational safety Both central Government and various state and health hazards governments, notably Kerala and West Bengal, have several social security and social assis- Kumar (1997) highlights the fact that the tance schemes for the general public under unorganized casual workforce is increasingly poverty alleviation and social welfare provi- being employed in hazardous jobs (such as sions. Although many of them apply to the

34 35 informal sector workers, the quantum of bene- (1997): on the production side, the rate of fits/relief provided is marginal and barely growth of farm output must be pushed continu- helps to lift the beneficiaries out of poverty. The ously, while on the labour supply side, the exist- Government of India has set up an inter-minis- ing agricultural workers must be absorbed terial group to consider proposals for launch- increasingly in non-farm jobs. ing an Integrated Social Security Scheme for The most candid assessment of trade union unorganized workers to provide for life insur- approaches and achievements in organizing ance, medical and maternity benefits and old- the unorganized came from the All India Trade age pension. Union Congress (AITUC). It has observed that: The Draft Labour Code prepared by the “…preoccupation within the parameters of eco- National Labour Law Association envisages nomic demands of the already organized the setting up of a coordinating high-powered workers has led to neglect of the task of orga- National Authority and establishing boards at nizing the unorganized… The Bangalore Ses- the level of states and union territories for sion of the AITUC held in December 1983 gave bonded and rural labour and for unorganized the call to ‘organize the unorganized’ as a pri- labour. The assumption is that rural and ority task. This has been repeated at the Vado- bonded labour are essentially rural phenomena dara, Madras and Patna sessions. Some con- and that all workers in the informal sector, irre- scious attention has begun in a number of spective of their craft or category of vocation, places to this task. There are few achievements can be covered through a unified and inte- on record. But these are altogether too little grated legal framework of social security. If compared with the magnitude of the task” there is need, the coverage can be extended (AITUC, 1997). through a notification or schedule to the legis- AITUC has all the same made some dents in lation and appropriate schemes drawn up for or ganizing unions/federations in beedi cigar, the purpose of limited social security even for co n s t r uction, aa n g a n w a d i , fisheries, and load- the self-employed. ing-unloading in some central Government undertakings like the Food Corporation of India 7. Trade union initiatives and Central War ehousing Corporation, etc. It is now targeting the 30 million construction work- All national trade union centres are aware ers and concentrating on strengthening its Al l - of and conscious about the need to organize the India Confederation of Building and Construc - unorganized, but although there is no dearth of tion Workers through formation of trade unions effort the results are not manifest. As one trade of construction workers in each district and state union leader observed: “In the organized sec- federations of construction workers in each tor, 10 per cent work gets us 90 per cent result. state. AITUC also developed the following In the informal sector 90 per cent work gives us action plan at its national conference in Am r i t - 10 per cent result.” sar in 1997 to organize the unorga n i z e d : The possibilities for collective action in the 1. Constitute a subcommittee at the state and informal sector have been rare due to wide- the district levels to promote, coordinate spread poverty and growing unemployment: and guide informal sector unions. The sub- too many labourers waiting to be called for any committee should select a group of indus- work in any location compared to the demand tries, trades, businesses, professions in the for labour (Breman, 1996). Regrettably, collec- informal sector and fix targets for organiz- tive bargaining in the informal sector has often ing them within a definite time-frame. Each meant that workers have been receiving less state should select its own target group for than the minimum wages prescribed. This has action considering the scope and magnitude particularly been the case with collective of the potential. agreements signed outside conciliation proceedings. When the conciliation officer is pre- 2. A fund should be created at state level to sent and a signatory to the collective agree- which the big unions in the organized sec- ment, he/she is supposed to have ensured that tor should contribute generously and make the terms of the agreement did not provide for available physical infrastructure for orga- less benefits than accorded by law, and that they nizing the unorganized. were just and fair. 3. Special attention should be devoted to The solution to the problem of the informal organizing migrant labour, forming cooper- sector in rural areas lies in the extension of the ative societies/banks of self-employed per- twofold strategy suggested by Sheila Bhalla sons/artisans as well as associations of pen-

36 sioners. Special emphasis should be laid on cult to organize the workers in the informal sec- strategies to assist informal sector workers tor. Its strategy has been to request veterans during the transitional phase of unioniza- from Government and organized unions to tion. assist in the task of organizing workers in the 4. Prepare a panel of advocates at central and informal sector. The union leadership believes state levels to provide proper legal aid for that if the unorganized wished to organize informal sector workers. themselves, they would face victimization from their employers which would usually result in The subcommittee set up has met subse- dismissal or termination of employment. quently and has decided to organize work- At the same time, the leadership is conscious shops/conventions at district and state levels of the fact that it is for the workers in the infor- for workers engaged in informal sector activi- mal sector to realize the need for joining the ties with a view to mobilizing support and union. Organizing activity should not be con- press for the following demands: sidered by the workers in the informal sector as (a) the ﬂoor-level minimum wage of Rs.75 with an act of charity. It was the experience of BMS 100 per cent neutralization of price rise and (for instance in Delhi and Andhra Pradesh) that separate legislation to ensure the payment informal sector workers pay more dues and thereof; more regularly than the workers in the orga- (b)social security rights; nized sector. Workers in the informal sector who join the union affiliated to BMS pay a day’s (c) service/employment security and needs- wages in a year. The subscription rates in the based minimum wage; organized sector vary from company to com- (d) a comprehensive law for agricultural work- pany. The usual rate of subscription is Rs.60 a ers; and year which is less than a day’s wages in the (e) a suitable amendment to the Contract organized sector. Labour (Abolition & Regulation) Act and The state units of the BMS help informal sec- the Industrial Disputes Act by incorporating tor workers in several ways depending on the the Supreme Court decision of December special needs of workers in different situations. 1996 on the abolition of contract labour. The services which are common to most categories include the following: (a) deputing a The subcommittee has also decided to hold leader from the organized sector to work with industry-wide (for instance ﬁshermen, weavers, them in organizing on a voluntary basis; (b) toddy-tappers, private-school teachers, private helping unorganized/self-employed workers transport, non-coal mines, gram panchayat to obtain licences, etc.; (c) liaising with the pub- workers, etc.) campaigns. It is also planning to lic authorities, including the police, to ensure convene a meeting of trade unionists working that their members are not subjected to any in different state-level panels of minimum harassment; (d) distributing handbills and wage committees to review experiences and other printed materials among members to evolve appropriate approaches for future raise their levels of consciousness with regard action. The state-level committees on informal to trade union rights, what their union can do sector have been activated. The Punjab state and what they can do for themselves; and unit of AITUC has contributed Rs.100,000 for (e) conduct rallies, protests, etc., to focus the the purpose of organizing the unorganized. attention of employers, the public authorities Maharashtra has started agitation for the and public opinion so that the members’ implementation of provisions for minimum demands are met and their grievances speedily wages which are below poverty level. The Bihar redressed. unit has organized protests by squatting before BMS has specialized and customized ser- minimum wage law enforcement officers and vices for different categories of members which has initiated steps to mobilize sugarcane grow- are provided on a needs basis through ad hoc ers and workers together with a view to get a arrangements. For instance, whenever there is closed sugar factory reopened. a petrol price hike, BMS state units help the auto Bharatiya Mazdoor Sangh (BMS) has been rickshaw drivers to secure a higher tariff. For active in organizing unorganized workers in workers in the informal sector who are covered certain sectors. They have been successful in (or waiting to be covered) by the minimum organizing beedi workers, for instance, in wage laws, the union’s main work is to ensure Andhra Pradesh. BMS, like the other national that minimum wages are revised periodically trade union centres, recognizes that it is diffi- and indexed to cost of living. The union has

37 organized construction workers and domestic tor Workers during its Calcutta conference. At workers in Mumbai and is planning to do so in the All India Convention held in Calcutta from Delhi. 1 to 3 November 1992, the CITU decided to The Indian National Trade Union Congres s organize an All India strike in pursuance of the (INTUC) has launched a project on orga n i z i n g 22-point charter of demands. The strike was un o r ganized workers in 10 out of 25 states in organized on 14 July 1993. While all the India with support from the International Con- demands included in the charter concern infor- federation of Free Trade Unions – As i a - P a c i fi c mal sector workers, the following were of spe- Regional Office (ICFTU-APRO). It held a cial significance to them: national seminar of state organizers intended to • stop infiltration of Indian and foreign further understanding of the problems of monopolies in the unorganized and the workers in the informal sector and develop small-scale sectors of industries; ap p r oaches to organize them and improve their working and living conditions. The following • have the Minimum Wages Act included in nine categories of unorganized workers were the 9th Schedule of the Indian Constitution; ta r geted: beedi workers, building and construc - • issue an appointment letter to all workers; tion workers, cycle rickshaw pullers and • mete out stringent punishment to employ- mechanics, handicraft workers, auto rickshaw ers for violating statutory provisions; workers, headload workers, fishing workers, rural workers and domestic servants. The action • provide for an eight-hour working day and plan envisaged the following fivefold strategy: a 48-hour working week, statutory leave, (a) hold mass contact programmes; (b) hold ral- holidays with wages for all the workers in lies and street corner meetings; (c) educate unor- the informal sector and payment of double ganized workers about their rights vis-à-vis the overtime charges for extra work; concerned authorities; (d) organize informal sec- • constitute district level tripartite commit- tor workers into a trade union and ensure they tees to monitor the implementation of the ar e reg i s t e r ed with the concerned authorities; Minimum Wages Act; and (e) organize publicity campaigns to focus • sanction bank loans within a short time to the attention of the Government on the burning workers in the informal sector at a low rate pr oblems of workers in the informal sector. In a of interest and issue licences for railway period of two years, the project claims to have hawkers, street hawkers, railway porters, en r olled 179,799 members into 60 trade unions etc.; and in ten states (INTUC, 1998). About two-thirds of • titularize all casual, daily rate and tempo- the new membership reportedly came from two rary workers after 240 days of work includ- states, viz., Uttar Pradesh and West Bengal. A ing breaks imposed by employers in jobs of sizeable section of the informal sector workers a permanent and perennial nature. being self-employed workers rather than wage la b o u r ers, their problems were outside the In 1997, the Hind Mazdoor Sabha has purview of employer-employee relations or issued a social charter which seeks the exten- union-management relations. Instead, the major sion of the living wage, employment rights and th r ust of the project was on liaison with the gov- social security coverage to all workers includ- ernment authorities at various levels. The pro- ing those in the informal sector. It has also been ject recognized the value of cooperation from the o rganizing workshops on organizing the non-governmental organizations and the role of u n o rg a n i z e d . the media in highlighting the sufferings of the Table 8 provides an illustrative list of HMS informal sectors workers and stimulating union affiliates’ activities in organizing the gr eater awareness generally. Though the proj e c t unorganized. claims some success in terms of new social secu- Kumar (1997) observes that the new eco- rity initiatives in some states and extension and nomic policies have pushed the agenda of better implementation of labour laws, the rep o r t “Organizing the Unorganized” to the forefront. did not substantiate the claim. He notes that the HMS is continuing its efforts The Centre of Indian Trade Unions (CITU, to organize informal sector workers through: 1994): at its General Council meeting held in 1990 in Kanpur (Uttar Pradesh), the CITU for- • raising awareness through trade union edu- mulated a charter of demands for the informal cation programmes; sector. In 1991 the CITU formed an All India • organizing certain home-based occupations Coordination Committee of Unorganized Sec- on a producer cooperative model;

38 Table 8. Activities of HMS affiliates in organizing the unorganized

Name of union Key achievements/problems

Visakhapatnam Port Employees’ Union Started four labour cooperatives to prevent exploitation of workers by private contractors; achieved a signiﬁcant hike in monthly wages (Rs.300 to over Rs.1,000) and provident fund, medical and uniform beneﬁts; won a court case that regularized 150 casual workers employed by the state-owned Food Corporation of India.

“Ban Bandhu” (Friend of the Forest) Federation of 49 local organizations working in forest areas. Several self-help and cooperative ventures, including education and training, marketing of local handicrafts and other products of tribal and forest workers, are being organized.

Kendu Leaf Workers’ Union (Orissa) Potential membership: 1.8 million. Over 1 million blocked roads in “Rasta Roko” agitation to press for implementing the recommendations of a committee set up by the state government. Minimum wages revised. Social security issues under consideration.

Bhatta Mazdoor Sabha (Punjab) Mainly covering brick kiln units. Secured higher minimum wages (although still inadequate), 15 per cent bonus and medical allowance after seven years struggle. Still not all employers pay minimum wages. Bonded labour system prevails. Activity is seasonal.

Rickshaw Mazdoor Sabha (Punjab) Assistance in case of harassment by public authorities. Con- tributory insurance coverage arranged for 221 rickshaw drivers.

Sangli Zilla Parishad Kamgar Sabha Secured legislative (Hamals Mathadi Act in Maharashtra) (Maharashtra) coverage extended to beneﬁt 2,000 manual and headload workers. Minimum wages increased by Rs.500 per month.

Indian Railways (Western Zone) Organizing contract labourers in the Western Railways.

Tri Sea Fishermen Union (Tamil Nadu) Supported the cause of women ﬁsh vendors against middlemen in ﬁsh auctions and did away with the 5 per cent commission charged by middlemen with the cooperation of local village committees.

Mumbai Kamgar Sabha, Mumbai 7,000 printing workers, loaders and transporters in local markets. Mainly through legal action, secured improve- ments in wages and welfare amenities such as provident funds, gratuity, house rent, leave and other allowances.

Bastar Khandan Mazdoor Sangh Unionized iron ore, horticulture and forestry workers who (Madhya Pradesh) are mostly tribal and women. Secured representation on several government committees at local level and improve- ments in wages and allowances.

Nagarcoil Fisherfolks Project (Tamil Membership claimed to have increased from 2,000 in 1988 Nadu) run by Tri Sea Fishermen Union, to 10,000 in 1994. Eliminated middlemen. Introduced a Nagarcoil as a socio-economic project small savings scheme. Conducting regular education and training programmes. Seeking to establish small-scale centres for outboard machines and fishing crafts, and village- level infrastructure for fish-picking, hygienic drying, salting and storing dried fish.

Source: Kumar, 1997.

39 • petitioning and lobbying the Government to labour and bureaucracy at various levels, have minimum wage and social security awareness generation, organization getting an extended to these workers using tripartite impetus and so on.” There is a need to revive committees and the judiciary; such camps. • launching a right-to-work campaign through The 73rd Constitutional Amendment has the organized sector unions to press for contributed to greater decentralization, delega- political acceptance of the constitutional tion and devolution of powers, duties and func- right to work for all; tions to local self-government bodies in matters such as agriculture, irrigation, cooperation, pri- • forging trade union unity on issues and mary education, health, hygiene and sanita- policies for protecting workers in the infor- tion, watershed treatment and waste land mal sector; and development, etc. These measures can have a • launching a needs-based minimum wages critical bearing and impact on the working and campaign. living conditions of unorganized rural labour. The Ambekar Institute of Labour Studies, The International Federation of Building Mumbai (formerly Bombay), affiliated to and Woodworkers (IFBWW) has also been car- INTUC has experimented with the concept of rying out research and has so far published “Link Cadre Development Programme” seek- three reports: (1) study of socio-economic con- ing development through organizing in Ratna- ditions of construction workers; (2) study of giri and Sindhudurg, the coastal region in migrant construction workers of Andhra Maharashtra (Sawant, 1990). Pradesh; and (3) modes of load carrying for Reddy (1998) studied the experience of women workers (ergonomic study). organizing agricultural labour in India. He observed that there has been a shift in empha- 8. Organizing the unorganized sis: instead of demanding higher wages and barren lands for allotment to the landless poor, Trade union activists should go to the field the land under illegal occupation is identified and organize the unorganized after surveying and taken over by the Government who then the locality, informal sector trades/businesses redistribute it to the landless poor. To some and the profile and problems of workers in the extent, this approach has freed the poor from informal sector. They should shed the bureau- landlord-induced litigation. The trade unions cratic approach. are also fighting against specific practices of In quite a few cases it has been observed that discrimination in the form of atrocities perpe- urban-bred élite unionists go to rural areas and trated against Dalits, particularly Dalit women. urban fringes to organize the unorganized. These changes, Reddy argues, emphasize the They wax eloquently on globalization, the need for organizations with a very strong vil- World Trade Organization, intellectual prop- lage-level base with the institutionalization erty rights and such issues but forget to address (Kannan, 1998; Nadkarni, 1990) of the unions the immediate needs of the target group. They with a power to mediate not only on economic act as aliens and it is little wonder that they demands but also in realizing the cultural, become alienated from the target group. social and political aspirations of the rural The Ministry of Labour of the Government labour. The present diverse forms of rural of India used to organize rural labour camps labour action, whether it is in daily forms of through the National Labour Institute (now resistance, “everyday patronage politics” to called V. V. Giri National Labour Institute) to receive benefits from government-sponsored organize rural workers in the informal sector. schemes, mobilization for the release from This experiment was known as Rural Labour bondage, agitation for higher wages, access to Training Camps. The experience of holding land or fighting the oppression of the Dalits and such camps, including the strategy, methodol- women, often appear as sporadic movements ogy and impact of such camps, was docu- with varying local specificities. The experience mented by the Institute. “It was considered one of the process of institutionalization of these of the most unconventional, unorthodox and forms of collective action suggests the plurality effective ways of social mobilization which had of possibilities. helped in spreading socially and politically rel- Other studies present the case for worker evant messages meant for the workers in the cooperatives’ potential to organize workers in informal sector… (they) could bring about a the informal sector and cites several examples closer interface between unorganized rural of such cooperatives including the contract

40 labour cooperatives in the opencast mines in (c) Low-cost industrial housing has to be given Dalli Rajhara, Madhya Pradesh, fishermen’s top priority. Trade unions can help to solve cooperatives in Kerala and slagpickers’ cooper- the problem by cooperative housing atives in Jamshedpur, Bihar. These studies high- schemes for workers. light the critical role of trade union backing and (d) Once the workers are unionized, unions of networking support of voluntary orga n i z i n g have to take a very assertive role in looking in mobilizing res o u r ces and garnering support after the welfare amenities and safety to make workers’ cooperatives effective in rais- p recautions for the workers. Merely im- ing political consciousness, providing prot e c - p roving the emoluments of workers is not tion and yielding tangible results to informal e n o u g h . sector workers. Gupte and Muthuswamy (1990) outline the Several micro-level case studies (Ruddar, following four-step programme of action for 1997) on organizing workers in the informal Central Trade Union Organizations (CTUOs) in sector point to the need for forging a wider plat- organizing rural workers: form and broad alliance to focus attention on the larger policy framework rather than the unit (a) Trade union centres should create a central in isolation; the need for the organizers to inte- cell entrusted with the responsibility of grate themselves into the larger social milieu of organizing the rural workers. The cell must the workers; and to realize the personalized be fully aware of the various schemes of the nature of power and authority in small units agencies that could be of assistance. and its impact on the process of organizing (b) Trade union centres must create a core of workers. Grass-roots level initiatives alone are dynamic cadre either through social work- not adequate and sufficient. They need the ers or through existing rural workers. back-up of highly visible campaigns and political support through wider coalition among dif- (c) Trade union centres must provide thorough ferent interest groups. Such initiatives ulti- briefing to these dynamic cadre not only mately resulted in Kerala, Maharashtra and with regard to union organization but also elsewhere in legislative initiatives for setting up the various services that could be provided local committees and welfare boards at the apex to the needy poor. level through legislation for headload workers, (d) Separate educational classes must be held for instance (Nambiar, 1997; Sundaram, 1997). either in the form of study circles or with a Others focus on the case of cooperatives for special curriculum suited to the target beedi workers in Kerala and Maharashtra and group. A special cadre of educators at suggest that three factors have contributed to regional levels should assist in this task. A the success of Kerala Dinish Beedi Workers’ time-bound programme extending over Central Cooperative Society Limited: (a) the three to five years delivered by these edu- supportive role played by the left government cators will go a long way in taking the mes- then in power in Kerala; (b) the high degree of sage of unionism to the rural people and development of the trade union movement in organizing them. Kerala; and (c) the interest and determination shown by the officers deputed by the govern- Based on a survey of urban unorganized ment of Kerala tomake the cooperative venture labour in the Mumbai metropolis, Gupte and a success. The active participation of workers Muthuswamy (1990) draw the following con- and the support of the Government are critical clusions concerning the role of trade unions in for the success of cooperative efforts to orga- organizing the urban informal sector workers: nize the unorganized. (a) Unions from the organized sector have to take a lead, approach these workers and 9. Women workers in the organize them. They would be able to unorganized sector improve their service conditions only with the help of strong unions. Ninety million of the 350 million labour force in India are women. Work participation (b) There is an urgent need for a social security and literacy rates are low among them. In rural scheme for the workers in the informal sec- areas, 18.8 per cent of the female workforce and tor otherwise when they are old and can no 29.3 per cent in urban areas are literate. The longer earn they will be turned into desti- majority of the women workers are engaged in tutes. casual/seasonal agricultural/rural jobs which

41 are low-paying and offer below poverty line empowering the women would be approp r i a t e . wages. Most studies on women workers in the Analysing the role of SEWA and WWF, Uma urban informal sector point out that though Ramaswamy (1997) considers that “women’s their number is large, their work is largely livelihood systems and status within the house- invisible in official statistics. Contrary to the hold and wider society have intricate linkages popular notion, far from being marginal work- to a host of processes in the wider society and ers, they contribute significantly as the “real” unless appropriate linkages are established, any breadwinners in most poor households. One of interventionist strategy would merely prom o t e the striking observations in most studies on the insular processes.” She theref o r e stresses the subject is that the mean hourly wage rate for need for developing networking and lobbies so women workers in the informal sector are as to impart greater visibility and political sup- lower than the minimum wage rate for port for the women’s movement. unskilled workers in any economic activity. Women workers suffer not only from This occurs notwithstanding the fact that India wage/employment discrimination but also has ratified ILO Convention No. 100 on Equal sexual harassment. Despite recent judgements Remuneration and also enacted a legislation, of the Supreme Court in Visakha vs. State of the Equal Remuneration Act, 1976. Although Rajastan & Others and Apparel Export Promo- the law does not discriminate against women, tion Council vs. A. K. Chopra in 1997 and 1999 law enforcement is weak against old traditions respectively, which laid down elaborate norms, and societal forces. Gender discrimination is standards and guidelines for protecting women pervasive in access to resources and opportu- workers from sexual harassment, it will be a nities for educational, economic and social long time before their impact is felt in the rural advancement. areas. The National Commission on Labour (1969), the National Commission on Women 10. Non-governmental organizations (1987) and the National Commission on Rural and unorganized labour Labour (1992) have pointed to the low unionization of women workers. The few voluntary The National Centre for Labour (NCL):The organizations that have been active in espous- National Centre for Labour is a forum of unor- ing the cause of women workers have been ganized workers born out of the initiatives, mainly concentrated in urban areas. during the period 1991-1995, of independent Re i n f o r cing the argument of Moser (1989), trade unions and academics engaged in the Mukhopadhyay (1998) frames the issue in terms field of unorganized labour. The preamble to of standard feminist discourse and argues that the Constitution of NCL asserts: “The tradi- the current discussion and approach to the tional trade union forms and strategies often do pr oblems of women workers are aimed at cater- not suit this (unorganized) sector. Despite the ing to women’s “practical” rather than “strate- fact that innumerable constraints confront the gic” needs. Instead of looking at the issues rel a t - workforce in this sector, there were attempts of ing to women workers in the informal sector as organizing these workers. Some of them could those who are compelled to enter the labour go beyond the traditional form of trade union market as target-earners concerned with rep a y - organizations. However, their number and ing outstanding debts or for meeting immedi- reach are not very large.” The national centres ate consumption needs, it is important to of trade unions did not have a role or say in st r engthen their hands in resisting downward the formation of NCL. NCL sees itself as a flexibility of earnings and other forms of dis- membership-based organization, transcending crimination in all aspects of work and employ- political party affiliations. Trade unions, asso- ment relations. There is no dearth of examples ciations, cooperatives, federations and confed- of successful ventures in organizing women in erations of unorganized labour who agree with the informal sector. The Self-Employed the aims and objectives of NCLare welcome to Women’s Association (SEWA) in Ah m e d a b a d seek affiliation. Membership is open to both and the Women Workers’ Forum (WWF) in registered as well as unregistered organiza- Madras are shining examples in this reg a rd . tions. The NCL has started making news even Given the magnitude of the problem and the though it is not even registered yet. multitude of the odds these workers face, any NCL’s organizational structure comprises a form of organization – whether a cooperative, General Council, an Executive Committee and trade union, NGO or any coalition with other a Secretariat. The proposed Constitution of gr oups – which can substantially contribute to NCL states that the General Council is a deci-

42 sion-making body, democratically elected by waxed eloquently: “How can I forget the day at member organizations, who will have the right an Annual Conference of one Centre Labour to recall or replace any representative. The Union where I was a delegate of SEWA, rep r e- membership of General Council will reflect the senting the unorganized women workers and actual composition of NCL membership in speaking about their problems of exploitation terms of gender, caste and community. and I was hooted out. The others made me The Executive Committee comprises up sound ridiculous! There was no delegate to sup- to 51 members, representing all sectors. The port me at that time except my own members! Secretariat comprises nine secretaries. The elec- We had to swallow the humiliation…what place tions to these bodies for the first time were held it [the unorganized sector] has in the labour at the Founding Convention on 28 May 1995. movement?… The labour of the unorga n i z e d The NCL’s agenda is low on ideology and sector remains totally unrep r esented at all the high on solidarity. Its target is to secure the si g n i fi cant forums of decision-making. We want informal sector the following rights: a national our rep r esentation there… I say that the unor- minimum wage, common to all sectors and ganized sector labour remains unrep re s e n t e d regions; work; livelihood and full employment; because of the combined bias of our Govern- access and control over natural resources; social ment and the organized trade unions who have security against sickness, disablement, death me r ely 7 per cent of the workforce of the coun- and unemployment – ESI (Employees’ State try within which only 25 to 30 per cent are union- Insurance), PF (Provident Fund), pension, ized… Let us build up our organized stren g t h insurance, unemployment benefit, etc; specific to reclaim our rightful place in the mainstrea m . rights for women such as maternal benefits, When the unorganized labour is recognized by crèche facilities, etc; adequate housing; equal the mainstream (we are the mainstream, in fact), opportunities for education, health care; access the whole struc t u r e of the society – economic to adequate essential goods through the public and social – will be changed. Private and public distribution system; equal remuneration for sectors of course will remain, but the people’s equal work for all. sector will become the most important backbone The NCL has generated euphoria in certain of the national economy. And we are the peo- sectors and scepticism in others, including the ple’s sector. We are the majority.” national trade union centres. Overall, it could Sanyal (1994) observes that some hold the not sustain the tempo it had built up in its firs t view that “the informal workers perceive their year because even the workers in the orga n i z e d chances of joining the formal labour market as sector have been at the receiving end in the wake restricted by the high wages that the organized of economic liberalization and globalization. formal workers have managed to extract from The problems of the informal sector have the employer. As a result, the two labour sec- become so daunting and complex that in the con- tors are inherently antithetical, and it is virtu- text of a weak economy, unstable government ally impossible to create institutional linkages and growing poverty and unemployment, the between them. Some have taken this argument State did not have either the will or the means to further by suggesting that even if the level of oblige the NCL or any other trade union body to antagonism between the two sectors were undertake the necessary initiatives. reduced, NGOs or unorganized workers should never join trade unions of organized 11. Conflicting interests workers because the former would be ‘swal- of the organized and lowed up’ and used by the latter to pursue their the unorganized labour own agenda.” Yet, till now – at least till the NCLformation Given the dualism in the labour market, received the publicity it got – the organized and some tend to brand the workers in the orga- the informal sector labour groups never con- nized sector as “labour aristocracy”. The inter- fronted each other openly or directly. Sanyal ests of the organized and the informal sector are (1994) offers the following evidence to explain considered antithetical or conflictual. The privi- such behaviour: leged and protected organized labour sees theunderprivileged and unprotected labour as (a) “Not all informal workers are interested in a threat to the perpetuation of their current a job in the formal sector; on the contrary, position. many formal sector workers would like to The inaugural speeches at the NCL make no move to the informal sector to start their se c r et of such antipathy where Ela Bhat (1995) own enterprise;

43 (b) A growing percentage of workers may pursuing the cause of the unorganized belong to both sectors; workers, particularly that of casual and contract workers who have a regular and day- (c) Within the same household, one member – to-day interface with the organized sector usually a male – may work in the formal sec- by the very nature of their work. For tor while another member, generally a instance, the most recent case concerns the female, may either work in an informal sec- landmark judgement by the Supreme Court tor job or run an informal sector business; in Gujarat Electricity Board vs. Hind Maz- (d) Low-income formal and informal sector door Sabha in 1995. This judgement gives workers usually live in the same neigh- labour courts the right to interfere when the bourhoods and experience similar problems contract is sham and trade unions and oth- associated with lack of basic services.” ers the right to pursue the banning of certain types of contract work. The CTUOs The NGOs and trade unions in the orga- have also played a major role in rushing nized and the informal sector will continue to through ordinances relating to building and have competitive, cooperative and comple- construction workers and they have a major mentary roles as described below: role to play in converting these into legislation and getting relevant rules and regula- 1. Trade union matters. The attitudes of the tions passed and enforced. They also have a leadership of the central trade unions in critical role in bringing amendments to the India towards the role of NGOs in organiz- Contract Labour (Regulation and Abolition) ing the unorganized, particularly in infor- Act, 1970, in the light of the experience mal/unorganized sector activities has been gained in its implementation and the recent generally positive. They recognize the task court judgements. Public interest litigation is gigantic and they need the support and by individuals and NGOs also resulted in collaborative effort of as many partners as many positive outcomes for unorganized are able and willing to lend a helping hand. and unprotected workers. It dates back to It is not an exaggeration to suggest that the early 1980s when the Supreme Court trade union leadership in the organized sec- passed strictures on the Delhi administra- tor has become somewhat unused to or has tion and ordered the payment of minimum forgotten the ﬁeldwork role of trade unions. wages to contract workers engaged in the Even where they seem to make an effort to preparation for Asian games in Delhi. organize the unorganized in the country- Another important case is BMM vs. Union side, for instance, the methods they choose of India concerning the plight of bonded tend to be inappropriate. For instance, Sen labour. (1996) refers to a rural educational camp for workers in the informal sector organized by 3. Technology to cheap labour. Ramaswamy the Centre of Indian Trade Unions (CITU) (1990) argues that organized sector workers and cautioned: “In this camp, national and are losing jobs not due to technology, but international issues like the Central Gov- due to transfer of work to cheap labour ernment’s new economic policy, industrial through outsourcing, contract labour, ancil- and foreign trade policy, Dunkel proposals, lary work, etc.: “With insecure labour pro- the history and development of the trade liferating and taking over an increasing union movement in India, etc., were on the production of the work of permanent agenda. It is quite possible to visualize how labour, trade unions and their members can- unorganized, poorly educated workers, in not remain protected enclaves for long.” fear of losing their jobs or involved in cut- Ramaswamy quotes a union leader in a fer- throat competition amongst themselves tilizer industry: “We have twice as many would squirm as the sonorous speeches contract labourers as permanent workers. boomed out of the microphones. This is a We man the process, while they perform all typical failure of central trade unions and the labour-intensive manual jobs. This is their organizing plans in the informal sector beginning to erode our bargaining power. It which have to be avoided in the future…” is we who have become peripheral and dis- pensable. If we go on strike, officers can eas- 2. Litigation to legislation. The role of trade ily man the process. It is the contract labour- unions, particularly the central trade union ers whom they cannot do without.” organizations (CTUOs), is signiﬁcant in Ramaswamy then cautions: “When cheap

44 labour can be had for the asking, the emolu- 8. Collective agreements in the informal sector ments of unionized workers would evoke should be registered with the appropriate envy, disapproval and hostility, and become government. They should preferably be impossible to sustain.” signed in the course of conciliation to make them legally binding and also to ensure that 12. Action agenda the agreed terms do not dilute the existing legal provisions. 1. Low literacy and low skills, growing poverty and the mounting problem of Mishra (1997), Secretary, Ministry of unemployment are the major barriers to the Labour, Government of India, articulated the improvement of the condition of the work- agenda thus: ers in the organized sector. There is a need “We would like to ensure that : to pay attention to social development and (a) labour is not employed in subhuman aggressive employment promotion policies. conditions; So long as illiteracy, poverty and unemployment continue to increase, public pol- (b) labour is not subjected to unfair practices icy, legislative or trade union initiatives and in terms of payment of wages, dis- interventions do not bear much fruit. Atight charge, dismissal and termination of labour market situation and a vibrant econ- employment; omy hold the key. (c) wages paid are fair and reasonable and aim progressively to reach the level of living 2. In the ultimate analysis, as Alfred Marshal wages; and argues, if the demand for labour is weak, if (d) minimum security is provided against risks the demand for the product of labour is such as injuries and accidents at work, sick- poor, the substitutability of labour with ness, maternity, invalidity and old age.” other resources is high, and if the proportion of labour costs to total costs is high, it would be difficult for trade unions to improve the Bibliography conditions of life for their membership and protect their jobs and incomes. However, if Abraham, A. 1980. “Beedi Workers of Bombay”, Economic and labour policy and labour laws are extended Political Weekly, XV (44), pp. 881-882. to cover the informal sector, they could then Acharya, S.; Jose, A.V. 1991. Employment and mobility: Astudy set the direction. among workers of low income households in Bombay City, New Delhi, ILO-ARTEP. 3. Labour administration and labour inspec- All India Trade Union Congress (AITUC). 1997. “Unorga- tion should also be strengthened and made nized sector, Agri-Labour andCaste-Class”, AITUC Edu- more effective. Without a strong trade union cation Series 3, New Delhi. movement/presence in the informal sector, Anant, T.C.A.; Sundaram, K. 1998. “Wage policy in India: A review”, Indian Journal of Labour Economics, 41(4), labour law enforcement and labour inspec- pp.815-834. tion would not be effective. Arora, S.L.; Yadav, S.K.; Thankachan, T.; Sahai, J. 1998. “Data Base for EmploymentPlanning in Informal Sector”, Man- 4. Tripartite machinery on social and eco- power, XXXIV(1), pp. 131-144. nomic issues should provide adequate rep- Avachat, A. 1978. “Beedi Workers of Nepani”, Economic and resentation for the constituents from the Political Weekly, XIII (30), pp. 203-5. informal sector. Basu, T. 1977. “Hosiery Workers in Calcutta”, Economic and Political Weekly, XII (51), p. 262. 5. Minimum wages should be indexed. Baxi, U. 1993. “Unorganized Labour? Unorganized Law?”, in Debi Saini (ed.), Labour Law, Work and Development, 6. National trade union centres should have a essays in honour of P. G. Krishnan, pp. 3-19. separate committee/cell to organize the Bhalla, S. 1997. Address to the 36th session of All India Trade unorganized. Such a committee/cell should Union Congress, Amritsar (October). Keynote address on the occasion of the launching of the National Centre for have a budget to undertake organizing cam- Labour, Bangalore. paigns and training programmes. Bose, A.N. 1974. The informal sector in Calcutta metropolitan economy, Geneva, ILO, (mimeo). 7. Trade unions should network with and form Brahmananda, P.R. 1999. “Economy – Aperspective: Lagging alliances with other interest groups such as real wages and rising per capita income”, The Hindu, 6 the media and NGOs. Feb. 1999.

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46 Sawant, S.T. 1990. “Link cadre development – conceptuali- Singh, S. 1979. “Organisation of Carpet Industry in Bhadohi”, sation and practice”, in S.T. Sawant, Ratna Sen and Klaus Economic and Political Weekly, XXIV (21), pp. 69-71. Voll (eds.), Planning and Labour, Delhi, Atma Ram and Singh, M. 1990. The political economy of unorganized industry – Sons, pp. 206-215. A study of the labour process, New Delhi, Sage Publications. Sardana, M.G. 1998. “Data and information base of informal Sundaram, S.K.G. 1997. “Organising the unorganised urban sector”, ManpowerJournal, XXXIV (1), pp. 125-130. labour: Case Studiesfrom Maharashtra”, in Ruddar Datt Sen, R. 1996. “Industrial relations in West Bengal”, IIRA (ed.), Organising the Unorganised Workers, New Delhi, Newsletter, pp. 19-20. Vikas, pp. 95-105. —. 1997. “Organising the unorganised labour”, in Ruddar Suryanarayanan, S.S. 1998. “Information base for informal Datt. (ed.), Organising the Unorganised Workers, New sector”, IndianJournal of Labour Economics , 41(3), pp. 459- Delhi, Vikas Publishing House Ltd. 474.

47 The Philippines

Trade unions can play an important role in bridging the informal sector and policy bodies and institutions and at the same time develop the sector’s capacity to understand pertinent issues and to negotiate with the proper authorities.

Sandra Yu Research Consultant

1. The Philippine informal sector threw scores of workers out of their jobs. Lack- ing opportunities for productive employment, The following study examines the extent to many were forced to create their own jobs which trade unions are responding to the through informal self-employment while those expansion of labour markets in the informal who were fortunate enough to keep their jobs sector, and identifies opportunities for and found their wages eroded by double-digit infla- obstacles to the integration of informal workers tion and therefore had to resort to informal into trade union structures. It surveys the types activities. For some time, it was even commonly of initiatives implemented by Philippine labour believed that self-employment had kept many groups, noting innovative approaches that are households afloat as well as the Philippine currently being practised or considered. The economy. study will also shed light on the strengths and Today, the Philippines is once again faced limitations trade unions bring with them into with the dreadful prospect of massive unem- this new terrain and defines capacity building ployment. Due to the competitive pressures of needs so as to enable them effectively to extend globalization and, more critically, in the wake their reach to the sector. of the Asian financial crisis, the Philippines reg- Part 1 elaborates on the phenomenon of the istered 64,859 lay-offs in a period of only five informal sector as it has been evolving in the months (January to May 1998) immediately fol- Philippines. It provides an overview of the lowing the first rush of the crisis in late 1997. magnitude and characteristics of the informal This figure surpassed even that recorded for an sector as well as the factors which have con- entire year, 1997, which was 62,736. Equally distributed to its growth. Part 2 analyses how trade turbing has been the rise in the unemployment unions are responding to the needs of the level in April 1998 to 13.1 per cent, represent- informal sector, their successes and difficulties, ing 4.2 million, or an increase of 1.7 million from and how they are modifying their structures to the previous quarter and 1.0 million from the accommodate such non-traditional types of same quarter in 1997. workers. Part 3 defines the challenges and As the experience of the 1980s would sug- needs of the trade unions in reaching out to this gest, job losses in the formal sector will be sector, while Part 4 provides suggestions and accompanied by an expansion of the informal guidelines for future action. sector where conditions are, for the most part, unstable and unprotected. This situation is caus- 1.1. Introduction ing much concern among Philippine labour gr oups which increasingly find their ranks In the Philippines, there has been a growing dwindling due to unmitigated ret re n c h m e n t acceptance of the existence of the informal sec- and contractualization. More construc t i v e l y , tor throughout the past decade. One has only this current wave is causing widesprea d to look at one’s surroundings – vendors, pedi- rethinking about how trade unions should cab drivers, street pedlars, food sellers, shoe respond and utilize traditional trade union repairmen – to appreciate the pervasiveness of modes to respond to the changing forms of work informal work. This acknowledgement began in order to meet the expectations of workers in with the economic crisis of the 1980s which general and their membership in particular.

48 1.2. Evolution of the informal sector of the labour force (as its share in total employ- in the Philippines ment went up substantially). However, we also see that although a lot of people were employed As noted earlier, the informal economy fur- in services, the latter do not constitute very pro- ther gains recognition during economic crises ductive activities (as shown by the service sec- with the massive dislocation of workers. How- tor’s stagnant share in GDP despite its larger ever, informal work is a long-standing phe- share of workers). One can therefore infer that nomenon and has been growing for several perhaps a large portion of the activities in the decades. The roots of the informal economy can sector concerned consists of low-productive be found in the inability of the formal sector to jobs in the informal sector (which is partly create adequate employment for jobseekers accounted for in the National Income and provide productive resources for small- Accounts). scale entrepreneurs. In a rush to industrialize in the 1960s, the Philippines had focused its development strat- Table 1. Sectoral shares in total egy on encouraging industries that are urban- employment and GDP (%) based, relying on a few large enterprises and on capital-intensive processes. A combination of 1965 1997 policy instruments were used to achieve this Share in total employment objective, including an overvalued currency Agriculture 57 40 which made importation of equipment cheaper Industry 15 17 but penalized agricultural exports; granting of Services 28 43 tax exemption on the importation of equip- Share in GDP ment; and granting of privileges such as import Agriculture 26 21 licences, foreign exchange allocation and sub- Industry 28 36 sidized credit to selected industries. Credit was Services 46 43 in fact rationed to big businesses in urban cen- Sources: Philippines Statistical Yearbook, 1978 and 1998. tres, siphoning off savings from the rural areas while denying small enterprises similar resources. In economies where employment and entre- This strategy also tilted institutional devel- preneurial opportunities are relatively few, the opment towards servicing larger firms. Formal distribution channels of economic growth are institutions such as banks, government regula- narrow. In such a situation, the informal sector tory bodies, training agencies, marketing net- is said to have a fixed character: the informal works, traditionally designed their pro- sector expands during economic contraction, grammes and requirements to suit the scale and but does not shrink proportionately during sophistication of larger enterprises, leaving periods of economic growth and recovery small enterprises with little access to the because the same channels are not in place. resources and protection they offered. Therefore informalization and underemploy- The overall effect of this strategy was agri- ment remain a stubborn feature of the economy cultural stagnation, oligarchic ownership of (Martinez, 1990). assets and massive unemployment. Local entrepreneurship was also stifled due to the 1.3. Magnitude and characteristics uneven access to resources. Consequently, the of the informal sector informal sector can be said to have arisen from this situation characterized by limited oppor- How large is the informal sector in the tunities for job creation and small business Philippines? The exact size of the informal sec- development. tor cannot yet be determined given the existing Table 1 shows historical data of people statistical systems. Current statistical instru- migrating out of the rural sector in search of ments are designed for visible enterprises, thus jobs (resulting in the reduction of the share of leaving out activities which are run on a very agriculture in total employment) only to find small scale, have unsettled locations, and are modern industry unable to provide them with not readily recognizable. Estimates have been the employment they had hoped for (as shown made, however, based on labour force cate- by the almost unchanging share of industry in gories which approximate features of the infor- total employment). Jobseekers therefore end up mal sector, namely, own-account work and in the service sector which has absorbed much unpaid family labour. The size of the informal

49 sector employment in the Philippines, using own-account workers and 63 per cent of unpaid these categories, has hovered at around 50 per family workers, services for 18 and 16 per cent cent of total employment during the past years. respectively, and transport services, 14 per cent Another approach at estimating informal and 5 per cent. Manufacturing accounted for 12 employment yields much higher figures. This per cent of unpaid family workers. method, called the “residual” approach, takes Alonzo found that trade organizations were the economy-wide employment from the dominant in transport where 89 per cent indi- household-based labour force survey and the cated the presence of such an organization and Census of Establishments or the Annual Survey 78 per cent said they were members of such of Establishments which cover enterprises with groups. Most cited lack of capital as their main recognizable and fixed locations. The difference problem. Others mentioned limited markets between the household-based and the enter- and the high cost of raw materials. prise-based data is presumed to represent The 1995 NSO-ILO survey furnishes some informal sector employment. Based on this insights regarding the working conditions in approach, informal sector employment was the sector and the kind of protection available found in 1988 to account for 85 to 90 per cent of (Joshi, 1997). Among the major complaints total employment in the private sector and, in regarding working conditions are the presence 1993, from 80 to 91 per cent for the trade, ser- of dust, noise, and chronic physical exhaustion vices and transport sectors (the only sectors for and body pain. This specially applies to home- which computations were done) (Alonzo, 1996). workers. Other problems noted were lack of As for the characteristics of informal sector ventilation, excessive heat, inadequate work- employment, a survey conducted in Metro space, poor work tools and workplace design. Manila in 1988 and updated in 1996 reveals The survey also revealed that most operators some information about informal sector opera- (93 per cent) do not use protective equipment. tors as well as their workers and business oper- Regarding social protection, the survey ations. Almost all of the operators (96 per cent) showed that only 15 per cent of operators are are at least 25 years old and 62 per cent are registered with the national Social Security Sys- women. Around 21 per cent have been operat- tem (SSS) (which is similar to the aforemen- ing for less than three years while almost half tioned findings of Alonzo). Among the reasons have been operating for three to ten years. A cited for not being members are the small size slight majority entered an informal activity in of their activity, the fact that SSS registration is order to supplement family income. Currently, not required, and that they see no need to reg- half of the enterprises represent the family’s ister. However, women are more interested main source of income (but 100 per cent in the than men in social protection schemes. Those case of repair services and 86 per cent in the case who are interested have expressed preference of other personal services). Around 84 per cent for health care to cover sickness and injury, old said they had one to two workers and over 80 age pension and education benefits. per cent said they worked more than nine hours Over 90 per cent are not affiliated to any a day and more than five days a week. Reflect- organization, their reason being that they do ing the limited sources of technical and market not expect to gain any benefit and that they lack information, 81 per cent said that their main knowledge about existing groups. As men- sources of new ideas were themselves. Around tioned earlier, different circumstances obtain 42 per cent were registered with the municipal among transport workers, the majority of authorities and only 10 per cent with the whom enjoy membership in an association national social security system. mainly for routing purposes. In a pilot survey of the urban informal sector conducted by the National Statistics Office 1.4. The legal and institutional (NSO) in 1995, in collaboration with the ILO, it environment was found that trade constituted 47 per cent of the informal activities surveyed, followed by The legal and institutional framework in services at 24 per cent (including hotels and which the informal sector operates has often restaurants), manufacturing at 11 per cent, been criticized as responsible for perpetuating transportation at 9 per cent, and construction their status of informality since the difficulty of and agricultural at 3 per cent each. The data is getting registered with government agencies similar in the case of own-account workers and can prevent an enterprise from gaining legiti- unpaid family workers in non-agricultural macy and protection. While studies have activities: in 1995, trade accounted for 52.7 of all shown that enterprises in some countries have

50 deliberately remained small due to the proce- ited package is better suited to short-term con- dural complexities of registration, in general cerns and affordability levels of low-income the legal and regulatory framework is less a households as it covers more immediate and problem for workers in the informal sector in common hazards (as those cited above in the terms of the required procedures, which have surveys referred to) and at minimal levels of not been found to be a hurdle for those who did contribution. choose to register, nor a major constraint to Furthermore, in pursuit of its mandate of those who did not (Mead, 1994; FREED, 1996). universal coverage, the NHIP developed an In addition to exclusion from national reg- Indigent Program whereby indigent house- isters, informality can also be perceived in holds are enrolled through the municipal terms of exclusion from institutional sources of authorities, which act as conduits. Their pre- productive inputs and from social protection mium is fully subsidized by both the NHIPand systems and labour legislation. It is in these the municipal government (Bautista, 1998). terms that the legal and institutional frame- This programme is still in its incipient stage. work assumes greater importance, namely, in terms of access to mainstream markets, tech- 1.4.2. Labour legislation 1 nology, financing, infrastructure, social security system and the protective arm of labour As regards laws on labour relations and legislation. worker protection in the informal sector, the country’s labour laws are theoretically meant 1.4.1. Social protection for the entire labour force. However, as stated in various labour relations provisions, includ- In the Philippines, a legal mechanism is in ing those on trade union organizing, collective place which extends social security coverage to bargaining and dispute settlement, it is clear the informal sector through the SSS which that these rights are available only to those with offers a broad range of benefits including clear employer-employee relations in the for- income replacements upon old age, disability, mal sector.2 The same holds true for laws on sickness, maternity as well as support for labour standards as they are applicable to funeral expenses and hospitalization. How- “employees in all establishments and under- ever, there are a number of reasons why mem- takings whether for profit or not, but not to gov- bership is low among informal sector workers. ernment employees, field personnel, members For many low-income informal sector opera- of the family of the employer who are depen- tors, membership contributions on a regular dent on him for support, domestic helpers, and basis are beyond their capability especially if workers who are paid by results” (Ofreneo they earn seasonal or unstable incomes, and 1996). Moreover, labour standards inspection even when some are willing, collection offices by the Department of Labour is applied only to may be too far from their communities. For establishments with five or more workers. workers employed in informal sector units, Those with less than five are instead given their owners are, firstly, not required to register “technical advice” and have one year to com- them if the former number less than five and, ply with labour standards. There remains the secondly, many of their work arrangements are question, however, of the desirability of inspec- not covered by a contract, linked to the fact that tion with respect to the informal sector as this the employer-employee relationship in most may further drive workers underground. cases is not binding. While it is clear that, for purposes of collec- In an effort to make social protection afford- tive bargaining, a clear employer-employee able to low-income groups, the Government relationship has to be established, those lacking came up with the National Health Insurance such privilege – workers, in general – can orga- Program (NHIP) in 1995 which seeks to provide nize themselves into any type of workers’ orga- everyone with access to health insurance. Under nization, including craft unions, cooperatives, this programme, one can apply for health ben- and mutual aid associations. However, the lat- efit packages which are more limited and less ter groupings are “for purposes other than col- expensive than that of the SSS which comprises lective bargaining.” In 1997, the Department of a wide range of short- and long-term insurance Labor and Employment issued Department benefits. This limited set of health benefits cov- Order 9, establishing implementing guidelines ers hospitalization, including room and board, for registering such workers’ organizations. In professional fees, prescription of drugs during an effort to ensure proper labour standards in confinement, and laboratory fees. A more lim- contractual work arrangements, the Labor

51 Department also issued Department Orders 5 Federation of Free Workers (FFW) in the Philip- (in 1992) and 10 (in 1997), spelling out the obli- pines, articulates FFW’s decade-long striving to gations of a contractor to a contracting employee, become a trade union social movement, aspir- a relationship which, for a long time, had ing to achieve empowerment not only of work- eluded the employer-employee category. While ers in the formal setting, but also workers in all the effectiveness of these laws has to be tested, sectors of society, including the urban poor, the there is evidence of weak enforcement of disabled and the elderly, and to integrate them Department Order 5. Homeworkers, for exam- into the trade union mandate and structure. ple, are generally unwilling to file complaints According to Asper, this thrust gains rele- against their principals for fear of losing their vance today as companies are downsizing and means of living and of retaliation; and where adopting more flexible arrangements. Such complaints have been filed with government measures mean that trade unions not only have authorities, the latter has shown unwillingness to worry about being responsive to the needs to accommodate them, saying that they were of displaced workers, but must also consider not the competent bodies to handle such mat- the long-term and practical consequences of ters (ILO, 1997). This spells out the need for such a trend: falling membership and their more advocacy work and vigilance among eventual loss of political influence and financial workers’ organizations to ensure that these base. Furthermore, trade unions risk becoming mechanisms are properly implemented. élitist if they choose to remain focused only on In summary, there is now a broader range of the fast-shrinking pool of rank and file work- options for organizing among informal sector ers. Asper reminds us that this reorientation to workers, including craft unions, cooperatives, the basic sector of society represents, in fact, a and workers’ associations. However, for pur- return to the roots of trade unionism which poses of negotiation or collective bargaining began as a mass movement. As a concrete mani- involving the application of labour laws and festation of its thrust as a trade union social standards, a clear employer-employee relation- movement, FFW amended its constitution in ship has to be established – something that is October 1998 to allow non-traditional types of elusive in informal settings. With this end in workers access to membership. mind, there have been efforts to compel The Alliance of Progressive Labor (APL), in “employers” with subcontracting arrange- collaboration with the Labor Education and ments to meet their obligations to their Research Network (LEARN), likewise notes the “employees”, although the mechanisms in failure of traditional unionism to include the place still need to be tested. vast majority of casual, informal sector and Other than this, the application of standards overseas workers, and is propagating the within informal sector units has to be done in a broader framework of what it calls “working developmental manner, that is, through incen- people”. This reconceptualization seeks to tives and awareness campaigns as well as pro- include heretofore excluded sectors, namely, ductivity support, targeted at informal sector non-wage informal labour, reserves of casual or employers so that they are better positioned contract labour, overseas contract workers, and encouraged to apply labour standards. houseworkers who are mostly women, and the Furthermore, informal sector workers may be unemployed. Like FFW, it calls its brand of assisted in enhancing their negotiating skills for unionism “social movement unionism” and arriving at agreements with their employers identifies itself as a multiform labour centre (Ofreneo, 1996). All these methods can be chan- that accommodates registered unions, area- nelled through workers associations, craft based or industry-based alliances, national unions or cooperatives, which are now being unions, general federations, community and recognized through the laws and guidelines trade associations, and working women’s orga- referred to above. nization (APL, undated). Already, its affiliates include associations of jeepney drivers, ven- 2. Trade union responses dors and construction workers. to the informal sector To provide a legal framework for a multiform unionism, APLhas actively supported the 2.1. Rethinking among trade unions passing of Department Order 9 which, as ear- Today, trade unions are currently engaged lier mentioned, provides for the registration of in serious rethinking about their role amid the workers’ associations with the Department of changing character of work. Antonio Asper, Labor, especially among own-account and con- Vice-President for International Affairs of the tractual workers. This provision also enables

52 workers employed in various small enterprises Nevertheless, several other objectives are to organize themselves into a single union targeted alongside productivity improvement, (but, again, for purposes other than collective as follows: bargaining). (a) improving access to protection from haz- Other trade union centres and federations ardous conditions and from life’s contin- are in different stages of reformulation. The gencies; Trade Union Congress of the Philippines (TUCP) changed its constitution as far as back (b) enhancing advocacy and bargaining skills 1987 in order to include the informal sector of informal sector associations; and within its membership. Likewise, the National (c) capacity building of institutions and net- Federation of Labor has been working among works of informal sector operators, private agricultural workers who have become small sector and public authorities so as to enable landowners as a result of the agrarian reform them better to service the needs of the infor- programme of the Government. The Lakas mal sector. Manggagawa Labor Center (LMLC) is also faced with the urgency of assisting its displaced Among the different models or approaches members, and has been mulling over the currently being implemented are the following: prospects of forming craft unions. And Trade (a) the creation of associations and craft unions Union of the Philippines and Allied Services for mutual support and advocacy; (TUPAS), while participating regularly in policy discussions on the informal sector and (b) coalition building and advocacy for the assisting intermittently in training groups of institutionalization of groups and policies vendors within the vicinity of its offices, is faced favourable to the informal sector; and with the imperative of responding institution- (c) the direct promotion of group and individ- ally to the needs of displaced members within ual businesses, known as the programme its membership and proposes, as a starting approach. point for their expansion into the informal sector, reaching out to its unemployed members. These approaches are described below.

2.2. Review of trade union strategies 2.2.1. The creation of associations or craft unions Trade unions employ different approaches in their efforts to extend assistance to the infor- It was earlier pointed out that with the pro- mal sector. It can be said that most of their mulgation of Department Order 9, workers’ efforts, at this point, are geared towards associations can now register with the Depart- improving the productivity of informal sector ment of Labor as such. A workers’ association operators inasmuch as survival is the urgent is defined as “any association of workers orga- concern of most workers in this sector. At the nized for the mutual aid and protection of its present juncture their concern is aggravated as members or for any legitimate purpose other scores of trade union members are being dis- than collective bargaining.” placed and are in need of alternative sources of For a long time now, trade unions have been income. organizing the informal sector as associations At this point, it is the informal sector opera- or cooperatives through which members sup- tor who is largely considered as the worker inas- port one another by means of loans, post-pro- much as most low-income informal operations duction services, affordable consumer goods, are carried out by those who have been forced insurance and other mutual benefits. Many of to create their own employment. Informal sec- these cooperatives are formed by trade union tor operators may have also come from the members themselves or are organized among ranks of workers who had been retrenched or informal sector workers. TUCPand FFW have contractualized. Moreover, because of the very long experience in this area, especially in orga- small size of their operations, they either do not nizing farmers and women, providing social hire workers or are simply assisted by family credit and supporting their livelihood activi- members. Hence, at a marginal level of opera- ties. They are further supported by the Work- tion, the employer and employee are assumed ers’ Fund, a non-profit organization created to to embody the same interest, if not the same service the three labour centres – TUCP, FFW person; and it is the urgency of survival which and LMLC – in their socio-economic projects most trade unions are trying to address. and the formation of workers’ cooperatives.3

53 As mentioned, a marked shift has been ance premium which the company has to pay noted on the part of several labour organiza- for the duration of the employment. The pri- tions towards the formation of craft unions. vate sector has shown support for this scheme Along with industry alliances, as envisaged, since it guarantees them the reliability and com- these are the vehicles through which informal petence of the construction workers who would sector workers can articulate issues pertinent to be engaged. specific industries, including policies on labour The scheme in question is being developed standards vis-à-vis small-scale employers and together with the Technical Education and subcontractors. According to Antonio Asper, Skills Development Authority (TESDA), the craft unions can address the following four main government authority in charge of voca- areas of concern: tional training and trade certification. Under (a) negotiating the terms and conditions of this scheme, IFBWW furthermore plans to employment; e n rol every certified worker with a national workers’ federation which will support work- (b) promoting standardization of skills and ers in skills training, safety orientation and wages within each craft; social insurance. Likewise, the private con- (c) testing and certification of skills, so as to struction sector has agreed to a construction improve marketability; and levy amounting to 2 per cent of project cost. The (d) upgrading of the craft into recognition as a fund generated from the levy will support train- profession. ing and insurance schemes for construct i o n w o r k e r s . Currently, two distinct initiatives have been Industry-based unions and multiform struggle. launched within this approach, as follows: Through its partner labour unions, the APLcur- Craft unions and promotion of labour standards. rently supports industry-based associations of The International Federation of Building and market vendors, transport operators, construc- Wood Workers (IFBWW) has been prom o t i n g tion workers and self-employed women. the organization of craft unions among con- Through their active involvement in policy for- st r uction workers who are employed on a pro- mulation, the transport operators’ associations ject basis and often under adverse working con- in Cagayan de Oro, Davao and Zamboanga ditions. Within this approach, its partner labour participate actively now in their local govern- federations have organized five community- ment’s traffic management office whereby they based associations of construction workers have a say in the setting of penalties, routing which have launched various initiatives includ- and traffic rules. Now they are working ing project identification, skills training, safety towards recognition by the Department of orientation, rental of safety equipment, mutual Transportation and Communication and will aid schemes and job facilitation. eventually be federated with the International IFBWW is currently working out a scheme Transport Workers’ Federation. The market for registering and accrediting construction vendors’ association in General Santos City workers, along the lines described above by also participates in the local government’s set- Asper, in an effort to standardize and recognize ting of rules in public markets. construction skills and to upgrade standards of Under the framework of “working people” employment among skilled and unskilled and given the variety of workers’ groups that workers. This scheme offers advantages to both this broader conception accommodates employers and workers. At present, the lack of (including company-, community- and indus- skills certification has allowed small contrac- try-based associations), the workers’ struggle tors to deploy workers who may not have the goes beyond collective bargaining agreements necessary construction skills. The lack of stan- in factories and plantations. According to dards, furthermore, places workers in a situa- Orlando Quesada, Executive Director of tion where they may possess a higher level of LEARN and partner of APL, the different skills and wage grade after completing a pro- arenas of struggle, especially as they apply to ject only to be downgraded again in the next informal sector organizing, are the following: assignment. (a) legislative at local and national levels; It is thus envisaged to provide a construction worker with an electronic identification (b) developmental, in terms of economic sup- card certifying his or her skills, say as class A port, cooperative development and capac- carpenter, and indicating both the wage rate ity building; corresponding to the skill level and the insur- (c) political and ideological;

54 (d) electoral and concerning matters of gover- cacy and coalition and negotiation with gov- nance; ernment authorities. As such, it has undertaken the following main activities: (e) the character of the sector as a mass movement or its role in pressure politics; and (a) baseline research which enabled the coalition to determine the needs of the identified (f) cultural or awareness-development of the communities and the proper intervention need for solidarity as opposed to individu- strategies; alism. (b) coalition building and membership expansion through which it strove to achieve a Taking the long view, Danny Edralin, Chair- critical mass of informal sector workers that person of APL, spoke of the vision of solidarity could bring pressure to bear for policy and which is possible among diffe r ent categories of legislative reforms; workers who, in spite of their sectoral concerns, will act as one to espouse common, national (c) capacity building of informal sector associ- concerns as working people. He recalls how, in ations to enable them to service their mem- the 1970s, the same industry-based approa c h bers’ needs and to advocate legislative and was taken in conceptualizing a national trade policy changes. A total of ten national train- union centre. Under this view, the national cen- ers’ training seminars were held by the ISP tr e would be rep r esented by the 12 major indus- among local leaders and trainers who in tries which, in turn, would be rep r esented by its turn would be responsible for echoing the sub-industries on a one sub-industry/one un i o n inputs in the communities. Among the top- basis. This is the strategy and vision espoused ics covered were community organizational by AP L ’s social movement unionism – one development; leadership; advocacy; social which encompasses diffe r ent types of workers, mobilization; entrepreneurship; project in contrast to the traditional conception of the planning; and paralegal training; and worker as a wage employee, one which involves (d) advocacy and negotiation as its main workers at diffe r ent levels of struggle, and one strategy to obtain policy and institutional which nevertheless strives towards an integra- reforms. tion of common interests as working people. So far, it has been able to build five area 2.2.2. Coalition building and coalitions in Rizal, Cebu, Tarlac, NCR (National the institutionalization Capital Region) and Negros under which it has of support systems mobilized 184 grass-roots organizations and enlisted the collaboration of four non-govern- Organizing workers in the informal sector is mental organizations: Balikatan sa Kaunlaran, not new to TUCP as it had changed its consti- a civic organization; Patamaba, a national fed- tution as early as 1987 to take account of the eration of homeworkers; Kababaihan Kaaga- growing reality of this sector and since then has pay sa Hanapbuhay (KAKASAHA), a self- been actively organizing cooperatives among employed women’s group; and Youth for agricultural workers and women workers. Empowerment and Solidarity (YES), a youth Recently, under the Informal Sector Coalition organization. Project (ISP), it has taken upon itself the task of As a result of its advocacy, the coalitions building coalitions within the informal sector were able to register the following gains: that will advocate policies and regulations favourable to the sector. Access to social protection. In the area of social The ISP is a USAID-supported project, protection, it was able to influence the lower- beginning in late 1996 and spanning three ing of the wage rate eligibility (to 1,000 pesos) years. It addresses three main issues, namely: for membership as self-employed in the SSS. In (a) access to social protection; view of the dearth of SSS collection offices in some communities, talks are also now under- (b)access to productive resources; and way between SSS and the ISP regarding the (c) improved living and working conditions for accreditation of associations and cooperatives children. as collecting agents of SSS premiums. The ISP has also received commitments from some local The main thrust of the project is the institu- government units under the Indigent Pro- tionalization of support systems and resources gram of the Philippine Health Insurance Cor- for the informal sector mainly through advo- p o r at i o n (PHIC) to allocate a portion of their

55 budget as counterpart premiums for indigents. Finally, as a result of a national consultation, At the same time, the ISPhas held consultations the ISP has hammered out a legislative bill on with informal sector operators and workers working conditions for young workers. The bill regarding the value of social protection and has stipulates specific standards on remuneration, been able to impart an appreciation for such working hours, occupational safety and health, safety nets. and social security for child workers. Both ISP Incidentally, the TUCP, together with two and YES will campaign for its passage. With the cooperative insurance agencies (Coop-Life achievement of institutional reforms, the ISP Mutual Benefit Services Association (CLIMBS) ensures the continuation of benefits and access and Cooperative Insurance System of the even after its project life in 1999. Moreover, it Philippines (CISP)) and a leading cooperative hopes that by creating a coalition and develop- federation (PFCCO), is seeking to expand its ing capacity within the network, it has been Worker Mutual Benefit Association to include able to sow the seeds of empowerment and col- more workers from both the formal and infor- lective action so that the gains in place may be mal sectors, and more benefit packages within expanded and multiplied. its insurance scheme. Currently, it is raising Likewise, the FFW launched a two-year capital as required by the Philippine Insurance action programme in 1996 called the Labor Ini- Commission for the benefit packages that it tiative Towards the Elimination of Child Labor seeks to provide. (LITECHILD), in collaboration with ILO-IPEC. Now in its second phase, spanning another two Access to productive resources. Under the banner years, LITECHILD facilitated the creation of a of access to productive resources, the ISP has network of anti-child-labour groups and a been able to access training and loan facilities youth organization comprising students and of government agencies, namely, the Depart- working children. This programme aims to ment of Social Welfare and Development, Tech- enable rural communities to address child nology Resource and Livelihood Center, and labour concerns while building the capacity of the Department of Health. It has also convinced community organizations to pursue develop- local government units to implement the law ment goals. LITECHILD is engaged in the fol- mandating all local units and line agencies to lowing main activities: allocate a portion of their budget for women (a) Organizing, networking and advocacy. It workers’ concerns. works with a network of anti-child-labour More recently, it signed a memorandum of groups – the Child Labor Action Network agreement with government financial institu- (CLAN) – as well as an organization com- tions and other agencies, committing the latter prising students and working children – the to a reduction of requirements in lending to Youth Organization against Child Labor micro-enterprises and to open non-collateral- (YO! CHILD) which plans, implements and ized credit windows. benefits from the activities launched. Protection of working children. In the area of child (b) Training and research. Village-level coun- labour, the ISP has worked closely with the selling activities are conducted with the par- ILO’s International Programme for the Elimi- ticipation of government officials, parents nation of Child Labour (IPEC) as well as the and youth in order to raise awareness on United Nations’ Children’s Fund. The ISP has child labour and to explore ways to elimi- helped to bring substance into 46 Barangay nate it. Councils for the Protection of Children (BCPC) (c) Direct services. Scholarships, support for in the five pilot areas. The BCPC is tasked with mutual aid and economic ventures, and monitoring child labour in the barangay (vil- technology-based training are provided. lage). The ISP has provided a number of seminars to the BCPCs including paralegal training, LITECHILD is being implemented in three action planning and seminars on child labour. towns nationwide, namely, Quezon Province A number of requests have been received from (Luzon), Samar (Visayas) and Lanao del Sur other BCPCs for assistance, but the ISPproject (Mindanao). Beginning in 1999 three more is now trying to focus on a few pilot areas and towns will be covered by the programme with passing on other BCPCs to the Department of agricultural and informal sector activities as the Interior and Local Government with the insti- main focus. LITECHILD takes further a sectoral tutional mandate for supporting and monitor- focus as each of the towns selected is involved ing BCPCs. in certain predominant activities. These towns

56 are in: Bulacan (Luzon; pyrotechnics area); be organized as cooperatives or corporations, Iloilo (Visayas; fish port area); and Cagayan de possibly with preference for the former for rea- Oro (Mindanao; port area). sons that will be explained later. For example, FFW-LITECHILD was one of the founding FFW is now assisting a group of 20 workers organizations of the Trade Union Coalition who have been retrenched from a pastry com- Against Child Labour which was formed in pany to set up their own cooperative cake shop. 1998 to consolidate labour action nationwide The National Federation of Labor is also assist- and facilitate a unified trade union position ing rubber plantation workers who have been internationally. Other members of the coalition awarded individual land titles as a result of the are TUCP, the International Textile, Garment government’s agrarian reform programme and Leather Workers’ Federation, the Philip- and are now managing their land individually pine Public School Teachers’ Association, the as well as the rubber factory collectively. Brotherhood of Trade Unionists/Norm Pro- NUHWRAIN Development Cooperative gram, and the Informal Sector Coalition Project. (NUWDECO), which is a development cooperative under the National Union of Workers in 2.2.3. Programme approach: Hotel, Restaurants and allied Industires Direct promotion of group (NUHWRAIN), has set up a cooperative restau- and individual businesses rant (now closed) and catering service managed by the former employees of a restaurant As pointed out earlier, much of the work of which had closed down. Another labour orga- trade unions focuses on enhancing the produc- nization is assisting a group of garment work- tivity of the informal sector since many of its ers who, as a result of a dispute followed by members are understood to live on a subsis- negotiations with their employer, have been tence basis. Others look at productivity given ownership of the factory and have orga- enhancement as an entry point to protection nized it as a cooperative enterprise, funded issues, as they may not be able to gain a from their separation pay. foothold in a sector that is invariably preoccu- One of the success stories using this pied with survival needs if they overlook the approach is the Progressive Skills Multipur- basic overriding concern. pose Cooperative (Proskills) which was estab- Some of the examples cited above, however, lished independently by a group of workers show how other welfare issues such as social retired from a leading beverage company. Start- pr otection and child labour are being addres s e d ing in 1993 with 19 workers and 900,000 pesos possibly in tandem with productivity initia- in capital pooled out of the members’ retire- tives. In their efforts to improve productivity in ment pay, Proskills convinced the company to the sector, however, some trade unions rea l i z e grant them the distribution and warehousing that once their informal sector members become contracts and to assist them through the devel- mo r e prog r essive and begin hiring employees, opmental stage. Today, Proskills has a mem- th e r e will develop a divergence of interes t bership of 200, a workforce of 500, an asset size between owners and workers – a situation of 30 million pesos. It now services all the logis- which may prove divisive for the trade union. tical and warehousing requirements of their They hope, however, that given their leverage former employer nationwide and acts as ware- as res o u r ce catalyst and service prov i d e r , they housing consultant to other companies. It can influence workers-turned-employers to be boasts of relatively high salaries for its workers, good employers and to promote favourable including benefits such as health insurance, worker policies. Furthermore, if the latter were educational assistance and pension funds, to choose to set up a group business and adopt including workers’ participation as associate a cooperative struc t u r e of organization, their members and part-owners. Thus, workers also workers would then, like themselves, become enjoy a share of the cooperative’s profits. Its part-owners of the enterprise, blurring the dis- marketing manager, a former warehouse tinction between employer and employee. supervisor, talks about the benefits that he has In the next section, the more innovative received. He is now able to send his children to approaches taken by worker organizations to college, afford the convenience of a car, travel enhance productivity among informal sector to his provincial hometown without incurring operators will be examined. debts – all of which would not have been possible if he had remained a wage earner. Collective enterprises. One such approach is the The foregoing supports the argument devel- promotion of collective enterprises which may oped by Danny Ang of NUWDECO when he

57 speaks of the workers’ cooperative as a way of fying so many diffe r ent motivations in a large escaping the “wage trap”, a common situation gr oup is daunting, and workers need to gain where a worker is paid only for the days in new competencies in running a business (to the which he has worked, earns no income during point of hiring professionals which by itself can holidays or typhoons, and is unable to find sub- also create conflicts). However, the promise of stitute work for the short duration of the work im p r oving people’s lives through collective ini- suspension. tiative, supported by successful experiments The option of the workers’ cooperative is and concrete opportunities, propels trade gaining interest among trade unions, but not unions towards replicating this model. without some misgivings.4 This approach can well gain wide acceptance among trade unions Support for individual businesses. Assistance and potential beneficiaries. For trade unions given by trade unions to individual businesses steeped in the socialist tradition, collective has taken various forms, including training and enterprises may represent a strategic step consultancy, organizing cooperatives for joint towards the vision of worker-owned and business support services, and the provision of worker-managed economy. For the less ideo- loans. The National Federation of Labor (NFL) logically inclined, collective enterprises pro- is assisting beneficiaries of the agrarian reform vide definite economic and social benefits as in managing their own farms. One set of bene- they achieve scale economies and added value ficiaries went into a banana-growing contract otherwise unattainable by small individual with their former employer after the land titles enterprises. For still other trade unions who covering the plantation were awarded to the may think twice about business development workers. as falling within their mandate, they find their In another such instance, the former place from the point of view of collective action employer pays rent to the new owners, the for- – one which promotes the realization of their mer plantation workers, in order to continue broader objective of securing employment, bet- using the land. The NFLis looking for ways in ter incomes and enhanced living conditions which the rent received by the beneficiaries among workers. According to Antonio Asper, could be used to help them earn additional trade unions can actually find their niche in incomes. Those beneficiaries who continued to worker cooperatives and collective action. work as plantation workers would also have to Among the potential beneficiaries, this be prepared to support themselves by means of option is an attractive one since the risks asso- new economic activities after the lease of the ciated with setting up and running enterprises company expires in ten years’ time. Bong Mal- are diffused in a collective effort, which is an onzo of the NFLwarns that the agrarian reform important consideration, especially for people programme is only halfway through and the who prefer and are accustomed to the relatively most productive and fertile lands are still to be riskless hierarchical environments of the wage distributed. This highlights the need for the sector. In a group setting, owners and staff are continuation of post-employment assistance to also able to exploit skills complementarities, farmers through the Department of Agrarian thereby boosting their confidence in running an Reform. Currently, the NFL provides training enterprise. and consultancy in various aspects of farm The cooperative structure may also be management and cooperative development. favoured as it allows for greater equity in deci- The FFW, through its Farm Crop Program, sion-making and in profit-sharing. No one indi- also assists farmers in forming cooperatives, vidual can have a share exceeding 20 per cent mobilization of savings and mutual aid, iden- of the entire capital, and every member has one tification of land reform beneficiaries, training vote regardless of his or her shares. of beneficiaries in sustainable agriculture and Such an approach can also capitalize on relevant farming technologies, and provides today’s industrial trend to “rightsize” or cut social credit. It currently supports farmers’ fed- costs associated with non-core functions of a erations in Batangas, Nueva Vizcaya, Zambales company, such as trucking, warehousing, med- (Luzon) Capiz, Antique (Visayas) and farmers’ ical services. It thrives on the companies’ cor- cooperatives in Nueva Ecija, Bicol (Luzon), porate strategies to rely on external service Iloilo (Visayas), and Lanao del Norte (Min- providers for functions outside their core com- danao). It also supports self-employed women petencies (Yu, 1997; OECD, 1995). through the FFW Women’s Network (FWN). Still, the process of developing such collec- Since 1997, the FWN has been organizing and tive enterprises is fraught with challenges: uni- supporting women’s cooperatives, providing

58 them with training in cooperativism and entre- institutionally to accommodate workers in the preneurship, and extending loans to them informal sector is the resistance among the more when required. So far, FWN is supporting ten conservative leaders whose reservations spring cooperatives and women’s associations in var- fr om a number of factors. One of these is the dif- ious parts of the country, including Batangas, ficulty of obtaining membership dues from the Zambales (in Luzon) Roxas, Iloilo (in Visayas), workers in the informal sector, thereby under- Davao, Iligan, Surigao (in Mindanao). mining the economic base of the union or federation. Another is the competition for res o u rc e s 2.3. Learning from the trade union among diffe r ent union concerns, namely, experience mounting legal battles to defend threa t e n e d workers versus developmental programmes for Trade unions in the Philippines fully under- the informal sector. Another factor is simply atti- stand that the labour market can no longer tudinal: some traditional trade union leaders accommodate a sizeable number of permanent seem inclined to maintain their turf or at least workers. Rather, it is becoming segmented and leadership of the hierarchy even with the entry atomized. Therefore, rather than simply of informal sector members. This type of chal- attempting to preserve present forms of work lenge can be met by thorough discussion and and staying the hands of the market, labour deliberations. Some leaders say that, with the organizations need to offer creative responses passing of time, one really has no choice but to if they are to remain effective defenders of accept other types of workers because the rea l - workers’ interests. ity is that their own membership will be shift- Launching out afresh, they realize that with ing to these non-formal work options. new forms of work, they would have to expand their definition of labour, which in turn Distinctions between formal and informal. The dis- demands more intense levels of involvement tinctions that have now emerged between for- and commitment on the part of our labour orga- mal and informal labour have caused resistance nizations. While traditionally trade unions had not only within trade union structures. They to be steeped in the three basic levels of engage- have also created division among workers and ment: dealing with the employer (through col- advocates who should otherwise join forces to lective bargaining agreements); dealing with achieve common employment goals. There are government in terms of participation (through several reasons for the distinctions and the lack governance); and dealing with themselves (via of a common identity. One is the ideological dif- mutual aid systems), today they have no choice ferences among different groups or resistance but to expand the arenas for struggle.5 on the part of neutral groupings, including One angle for such expansion is establish- community associations. Another is the lack of ing and maintaining their foothold among inclination among workers in the informal sec- informal sector workers, a new terrain for most; tor, for instance women in subsistence activi- another is their ability to help workers secure ties, to engage in mobilization and political remunerative incomes through the latter’s own action based no doubt on a common perception productive efforts; and still another is their abil- that trade unions advocate wage issues which ity to help ensure adequate protection for work- are irrelevant to non-wage workers. Further- ers, now self-employed, through innovative more, the programmes and policies of the strategies. The field is now open for experi- Philippine Government and of non-governments, but one can learn from the challenges mental organizations have unwittingly accen- and successes that have so far been recorded. tuated the distinctions between the two sectors, thereby causing unwillingness among some 2.3.1. The challenges faced informal sector representatives to participate in by trade unions labour activities and encouraging them to establish and guard their separate identity. The challenges trade unions have been fac- The APL is trying to dissolve such distinc- ing involved the transition to a new set of clien- tions through the propagation of the “working tele, mainly operators in the informal sector, people” concept, and by encouraging trade and the associated adjustments and competen- union federations to apply the same set of cies that they need to develop. They may be membership principles to both formal and identified as follows: informal sectors. Clarity in direc t i o n . Among the major challenges Inability to pay dues. The inability of the informal faced by trade unions in their move to expand sector so far to pay dues is a valid concern.

59 Labour unions which have opened their mem- sell their competence well, to be good players bership to informal sector operators admit that in the labour market. He stresses that this mar- only about 10 per cent pay regular dues. Per- ket orientation is an imperative that has been haps what must be addressed is not the coerci v e lost among workers and unions. It is this very mechanism of dues’ payment but the increa s e d market orientation which displaced workers ef fectiveness of the union’s services so as to have to revisit and re-nurture in their effort enhance the members’ capacity to pay and to to enhance their productivity and their mar- elicit the members’ desire to secure union mem- kets. Prof. Jorge Sibal cites the excellent prod- bership. For informal sector operators the trade ucts of some trade union members, including unions’ effectiveness relies on its ability to pro- the food catered by the NUWDECO. But he vide business support services, which inciden- points out that while the workers are good in tally can be a fund generator for a union. The production, NUWDECO should scale up its NFL, for example, earns from providing busi- marketing efforts since few people are aware of ness support services to its cooperative mem- their products. bers such as bulk buying of raw materials. Interestingly, those who are spearheading Attitude of the informal sector. Trade unions this type of work within NFLare forming a non- encounter a different set of attitudes in the profit organization. This brings to the fore the informal sector as compared with formal wage union’s option of forming a separate organiza- workers. They find that they initially overesti- tion supported by grants for developmental mate the capacity of workers to take charge of purposes instead of expecting membership their working lives. For instance, those who dues to pay for services rendered. This is an suddenly find themselves out of work undergo important consideration especially during the a transition whereby their previous behaviour developmental stages of an informal sector on the job is no longer relevant to their new association wherein members are still trying to environment. Malonzo cited the tendency boost incomes through joint action and have among some farm workers who were awarded not yet achieved this first and basic objective. small landholdings, but who continue to expect This option is an alternative to integrating the entitlements without concomitant work and informal sector immediately as regular mem- investment. bers of the unions with the same dues-paying At the very least, the informal sector is gov- responsibilities. erned by a different culture, similar to the In the case of the craft unions, it is expected distinctions between wage work and entrepre- that members would pay dues in exchange for neurship. Some unions realize that the organi - regular upgrading of skills and negotiations by zational processes involved are lengthier, that the union on their behalf; or that those with efforts have to be made to elicit and retain inter- unstable incomes, such as construction work- est in the group processes. Work behaviour is ers, would be expected to pay dues only when also different since wage workers operate they are assigned to projects. The partner orga- within a structure with a definite system of nizations of IFBWW require dues and insur- rewards and sanctions while the self-employed ance premium only when their construction- have to be motivated and driven from within. worker members are employed, and are This has implications for the types of orienta- increasingly finding ways to seek counterpart tion and training to be developed and delivered from employers. by trade unions in order to motivate informal sector operators to be more productive, espe- Lack of technical capacity. Since the aim of much cially those who come from the ranks of the of the trade unions’ activities is to increase the employed. productive capacities of informal sector operators, they often cite their lack of technical capac- 2.3.2. The strengths of trade unions ity in the areas of business development. While their strengths lie in cooperative formation and Trade unions, however, bring with them organizational management, they admit the definite advantages and strengths which have need to be more entrepreneurial. One of their underpinned their work with the informal sec- most cited areas which needs to be developed tor. Such advantages largely derive from their is the ability to market their goods. experiences and skills as organizations, and For instance, Bong Malonzo from the they are transferred to their organizing work in National Federation of Labor speaks of the the informal sector. They may be perceived as need among workers to be good tradesmen, to follows:

60 Organizational discipline. Their talent for or- away some people. In the latter case, trade ganizational management is undisputed, in- unions should allow other organizations to cluding resource mobilization and fund spearhead some activities even as the former management, all of which they bring with them provide support from behind the scenes. as they promote craft unions and associations among informal sector workers. Some are steeped in the techniques of cooperative devel- 3. The role of trade unions in opment and have been able to transfer their the evolving world of work: knowledge to cooperatives of informal sector Challenges and opportunities operators and workers. Again, what may be 3.1. The role of trade unions further needed is entrepreneurial competence. in today’s world of work: Furthermore, the democratic structures of A summary unions lend themselves well to organizing in the informal sector where the workers’ capac- One can see from the work of trade unions ity for self-management as an association must over the past few years that there have been be further developed. serious efforts in the Philippines to extend trade union activities to the informal sector. More Established links with displaced workers. Trade fundamentally, labour organizations are unions furthermore have established links and engaged in a process of rethinking, intensified relationships with informal sector wage work- if not triggered by the current wave of down- ers who have come from the ranks of wage sizing and casualization of the industrial work workers. Furthermore, these displaced workers force. Such rethinking involves a reconceptual- are already organized which makes it easier for ization and redefinition of labour to include trade unions to maintain relations with them evolving systems of work both in the tradi- and to maintain their networks. tional and non-traditional settings. Established links with government and private sec- Op e r a t i o n a l l y , trade unions are at various tor. One definite advantage of trade unions is stages of expanding and servicing the informal their strong links with government agencies se c t o r . Some, such as FFW, TUCP, NFLand AP L , and the business community, a characteristic actually began work several years ago and are which facilitates advocacy work in the informal now integrating the informal sector into the sector. The president of FFW, for instance, is a st ru c t u r es of their trade unions and federations. commissioner of the SSS and Oliveros himself Others may have undertaken a prog r a m m e (National Vice-President of the FFW) repre- ap p r oach, involving the setting up of new sents labour in Pag-IBIG, another government- departments and institutions that are separate run insurance system. It is this linkage which fr om the union itself and specially designed to also facilitated the work of TUCPunder the ISP undertake activities for the informal sector. At in securing agreements from government the very least, the current wave of downsizing financial institutions to remove collateral fo r ces everyone, including the reluctant, to requirements from micro-loans, and from the reconsider their relevance to members who are SSS for accrediting collecting agents within fo r ced to take on other types of work. their coalition. It is also such a link which has Trade unions find their role at two levels of facilitated the advocacy and eventual issuance informal sector workers – the owners and the of Department Orders 5, 9 and 10, which set in workers. While much of their effort is focused place the mechanisms for worker protection, on productivity and welfare concerns of the including that in the informal sector. owners through productivity enhancement Several members of the private sector have and social protection schemes, they are evolv- offered to help FFW in their efforts to assist the ing ways to protect workers from substandard informal sector. IFBWW’s collaboration with working conditions through the promotion of the Philippine Construction Association has craft unions and worker associations and won itself various agreements in favour of con- through advocacy for legal mechanisms to struction workers. ensure their recognition and protection. For those whose members have begun employing Established names. Cedric Bagtas, TUCP’s workers, the work of the union entails simulta- Deputy General Secretary, thinks the estab- neous support at both levels, among owners lished names of the unions help them in forg- and workers. The NFL has encountered this ing links with the informal sector. However, it situation and has responded by convincing can also work the other way, which is to turn the new employers to allow their workers to

61 unionize. The potential conflict due to the well as common interests of “working people” simultaneous espousing of both owners’ and as a whole. They need to be understood if trade workers’ interests is not yet clear. unions and informal sector associations are to Most trade unions find that they have to advocate for policies favourable to their eco- gain competencies in new areas – areas which nomic activities more effectively. Currently, the had previously been addressed by institutional World Confederation of Labor provides train- employers and where workers have to take ing on community-based trade unionism greater responsibility to provide support, along which covers, among others, services to work- with government, trade unions and private ers in marginalized sectors. agencies. The areas in question are productivity enhancement, social protection, occupa- Technical competence in business and cooperative tional safety and self-organization. It must be development. Secondly, trade unions cite the noted that there exists a dilemma among some need to learn the technical aspects of enterprise worker organizations as to whether they development, including business opportunity should leave the productivity aspects to other identification, management of enterprises, technical agencies steeped in such services and financial schemes or social credit. Some stress concentrate instead on protection issues and the more pressing need for technical assistance advocacy initiatives. In some instances the mat- in cooperative formation and development, ter remains unresolved, but in others the solu - possibly with the assistance of an ILO expert in tion is obvious. Those in the latter category strengthening cooperatives among benefi- believe that they should evolve responsive ciaries of land reform. One input that trade strategies to improve productivity and incomes unions can benefit from is technical guidance in and that, without these strategies and compe- the monitoring and benchmarking of a cooper- tencies, they risk losing union members to other ative’s performance. organizations who can better service their members’ economic sustenance. Organizing schemes for informal sector workers. Thirdly, given that the thinking among trade 3.2. The capacity building needs unions is converging around the idea of craft of trade unions unions, it may be useful to learn from the experiences of other countries in this area. Posi- Once they recognize their need for capacity tive examples of trade union centres and fed- building, labour federations identify the types erations which have successfully combined of skills and competencies that they need in informal and formal sector workers within order to service the informal sector more their constituency would provide inspiration effectively. and guidance to worker organizations. Bong Malonzo cites the labour movement in Israel Policies and services for workers in the informal sec- which, fired by the vision of creating their own tor. First and foremost, labour federations cite state and society, had successfully brought the need to be more acquainted with appropri- together political parties, cooperatives, unions ate services for workers in marginalized sectors and worker-managed enterprises. and for the self-employed. Because their services have primarily been concerned with Popularizing debates on the economy, evolving work labour relations, dispute settlement and collec- systems and a common basis for cooperation. Finally, tive bargaining on behalf of wage workers, th e r e is a need for more participation in the trade unions cite the need for a better under- debates on the economy especially in terms of its standing of the issues and approaches relevant impact on households and work systems, and to small-scale producers, craftsmen and self- for clarifying issues which concern informal sec- employed workers. For instance, they would tor workers. This need for clarification goes hand need to understand the strategic options for in hand with the need to popularize economic intervening in the areas of improving produc- issues so that workers may understand how the tivity and worker protection in the informal latter impinge on their working lives. Marlon sector. Quesada (See Annex 1) points out, however, that They also need a clearer understanding of much of this discussion takes place in academic macroeconomic policies and their impact on ci r cles and NGOs when it should be discussed micro-level realities of the informal sector as at the grass-roots level as well. Furthermore, well as their consistency with laws and regula- given the evolving character of trade union tions. Such policies relate to sectoral interests as involvement in the informal sector, forums on

62 or ganizing working people and policies impor- tor associations. However, most recognize their tant to them can facilitate solidarity as well as the need to appreciate the actual needs of informal cr eation of a common basis for cooperation. sector operators and workers and thus the policy and institutional framework within which 4. The future directions of the trade they operate. union movement vis-à-vis The following summarizes the expressed the informal sector needs or areas which the ILO may consider for development, as culled from the discussion in The growing reality of informal work sys- this paper. Also indicated are the organizations tems is currently forcing trade unions to cross currently doing some work in the identified traditional boundaries of trade union engage- action area, or that have expressed serious ment and move towards acquiring a better intent in initiating some action. understanding of work itself, the definition of workers and the role of the labour movement. • Pr opagation, through seminars on trade Some groups articulate this passage as that of unionism, of the concept of “working people” reaching out to basic sectors of society – a thrust or a new concept of the “worker” that encom- which in fact harks back to the origins of the passes all types of employment. [FFW, AP L ] labour movement – or to “working people” in The proposed seminars include discus- general. Others may have a more limited per- sions on: ception of their emerging constituencies – infor- (a) the relevant concerns of informal sector mal sector workers or retrenched workers – but operators and workers, namely, produc- nevertheless one belying the fundamental tivity, health and safety, social protection reorientation that is in progress. Whatever the and child labour; stance taken, the forecast for the future is a more (b) strategic options for including informal all-embracing labour movement in the Philip- sector workers in trade union structures, pines. As it happens, we are now at this crucial for organizing different types of workers juncture where the means for such expansion is and servicing their productive and being framed and tested. protection needs, and for generating It was pointed out earlier that industrial resources for the said purpose; development in the Philippines since the 1960s has been characterized by macroeconomic and (c) the strategic role to be played by trade institutional policies which tended to favour unions, government agencies, informal large industrial firms and capital-intensive sector associations, non-governmental growth to the detriment of jobseekers and small organizations and networks thereof; and enterprises. While liberalization efforts have (d) planning and evaluation guides for trade stepped up in the early 1990s, thereby opening unions as they set out to extend their up markets for smaller enterprises, much reach to the informal sector. remains to be improved in terms of the character of most policies and institutions in terms of • Model subcontracting in collaboration with making them favourable to the requirements of participating employers and clusters of smaller enterprises. Currently, various support informal sector producers, based on the pro- schemes have cropped up in communities, such visions of Department Orders 5 and 10, as those providing finance, training and mutual which mandate certain minimum standards aid, which are in fact responses to a lack of insti- in contractual employment. Such pilot pro- tutional support. These schemes, incidentally, jects may illustrate how specific subcon- are now providing lessons on how institutions tracting arrangements can produce positive such as banks, technology centres and social financial and welfare results for both par- security systems, may better design their ser- ties. They should also provide lessons on the vices to reach this market. validity and viability of mandated guide- Trade unions can play an important role in lines. [TUCP, APL] bridging the informal sector and policy bodies and institutions and at the same time develop- • The formation of craft unions in pilot sectors ing the sector’s capacity to understand perti- where standards of employment and social nent issues and to negotiate with the proper protection may be ensured through authorities. We have seen how some trade skills certification, rate determination and unions have facilitated policy and institutional dialogue with employers. One of the ser- changes by working closely with informal sec- vices which craft unions may provide is

63 placement of workers, including training ators and workers, or more specifically, and possibly payroll management of issues and regulations affecting the self- deployed workers, for which the craft employed, homeworkers, contractual unions will be paid by the hiring company. employees, workers in informal or micro- This service may be organized as a cooper- enterprises, and child labour. ative enterprise from which workers, including those deployed, may earn a divi- • As is implicit in all the areas indicated dend. [IFBWW, LMLC, FFW, NFL] above, the key areas for action are capacity building and alliance forging between trade • Pilot testing of a scheme by which the col- unions and informal sector associations lection of the social security premiums from wherein trade unions play a supportive, in informal sector operators can be assigned to contrast to a paternalistic, role to informal accredited trade union affiliates in locations sector associations as the latter’s capacity where collection offices are absent and, for self-organizing and management is through this process, test criteria for accredi- strengthened. tation and control systems. Incidentally, there is only one collection mechanism for 4.1. The risk of overcrowding both SSS and NHIPcoverage, which greatly the agenda facilitates workers’ access to any of the selected options. [TUCP] A starting point in this endeavour is to form a core group of trade union rep r esentatives to • Provide training and consultancy to trade chart the directions and priorities of trade union unions in cooperative development and action. It should include the major workers’ or ganizations consulted for this study, pertinent management, tapping the ILO’s vast 6 resources in this area and applying them in government agencies , and other workers’ the context of collective entrepreneurship gr oups which may be recommended for inclu- and business management. This should sion. There is a danger, however, in involving too help test and replicate the option of forming wide a rep r esentation in the initial stages of pro- collective enterprises, one which may be gramme formulation as this approach may more appropriate and viable for erstwhile result in diffusing the action agenda to the point wage workers. [FFW, NFL, APL] of overaccommodation and losing focus. The selection of informal sector associations may be • Capacity building of trade unions to enable left to the trade union centres but definite guide- them to provide technical support to agrar- lines should be agreed upon initially. ian reform beneficiaries – plantation work- Now is perhaps the best time as any to sup- ers turned small landowners – in managing port trade union initiatives in expanding to their farms, implementing joint action reach the informal sector. The urgency of the where certain efficiencies may be achieved moment coupled with the accumulated experi- and/or in collectively owning and manag- ence in the field of servicing this sector prov i d e ing plantations where such opportunities a rich and dynamic ground for new institutional are provided. [NFL] systems to emerge out of the interfaces among informal sector associations, trade unions, gov- • Capacity building of trade unions to enable ernment agencies and non-governmental orga - them to help their members create and main- nizations. This synergy also provides the tain individual businesses. Although some momentum for continuous action learning, all workers’ organizations remain ambivalent ge a r ed towards evolving a policy and an insti- about their role in supporting the prod u c t i v e tutional environment favourable to the prog re s s aspects of businesses (in effect, helping the and welfare of workers in the informal sector. employers), there is also great anxiety and helplessness among trade unions with Bibliography respect to finding new income sources for displaced members and identifying external Alliance of Progressive Labor (APL). Undated. Towards Build- or ganizations that can properly provide such ing an Alternative Labor Center. Unpublished manuscript. assistance. [FFW, TUPAS, Workers’ Fund] Alonzo, Ruperto. 1996. “The informal service sector in urban poverty alleviation in the Philippines”, in United Nations Economic and Social Commission for Asia and • Initiating policy discussions and populariz- the Pacific, Role of the Informal Sector in Urban Poverty Alle- ing debates relating to informal sector oper- viation, UN-ESCAP, New York.

64 Bautista, Ma. Cristina; Yap, Ma. Eufemia; Soriano, Elmer. 1998. Serrano, Melisa. 1994. The implications of labor flexibility to Local governments’ health financing initiatives: Evaluation, unions in selected establishments in Metro Manila: Are unions synthesis and prospects for the National Health Insurance Pro- at the end of their tether? UPSchool of Labor and Indus- gram in the Philippines, Draft report, USAID, Manila. trial Relations (UP-SOLAIR) and Friedrich Ebert Stiftung Department of Labor and Employment, 1992. Department (FES), Manila. Order No. 5. Rule XIV of the Rules Implementing Book III Waterman, Peter. 1991. Social movement unionism: Anew model of the Labor Code on Employment of Homeworkers. for a new world , working paper, Series No. 110, Institute —. 1997. Department Order No. 9. Amending the Rules Imple- of Social Studies, The Hague, Netherlands, Sep. menting Book V of the Labor Code. (Affirms right to self- Yu, Sandra. 1994. Supporting the informal sector: Cases of NGO organization and provides guidelines for registration assistance programs, Institute on Church and Social Issues, and responsibilities of workers’ associations.) Quezon City, Philippines. —. 1997. Department Order No. 10. Amending the Rules Imple- —. 1997. “Collaborative enterprises and industrial linkages: menting Books II and VI of the Labor Code. (Covers guidelines A response to globalization”, Intersect, Sep. on contracting and subcontracting arrangements.) Federation of Free Workers. 1997. “AFFW Women’s Network 1995-1997: Trailblazing!”, St i r r i n g s , No v. - D e c . Notes —. 1998. Report on the 20th National Convention, Quezon City, 1 Philippines, 26 April-2 May. This section is largely culled from Ofreneo 1996. 2 Foundation for Rural Economic Enterprise and Development In Philippine labour jurisprudence, the following crite- (FREED). 1996. Processes of formalization and informaliza- ria determine the existence of employer-employee relations: tion: Selected cases,Assessment Report, Series No. 13, ILO- (a) selection and engagement of the employee; (b) the pay- SEAPAT, Manila. ment of wages; (c) the power of dismissal; and (d) the control over the employee with respect to the work process. International Federation of Building and Wood Workers, Among these powers, the most important is (d). Philippine Affiliated Program Office. 1998. Philippine 3 Construction Workers Development Report 1995-98, Among the main services of the Workers’ Fund is capac- IFBWW-PAPO, Manila. ity building of cooperatives through training; provision of social credit to cooperatives; support to the retail activities ILO. Convention Nos. 29 (concerning forced or compulsory of workers’ associations through bulk buying services; and labour); 87 (concerning freedom of association and pro- pr ovision of affo r dable housing. The bulk of its assistance so tection of the right to organize); 98 (concerning the appli- far has been given to cooperatives of union members and their cation of the right to organize and to bargain collec- fa m i l i e s . tively); 100 (concerning equal remuneration for men and 4 women workers for work of equal value); 105 (concern- Some of these misgivings, as voiced in a forum, are: (1) ing the abolition of forced labour); 111 (concerning dis - the use of ownership transfer as a way of avoiding the com- crimination in respect of employment and occupation); pany’s obligation to its workers; (2) the use of workers’ co- 138 (concerning minimum age for admission to operatives as a union-busting tool or to weaken collective bar- employment). gaining processes; (3) contracting out services to a workers’ cooperative to lower wage costs; (4) the source of account- —. 1991. The dilemma of the informal sector, Report of the Direc- ability for safety mechanisms and health standards prev i - tor-General (Part I), ILO, Geneva. ously addressed by the company; (5) possible accommoda- —. 1997. World Labour Report 1997-98. Industrial relations, tion of labour-only contracting under this scheme; (6) the use democracy and social stability, ILO, Geneva. of workers’ cooperative by management as a way of weeding Joshi, Gopal. 1997. Urban informal sector in Metro Manila: Prob- out “misfits” and luring them into the cooperatives; and (7) lem or solution?, ILO-SEAPAT, Manila. whether employees of workers’ cooperatives can form unions Martinez, Hugo Pierla, 1990. “The gray area in microenter- and enter into collective bargaining agree m e n t s . prise development,” Grassroots Development, No. 14(2). 5 Interview with Bong Malonzo, 13 January 1999. Mead, Donald. 1994. “The legal, regulatory and tax frame- 6 The Department of Labor and Employment (DOLE) has work and small enterprises”, Small Enterprises Develop- overall responsibility for policy matters concerning informal ment Journal, (5)2. sector workers. Relevant bureaux under DOLE cover Rural National Statistical Coordinating Board. 1978. Philippine Sta- Workers, Labour Relations, Local Employment, Wor k i n g tistical Yearbook. Conditions, and Women and Young Workers. Other technical line agencies pertinent to the informal sector are the Depart- —. 1998. Philippine Statistical Yearbook. ments of Interior and Local Government (DILG), Trade and Ofreneo, Rene. 1996. Informal sector: Labour laws and industrial Industry (DTI), Health (DOH), and Social Wel f a r e and Devel- relations, Assessment Report, Series No. 6, ILO-SEAPAT, opment (DSWD). Specialized agencies concerned with spe- Manila. ci fi c issues are the Social Security System (SSS), Philippine Ofreneo, Rene; Bach, Macaraya. 1998. The crisis: impact on Health Insurance Corporation (PHIC) which is in charge of Philippine labor relations, paper prepared for the Confer- the National Health Insurance Program, National Statistics ence on The Crisis One Year After, organized by the Of fice (NSO), and Cooperative Development Au t h o r i t y Philippine Economic Society and the Friedrich Ebert (CDA). The National Economic Development Au t h o r i t y Stiftung, held in Makati City, Philippines, 13 Nov. (NEDA) is in charge of socio-economic planning and has a key role in fostering the integration of the informal sector in OECD. 1995. LEED Notebook No. 20: Local economies and glob- the national economy. Local government units often consti- alization, OECD working paper, Paris. tute the first line of engagement for the informal sector and Ortega, Hanes. 1999. Summary information on FFW program on as such hold the most potential for intervention and support child labor, LITECHILD, unpublished manuscript. on behalf of the sector.

65 Annex 1 List of persons interviewed

TUCP Workers’Fund Cedric Bagtas Ma. Luz M. Almazan Deputy General Secretary Executive Director Trade Union Congress of the Philippines (TUCP) Workers’ Fund TUCP-PGEACompound Room 503, Fil Garcia Tower Masaya and Maharlika Sts. 140 Kalayaan Avenue, cor. Mayaman St. Diliman, Quezon City Diliman, Quezon City Tel. nos.: 922 2185; 921 5236 Tel. nos.: 924 8569; 924 8577 Fax. no.: 921 9758 Fax. no.: 924 8570 E-mail: [email protected] E-mail: [email protected]

Vivian Calalo Project Officer LEARN Jojo Trono Orlando V. Quesada ISP Training Consultant/Empowering Women and Executive Director Child Workers in the Informal Sector Labor Education and Research Network (LEARN) TUCP-PGEACompound 72-D Scout Rallos St. Masaya and Maharlika Sts. Kamuning, Quezon City Diliman, Quezon City Tel. nos.: 924 2295; 927 6713; 414 1537 Tel. nos.: 434 3704; 922 2185 Fax. no.: 927 6709 Fax. no.: 921 9758 E-mail: [email protected]

FFW IFBWW-PAPO Antonio Asper Emil Albert S. Yuson Vice-President for International Affairs National Project Coordinator Federation of Free Workers (FFW) International Federation of Building and Wood Workers BATU Project Development Office Coordinator – Philippine Affiliated Program Office (IFBWW-PAPO) FFW Bldg., 1943 Taft Avenue 8/F Fil Garcia Tower Malate, Manila 140 Kalayaan Avenue cor. Mayaman St. Tel. nos.: 524 3150; 524 0709; 525 5823 Diliman, Quezon City Fax. no.: 521 1835 Tel. no.: 924 2464 E-mail: [email protected] Fax no.: 924 2398 Email: [email protected]

LMLC Willie Laurente HEALTHDEV Head Secretariat & National Council Member Dr. Ma. Eufemia C. Yap Lakas Manggagawa Labor Center (LMLC) Executive Director Rm. 401 FEMII Bldg. Health Development Institute A. Soriano St. Ateneo de Manila University Intramuros, Manila Loyola Heights, Quezon City Tel. no.: 528 0482 Fax no.: 426 4327 E-mail: [email protected]

NFL Bong Malonzo UP-SOLAIR National Federation of Labor (NFL) Prof. Jorge Sibal c/o IFBWW Ernesto M. Valencia 8/F Fil Garcia Tower UPSchool of Labor and Industrial Relations 140 Kalayaan Avenue University of the Philippines (UP-SOLAIR) Diliman, Quezon City Diliman, Quezon City Tel. no.: 924 2464 Tel. no.: 920 7693 Fax. no.: 924 2398 E-mail: [email protected]

TUPAS Vladimir R. Tupaz Secretary-General Trade Union of the Philippines and Allied Services (TUPAS) 4/F JS Bldg., Magallanes St. Intramuros, Manila Tel. no.: 527 1304 Fax no.: 527 1306

66 Europe

Bulgaria

In conditions of declining industries, inefficient social dialogue and falling membership, trade unions need to mobilize potential local actors, social partners and interest groups and draw support from central policies which could provide the necessary dynamics for change at the local level.

Grigor Gradev Director Institute for Social and Trade Union Research

The Bulgarian path to a market economy Similar phenomena are not new to res e a rc h and a democratic society in the 1990s has been and policy-making in both the developed and marked by recurring periods of crisis and sta- especially the developing countries. As a res u l t , bilization. The overall effects of these develop- a quite clear distinction has been drawn between ments have been delays in the necessary the formal economy and diffe r ent types of activ- reforms, increased social costs entailed in the ities outside the formal economy have been transition process, and development of a nur- developed. As a result the “informal sector” can turing environment for different types of activ- be rigorously defined in terms of statistical data1 ities in the shadow economy. and diffe r entiated from other types of activities The year 1998 provides a very clear illustra- outside the officially prescribed rules. For the tion of the complexities involved: one year after purposes of policy development, however, the the introduction of the currency board (July notion may be red e fi ned more as a survival rea c - 1997) successes have been unquestionably evi- tion to inconsistent official policies squeezing dent – financial stability, currency rate stability, the individual to the periphery or beyond the ex t r emely low inflation (inviting fears of defla- territory of the society. Such an approach cracks tion), budget surplus, etc. All the same, during the narrow framework of the legal/illegal the latter half of the year there was a serious dichotomy and shifts the basis for legitimation decline in major branches of industry – metal- of informal activities to the realm of social con- lu rg y , chemicals, food, transport, etc., and sent and consensus policies directly related to mounting financial pres s u r es in construction. In the fundamental social rights of people. other words, owing to the current conditions, the This line of thinking has been convincingly achievements at the macro level failed to trans- demonstrated by the report of the Director- late into positive dynamics and development. General of the ILO on the dilemma of the Surprisingly enough, national statistics informal sector and expressed in concrete form, recorded an overall growth in the economy leading to win-win solutions on the spot.2 A t accompanied by an increase in real income of the same time it is interesting to cast a glance at the population and stamped by higher figures the possible implications for the social and for consumer spending, including in durable political context of individual and public goods. A first reaction is to look at the wage behaviour. As I. Pardo suggests, the redefining policies and trade union behaviour in the enter- of certain boundaries of legitimacy acceptable prises or the real value of the statistical data. at the local level may turn useful in providing Some experts, however, have suggested that “cover-up” and justification for political cor- the growth figures, badly needed by the Gov- ruption and undemocratic “solutions” for big ernment, may be more realistically explained players in higher circles of political power.3 by the cumulative effect of the different forms The complexity of the problem of the infor- of the shadow economy. mal sector in Bulgaria arises not so much from

67 certain unique features but from difficulties of ately seized by existing or emerging networks interpretation: it is usually positioned within of actors or individuals. In this sense the the general framework of activities variously research is faced with a row of interrelated situ- labelled – black, grey, hidden, shadow econ- ations, a continuum of combinations of charac- omy, etc. The terms tend to be used inter- teristics. It starts at one end with what might be changeably but most often retain the stigma of termed “pure” informal activities and at the intentional illegality and social deception. This other is composed of activities which assume wholesale approach has been subject to the outright anti-social, sometimes criminal char- process of initial differentiation for the last two acteristics in the non-formal and the formal sec- years. A pilot project on the different sectors of tor (both private and state). non-formal economic activities was launched This paper will focus on the functioning of by EUROSTAT and the Bulgarian National Sta- the latter section of the continuum where the tistical Institute in 1998 but the first results will major features of the informal sector are domi- only appear in the year 2000. It is expected that nant factors as far as it is possible to lift them the results of the project will throw some light out of the general understanding of the hidden on the content of the different forms and draw economy. This is not to isolate it from the envi- certain boundaries between the informal sector ronment but explicitly to define its own nature and the rest. and the interdependence between these defen- As has been hinted above, the presence and sive reactions for survival and the more general output in the informal and other shadow sec- processes involved in the official policy of tors are sometimes tacitly taken into account in transformation. The second focus is on trade the process of formulating and implementing union approaches and policies with regard to reforms as survival strategies of workers and these highly controversial questions com- enterprises. At the same time, these sectors are pounded by their need to support the reforms, used to explain difficulties in social security promote trade unionism and build up organi- systems, to argue in favour of tightening tax zational power and their social status. policies and discipline, or are blamed for ero- The paper is structured around several sion of competition, etc. Although for other sec- major topics. First, attention will be devoted to tors most of these effects are everyday truths, the dynamics which set in motion informal for the informal sector it quite often represents activities within the particular conditions of the the “dilemma” in reverse: on the one hand, Bulgarian transition economy. The second part there are no public ideas or attempts to facili- will describe the most common and obvious tate the operation of the informal sector, and on forms of informal sector activities, along with the other, it often comes under the fire of gen- the views of the corresponding branch or eral condemnation of “shadow” types of oper- industry unions. Thirdly, the effects in the areas ations, while actually contributing to the of trade union interests will be discussed – preservation of the social peace. The irony is employment, industrial relations and social that in some instances the thread of such logic policy, and finally the positions and policy sug- goes as far as the decisions of the international gestions of trade unions concerning the infor- financial institutions and the programmes they mal sector. negotiate with a country. For trade unions, all This study is based on res e a r ch – actually these issues present challenges in both major quite scarce – conducted using data from areas – “hidden” and “informal”. They have national and trade union institute statistics, been further complicated by the need to accel- interviews with trade union leaders and experts, erate reforms and the persisting uncertainty of rep r esentatives from the employer orga n i z a - the structure and future of industry, agricul- tions, the Supervisory Board of the National ture, services, accompanied by a severe decline Social Security Institute, Small and medium- of living standards and continuing loss of sized enterprises (SMEs), the informally self- members. employed and official statements in the media. It should not be forgotten that the period of transition is a time of simultaneous changes in 1. Driving forces and size the power structures, legal frameworks, property basis, policy strategies and the actors The existence of unregistered and non-taxed articulating economic and social interests. economic activities has been an organic element These circumstances generate inevitable inter- of the command economy as well as an organic nal contradictions and “white spots” in all these part of everyday life structures of “socialist areas and between them, which are immedi- society”. They quite effectively filled in the

68 numerous empty niches of the “deficit econo- Minister during his first days in office in June my” of socialism – especially in the service sec- 1997, admitting that 60 per cent of the State is tor and other small-scale undertakings to meet in the hands of hidden power structures: “We, necessities of the households or individuals. the executive and judicial powers, have to Within this process, there gradually appeared impose a respect for the State and that the Bul- specialized social structures to facilitate such garian pays the State, not the criminals”.7 exchanges – networks of people linked by kin- One year later, the Government could report ship, friendship, craft interests, professional that as a result of the success of the Currency closeness or interdependence. Networking in Board they have won back the State. This this sense is aimed at enhancing mutual sup- clearly held true, at least about the open and port to cope with existing problems or grasp- visible forms of coercion – economic or physi- ing new chances offered.4 As E. Sik convinc- cal. Still, the big problem remained – corruption ingly illustrates, the effect leads to the and economic mafia structures that have formation of specific “network capital” – the formed the new main targets of government ability of one unit of the chain (person, group, policies since the autumn of 1998. organization) to operate maximum resources As chance would have it in the course of by linking up to numerous other network struc- research, during an interview with the tures. This potential is used as a counteracting owner/manager of a small trading company, strategy for overcoming the limitations he had to talk to the local tax inspector. The imposed by the planned and the underdevel- company had virtually no accounting or oped market – “a substitute for the market and records and had to pay heavy fines as this the State, and it superimposes the market and requirement had been made clear during the the State”.5 In the conditions of the closed previous meeting at the tax office in the munici- “socialist” society, the main actors and benefi- pality. The owner immediately consulted other ciaries in the shadow sector have been engaged business friends who advised that 10 per cent in small trading, hard currency exchange, of the sum of the fines should bail him out. He household and car maintenance, home econo- then had to arrange another meeting by tele- my, etc. Along with them, networking (of direc- phone on the following day. The response from tors) has proved to be an effective way for the tax inspector was adamant: “Come at lunch enterprises to cope with bottlenecks or failures time and there will be plenty of time to discuss in the planned exchanges in order to fulfil pre- your problem since you are my only client fixed targets and report successes. tomorrow.” The owner found himself close to Over the years, this way of life has signifi- disaster when it turned out the next day that 10 cantly reshuffled the moral base for “normalcy” per cent was not enough. by way of socially legitimizing informal trans- There is nothing unique about the case just actions at practically all levels. Access to such cited. It simply demonstrates the interplay of transactions became a specific sign of distinc- some key factors which underlie informal activ- tion and measure of success for the person. In ities: first, the relativity of the necessity to pay this sense, Sik also underlines the importance taxes (independent of the particular amount). of such practice which has led to balkanization The lack of simple and efficient channels for of Eastern European societies through net- solving problems, for avoiding complicated working, expressed in the meteoric rise of the administrative procedures, contradictory informal economy and the visible trend norms and regulations which change several towards a dual economy6 in the 1990s. times a year (sometimes with reverse power for Within the Bulgarian context the debates are previous periods) can demotivate any good not about the validity of such conclusions but intention. On the other hand, the lack of about the extent to which they are already real resources to ensure the smooth operation of the practice and the dynamics of their develop- formal channels merely invites unaccounted ment. The key question that implicitly lies in business transactions and unregistered labour. the debates and occasionally floats to the surface concerns the scale of expansion achieved Taxation policy and its proximity to the point of no return, where the impact of non-formal factors on offi- Bulgaria is no exception to the general argu- cial economic processes renders them ment that the existence and growth of the infor- ungovernable by formal powers. Nowhere else mal sector is a defensive reaction to overbur- has this been more vividly exposed than in an dening economic agents with tax payments. extreme but explicit statement of the Prime The second most important factor is uncer-

69 tainty – of the laws, rules, procedures, etc., trading. As information from interviews with sometimes implemented with backward force companies and experts suggests, the situation or with contradictory requirements from dif- forces bigger companies to avoid dealing with ferent institutions. Constant changes in the small ones. Unregistered small companies find framework, aimed exclusively at coping with themselves in a position of quasi end-users, the budget deficit, give rise to a feeling of since they have to buy and sell with VAT always “unfair play” on the part of the public author- included. At the same time they cannot issue ities, the individual always losing in the end. transaction documents for the other side of the Naturally, this approach shifts the ground for deal to restore the money paid for VAT even in legitimization of activities away from officially cases when the other companies are registered. prescribed principles towards the level of indi- In theory SMEs do not incur direct money vidual necessities and raises the question of the losses but in reality they lose customers, com- definition of “good” and “bad”. The main result petitive positions and face narrower profit mar- is that small businesses perceive this situation gins, with usually higher needs for operation essentially as a “hostile economic environ- capital. The situation is virtually dooming ment”. The same line of reasoning leads to pro- many newcomers to non-growth prospects and gressive consolidation of a “low-trust” society, possible death. It is indicative that in the region where personal self-respect and recognized of Russe, on the river Danube, half of the com- success in business are more and more directly panies have de-registered for VAT in the course correlated with avoidance of formal obligations of the 14 months following January 1998.8 The and procedures. escape option is engaging in unregistered The puzzle of a shrinking tax base for col- transactions. lection versus high tax rates (32 per cent of GDP One such case is a printing shop of seven in 1998 is drawn from tax revenues) has been a workers with long working days, re a c h i n g challenge to all governments in the period of u p to 10-12 hours and often Saturdays or Sun- transition. In its current programme the Gov- days, which in 1998 could normally make ernment envisaged gradual reduction of taxes about 40-45 million Bulgarian Levs. Not sur- over several years and in 1999 the corporate p r i s i n g l y, however, the company is re g i s t e re d profit tax has been lowered to 28 per cent and for VAT. The key is networking with other, VAT to 20 per cent – a 6 per cent overall reduc- similar companies through empty transaction. At the same time, however, the social pol- tions, which enriches the concept of “network icy reforms led to an overall increase in social capital” (Sik, 1994). Such operations create a security taxes of 2.3 per cent with further rises s p e c i fic “virtual business” environment and a anticipated in the second half of 1999 and later. somewhat “virtual” network capital which In the end, part of what has been given with one finally leads to registration, secures survival of hand has been taken back with the other. all members of the network and brings re a l Changes in this area are by no means easy since money pro fit . it is not a domain of independent decision- A positive move for easing the grip on making for the Government and its every move SMEs, especially sole-traders, in 1998 has been have to be blessed by the International Mone- the introduction of a one-off annual patent tax tary Fund (IMF) within the current three-year for a specific range of activities, mainly services agreement. (household, maintenance, beauty and pleasure, Sole traders are in a particularly un- etc.) and small production facilities, suppliers favourable situation since they have to pay as for the service activities. This measure really physical persons, in line with the steep scale for provides a breath of air, but along with it again personal income tax, which imposes higher came the condition that for each hired worker rates for the same amount of income than the after the first one (usually the owner) the patent legal rates for corporate profit tax. In practice, tax is raised by 25 per cent, which means dou- under equal conditions, microfirms have to pay bling for four employees. These decisions have more than corporations. been criticized by the major employers’ orga- Apart from the total tax burden, another nizations – Bulgarian Industrial Association major mechanism of exclusion of SMEs is the (BIA) and the Union for Private Enterprising qualifying threshold for VAT registration and (the major organization for SMEs). As the Direc- using tax credits, which requires a turnover of tor from BIAput it: “Obviously no one from the 75 million Bulgarian Levs (US$ 42,600) for the rule-makers sat down with pencil in hand to previous 12 months. In the current conditions calculate that revenue from personal income it is quite difficult to achieve this level, even in tax could be bigger than the 25 per cent patent

70 tax.” Such regulations inevitably exert pressure inevitably press people to search for another for using informal labour or a mixture of for- one to cover up necessities. However, the sec- mal and informal, paid at the level of the mini- ond job is also a “bad one”, since it is not the mum wage as usual. main source of income. Thus, “bad jobs” and inefficient work proliferate across all sectors of Employment and living the economy. The tables below provide a brief standards decline illustration of these parameters. Taken for the whole period of transition the Due to the combined effect of different eco- figures are even more striking. According to nomic trends, mainly with negative outcomes9 estimates of the Ministry of Labour and Social – loss of traditional markets, financial and Policy, the real decline of the average monthly banking instability, high and hyperinflation – salary for 1998 is about 56 per cent compared restructuring and privatization have led to a with 1990 and the decline of the minimum wage substantial fall in employment during the is 74 per cent for the same period. period of transition. In 1990 the total number These shifts in the sources of income of the of employed was 4.1 million people which population have exerted pressure for restruc- dropped to 3.15 million in June 1998.10 Unem- turing incomes. Over the years there has been ployment has been fluctuating over the years a stable downward trend in the share of wage but around high levels – about 12.2 per cent for income to about one-third of total income and 1998. a substantial share of the home economy to There is one specific feature in the employ- above 20 per cent. The other feature of particu- ment status in Bulgaria – employees on unpaid lar interest is the level of naturalization of leave from the enterprises. This situation is a incomes, which in 1996 stood at above 40 per kind of trap, since people are not working but cent in the villages and about 14 per cent in the are not unemployed, and also because the towns.11 With the slump in industry in the sec- labour contract is not terminated. So they ond half of 1998 and the beginning of 1999, the receive neither wages nor unemployment ben- practice of paying in kind with products of the efits. In many cases such situations continue for enterprise has been resumed in some instances months on end, during which people find other (e.g. electric hand tools). Then the workers have sources for earning a living, and even after they to exert themselves to turn such articles into return to work these sources tend to be main- real money to live. tained – until the next spell of unpaid leave. All the above factors have been described to The third important factor is that being at explain the complexity of the origins of infor- work does not guarantee that one can secure mal and hidden economy activities which sug- enough income to maintain a decent living gest that even in a mid-term perspective these standard and in the last couple of years the phe- sectors will continue to play a decisive, even nomenon of the “working poor” seems to be crucial role in certain cases. In this light it suf- more and more stabilized. These “bad jobs” fices to point out that according to the agree-

Table 1. Some main macroeconomic indicators as of December each year

Indicators 1992 1993 1994 1995 1996 1997 1998 1.Cost of living, 1 person1 in BG Levs 1870 3 096 6 673 8 805 36 714 216 281 222 538 2. Total income, 1 person in BG Levs 1597 2 385 3 885 5 318 11 966 125 576 3. Average monthly salary2 in BG Levs 2 047 3 231 4 960 7 597 13 965 125 163 187 437 4.Minimum monthly salary in BG Levs 850 1 414 2 143 2 760 5 500 45 500 53 500 5.Exchange rate to US$ 1 23.33 27.65 54.25 67.17 175.8 1 676 1 761 6.Unemployed – numbers 576 893 626 141 488 442 423 773 478 770 523 507 465 202 1 Data from the quarterly surveys of the Institute for Social and Trade Union Research. 2 Ministry of Labour and Social Policy data. Source: National Statistical Institute (NSI).

71 The decline and the dynamics of change for the last several years are presented below. Table 2. The dynamics of change in incomes and prices (1992-1997)

Indices at 1992=100 1992 1993 1994 1995 1996 1997 Total income – nominal 100.0 148.5 246.6 365.0 557.5 561.1 – real 100.0 95.4 82.7 77.3 53.3 79.1 Average salary – nominal 100.0 157.8 242.3 371.1 682.2 6 721.2 – real 100.0 101.4 81.4 78.6 65.3 94.8 Minimum salary – nominal 100.0 168.4 241.1 337.0 520.4 4 614.3 – real 100.0 108.2 81.0 71.3 49.8 65.0 Consumer prices – NSI index 100.0 155.6 297.5 472.4 1045.4 7 094.1 Source: National Statistical Institute data (NSI).

ment with the IMF the Government has to pur- • first, that expert opinion surveys cannot sue to the very end its economic reforms – close give exact parameters but for the moment or privatize all loss-making enterprises and are the most reliable approach to the study other state-owned ones by the middle of 1998. of the non-monitored economy; Although trade unions and their experts • second, that the size of the hidden economy praise the “safety valve” effect of the informal was about 27.8 per cent of GDPin 1996; and sector, they are at the same time particularly concerned with the growth of the hidden econo- • third, that the sector is growing and reached my and its impact on the formal one, including 31.2 per cent in 1997.12 the big public or private sector companies. In the last couple of years they have found them- The second and more reliable source of infor- selves in the vice of high unemployment and mation is the survey conducted by the Institute further closures of enterprises, compounded by for Market Economy, “Non-Institutionalized the need to intensify the restructuring of the Employment and Self-Employment”, carried economy and at the same time set in place and out in 1996.13 The main conclusion about the size safeguard more diversified and loosely bound states that one-third of all employed people are employee interests. engaged in either the black (fully concealed) or gr ey (partly hidden) sector of the economy. Size of the informal sector At the same time every tenth employed person receives additional remuneration from the The sustained interest in conducting employer which both sides conceal.14 research in the area of the informal and mainly According to other specialists, such as E. of the hidden economy has been a relatively Hursev, head of a financial and consultancy recent phenomenon. Estimates at present vary company, the hidden economy moves in the significantly as to where the boundaries have area of 30-50 per cent of GDP. Research associ- to be drawn. The National Statistical Institute ates from the Institute for Economics at the Bul- (NSI) itself has two different opinions. The offi- garian Academy of Sciences point to 40 per cent cial figures it provides are 18 per cent of GDP as a more probable figure and G. Minassyan for 1997 and 21 per cent for 1998. The increase considers it closer to 50 per cent.15 has been attributed mainly to the expanded With all the differences of opinion it seems area of the surveys rather than to internal that a realistic assessment of the size of all eco- growth. Another survey, however, conducted nomic activities outside the formal sector gravi- by NSI specialists among 100 experts in both tate around two characteristics – firstly, a share theory and practice, including 23 specialists of about 35 per cent of GDPand, secondly, that from different departments of NSI, provided there is a clear tendency for this sector to grow. different results. The experts were in full agree- In any case it is not a negligible or side phe- ment on three main issues: nomenon within the process of transformation

72 and it is powerful enough to exert backward considerable lack of clarity and uncertainty, pressure on the way changes are carried out. about ownership rights, and domestic arrange- The share of the informal sector within the ments of use and prospects for development. general formulations of the non-formal econo- There is still no market for land and a lot of it my, mentioned above, is difficult to determine. stays unused. Again, the expert opinion survey throws some As a result of the rapid depopulation of the light in that regard. The results suggest that 44 rural areas and a sharp rise in the average age of per cent of the non-monitored economy is the the people who remain, the major actors on the outcome of non-declared activities, incomes land now are cooperatives (newly created by and tax evasion. Afurther 25 per cent constitute res t o r ed owners or reformed ones), entrep r e- activities of the informal sector per se – house- neurs who rent land, single farmers and family hold enterprises, freelance professions, etc. farms. All of them need hired labour for the whole season or for animal breeding, for some peak periods or for particular operations. Labour 2. Types and forms of informal is of two types – local and migrant. Internal vil- sector activities lage networks for rotating assistance is an impor- General view tant source along with some hired hands. The second key supply source is migrant workers. The main form of participation in informal Labour migration in the period of transfor- economic activities is through labour, hired or mation is not well documented. It is virtually self-employed.16 The areas where these types of impossible to arrive at any realistic figu r e as to work are most often performed and visible are the number of people involved. Two main agriculture, construction, services, transport gr oups can be identified: the unemployed from and trade. There are also forms of operation the towns who look for work in the villages, which are quite specific for the region of the which is a relatively limited phenomenon; and Balkans and Bulgaria, like “suitcase” trading or those who migrate over long distances, even private lessons on school subjects. In these migrating more than 200 or 300 km to find work. areas the amount of hidden labour and hidden The second group consists of pred o m i n a n t l y income as a percentage of the average for the ethnic minorities, mostly gypsies, and Turks in country is also the highest. smaller numbers. Of course the groups are not One of the new characteristics is the involve- strictly defined and over time people can ment of child labour in the work process in all change from one to the other. sectors of the hidden and informal economy. Workers are hired mainly through direct bar- The Ministry of Labour and Social Policy did gaining for a particular time period or amount express its concern that in their opinion 50,000 of work and no contracts are drawn up. Unclear children under the age of 16 have been work- ownership and renting (again for fixed periods) ing in 1998. Trade union experts added that the also strengthen the temporary character of the number is probably higher and cases where arrangements. In this way, both employers and children have been used even for heavy physi- hi r ed workers are deprived of the possibility of cal work are becoming more common. a more permanent settlement both in terms of The next part will be devoted to some of the work and domicile, which could offer a chance most common activities in the informal sector, for a total change in the life patterns of some of ways of operation, conditions of work and their these migrating work groups. In the case of the effects on the people involved. gypsies, they usually move in big families as a whole. Thus, from very early on, children start Agriculture working and most often are deprived of the possibility to attend school and their future life This is one of the most controversial areas of chances are reduced to similar types of jobs, low development within the reform process. Fol- pay and poor living standards . lowing the forced and quick liquidation of the Even when people from the towns or the previous “socialist” collective farms, the neces- second generation come back to the village they sary reforms, especially return of the land to the find it difficult to settle. Families with children, previous owners and creating infrastructural in particular, find it too difficult to adjust to the and financial conditions for a new type of agri- lack of available medical services, schools, and culture, have been significantly delayed and are other services within easy reach. still under way at the moment of writing. Thus, The problem of housing is usually solved by working on the land is still characterized by a using farm buildings belonging to former co-

73 operatives or empty schools, kindergartens or Companies and entre p reneurs find pro j e c t s hospitals. In some cases people stay for two to t h rough auctions and more often through con- three years, especially when they are engaged tacts with owners of potential constru c t i o n in animal breeding. It is also common practice sites. They operate at an enormous pro fit – to move each year. 200-300 per cent – but the risks they take are Payment is in cash or kind or a mixture also serious. For these reasons they keep their of both. The average amount earned in network which functions like a guild thro u g h money fluctuates between 70,000 and 90,000 which they can transfer both constru c t i o n Bulgarian Levs. In most cases of course work- o rders and workers. It is also in the interest of ers produce food and they can use some for the workers, especially the qualified ones, to immediate consumption and to prepare stores leave telephone numbers where they could be for the winter, which considerably relieves reached for another period. The average the strain on the family budget. In these terms, employment period of informal workers stays animal breeding would appear specially prof- in the range of 13-14 days a month re g a rd l e s s itable providing as it does milk and meat prod- of weekends and holidays. It is not low since ucts. Working time is a very relative term in in the normal industry capacities operate 70 these conditions and depends on the degree of per cent of work time. necessity as well as the overall strategy of the Different categories of workers are used for group. As a rule, no social security payments different tasks. The basic division is level of are made. skill. Usually there would be a project manager The labour code and other legal norms and who is close to the boss and monitors the rough requirements are often useless language in work of the unskilled. Finishing operations are these conditions. Trade unions in agriculture done by specialists (employed elsewhere or suffered the most severe decline in the transi- self-employed) who have acquired a name in tion period – from about 1,200,000 members to the area. less than 20,000 members in both federations of Entrepreneurs prefer to hire workers from the two confederations. This also means that the north and south-eastern parts of the coun- they cover a limited part of the country in terms try – the Turkish regions – for the basic work. of these types of agricultural work. In many They have the reputation of being very consci- cases there are temporary members for a cou- entious workers. For excavation, preferences go ple of months only. In addition, the fragmented to the pomak (Bulgarian-speaking Muslims) and unclear structure and status with regard to brigades, termed colloquially “the Japanese the identity of the owner/employer do not excavators”. For more complicated tasks – facilitate trade union membership. reading drawings or schemes – skilled Bulgar- ian workers offer their services but they avoid Construction any dirty or low-paid work. It is curious that in this type of activities gypsies are not to be seen. The informal market for labour in this Payment is bargained on a daily wage basis sphere is run mainly by officially registered or as a fixed amount for work finished. Week- companies. They have to be registered in order ends and holidays are normal working days to qualify for participation in auctions or other and these can be as long as 12 hours. It is diffi- forums to win orders for construction sites. cult to know whether contracts are drawn up There are also sole operators (“masters”) who but the guess is that in certain cases there are are usually qualified in certain trades and pro- probably civil contracts for the need of account- vide services for small tasks – mainly internal ing. This means that if social security contribu- house restructuring and repairs. They would tions are paid for someone they will be at the also offer services for performing specific jobs minimum level. Wages are not considered bad on company construction sites. since they are at an average of 20,000 Bulgarian Some companies are said to be used by the Levs with 10-15 per cent fluctuation. In the élite to whom they provide discreet services words of the Turkish workers, one month’s which are paid for without leaving any trace or work in a big city equals six months’ work in evidence in any form. In these cases no account- their native places. ing documents are kept and no one knows what Entrepreneurs have no interest to secure services are offered nor how much is paid. good working and living conditions for the Informal labour is very convenient for such workers. No one raises the question of health purposes. Of course these operations are virtu- and safety measures. “Only God is keeping an ally impossible to prove in public. eye on these workers.”

74 The workers live in special wheelers in ilar attitude. Tip - o f fs to labour inspectors and primitive conditions and insecurity, since of fers for joint actions are sidetracked and if wheelers are in the open spaces. It is better some inspectors still turn up at a particular site when there is a chance to live in the building “they are met with a briefcase [with money] or under construction. Entrepreneurs use special with a gun”. The workers also prefer cash pay- tactics to intimidate workers, especially the ments and are not interested in social security Turks. Sometimes just before payment they or accident prevention, a position not in keep- prompt the police to check workers’ registra- ing with the trade unions’ approa c h . tion addresses, and when they have none, to force them to leave without pay. Thus workers Private tutoring avoid staying too long at the same place. Cut off from their natural social and family The educational system in Bulgaria has in en v i r onment, they quite often “give in” to the the last 50 years developed and maintained a temptations of the big city, lose the money number of schools specialized in teaching West- earned and “disappear”. Women from several ern languages. Although they formed part of villages in the north-east raised the idea of rot a t - the élite of the school system, they were initially ing to have “on duty” periods with the group of open to all those who could pass a selection their husbands in Sofia to preserve incomes and examination, which gave an opportunity to the se c u r e regular transfers to the families in need. children who applied themselves. The quality Freelance self-employed workers operate of education was high and virtually guaranteed under much better conditions. They would nor- access to university. Since admittance to uni- mally work inside the flats or houses or around versity follows a similar pattern of selection on them. Their bargaining power is much bigger the basis of an entrance examination, the rate because they deal directly with the customer. of entry from these schools stand at about 95- They have professional authority to judge what 98 per cent. needs to be done and how, which predeter- With the opening up to the rest of the world mines their payment. In addition, they can sim- in the 1990s, a good education, especially with ply press the customer, especially less experi- Western languages, was no longer merely an enced people, because even in conditions of an advantage but became vital for access to good expanding market economy such services are jobs. Correspondingly, competition became not easily available at guaranteed quality. The tighter and the examinations more diffi c u l t . bigger firms avoid small offers as unprofitable. This meant additional training of pupils in Pay is usually determined by the amount of mathematics and literature outside the curricu- work to be done, measured by square metres or lum. The tendency probably started in the late any other appropriate measure. Weekends and 1980s but has since flourished as demand soared holidays do not make any difference and the in the 1990s. The scheme for preparation for workday continues for long as the manager university entry examinations is quite similar wishes, but the workers still have to take into but has been in place for a much longer time and account certain commonly accepted rules in the encompasses almost every main subject offe re d . blocks of flats like not making noise in the after- Private tutoring usually takes place at the noon or in the evening. Rates (e.g. per m2) dif- home of the teacher where a couple of children, fer for the capital, major cities and other areas rarely one child only, would be taught and but they can reach 50,000 Bulgarian Levs a day. drilled for one or two hours once or twice a In addition, there are no records of the work week. These activities are extremely profitable done and no responsibility for the real outcome. since the rates fluctuate mainly around 4,000- Trade unions recognize that most of the 5,000 Bulgarian Levs an hour (US$ 2.5). The workers in the informal sector are their former average overall amount received for one month members and probably future ones, so the peo- in this way is the equivalent of the salary of a ple can at least earn a living. Both building fed- chief expert in the Ministry of Finance, but erations of the Confederation of Independent without taxes. Good teachers, especially those Trade Unions in Bulgaria (KNSB) and the Con- who participate in the marking of the exami- federation of Labour, Podkrepa, state that they nation papers (tens of thousands) and are clear ar e ready to intervene, especially with reg a r d to about the criteria applied, build up fame over contracts and conditions of work, but in the pre- time and need not fear any scarcity of pupils. sent conditions their influence has not prod u c e d The system functions in a similar manner in the many results. Private companies do not talk to case of university entrants with the difference trade unions and state ones are adopting a sim- that rates tend to be double.

75 According to the Union of Bulgarian Teach- ments, blurring the line in real-life terms. They ers there are about 3,000 secondary school bear all the characteristic features of the infor- teachers involved in private teaching for lan- mal sector per se – a low level of organization, guage schools. As for university lessons, how- virtually no separation of company and house- ever, the figure must be much higher. The trade hold finances and, most important, the prime unions in the field of education from both trade goal – survival. As the evidence shows, small union confederations do not see the phenome- businesses are not inspired by any entrepre- non as seriously disturbing and tacitly support neurial urge, any particular drive or any itch- it as a means of compensating the extremely ing to prove oneself or be “one’s own boss”. In low salaries in education – teachers are at the the most common case the aim is very simple – bottom of the payment scales of the employ- another chance for survival18 ... maybe. ment categories in the country. Even after complying with the requirements In this sense, the attitude assumes the qual- of formal registration, workers find themselves ity of a form of social revenge on an unfair state having to maintain their presence in both for- policy, one extending the limits of moral legiti- mal and informal operations to keep floating. macy to include private tutoring. Two problems Thus, the question still remains as to whether emerge: the first is that the incomes received are they resort to informal activities from the base additional and their size may go well beyond of their main business or whether they occa- the justifiable compensation for losses incurred sionally float up to the formal surface to show in the formal sector; and the second, which has “proper” behaviour. As has been pointed out become more evident in recent years and will above, growth does not necessarily lead to any be even more so in the future, is that these substantial change in their dual nature of such examinations act more and more as a mecha- activity, since once they become more “visible” nism for social exclusion, especially in the con- they have to start other types of “games” – with ditions of persistently low living standards. tax inspectors and the whole taxation system if Willing or not, the corps of teachers, in fact the they are to continue to survive. best ones, provide a social base for the system’s functioning and reproduction each year. Suitcase trading

Household and individual services This is a very specific phenomenon in the conditions of transition. Some roots lie deep in With the decline of full employment, a lot of the times of the “deficit economy” of socialism. people with technical and other skills have been In those days it involved mainly Wes t e r n - m a d e , released and are now engaged in providing usually good quality, products that were impos- personal and household services – repair and sible to find in the centralized, planned trading maintenance of home appliances, cars, mechan- system and were distributed through informal ical devices, plumbing, carpentry, hairdressing, networks. After the opening-up of the State and sewing, etc. The pattern of operation is similar the economy after 1989, the nature, scope and to the one described earlier, that of freelance form of activities in that area have thorou g h l y construction specialists. The major difference is changed: with the sharp drop in living stan- that in this sphere people would often need a da r ds, they started to concentrate on low qual- real workplace and equipment, and this leads ity and low-price goods for everyday consump- them to register most often as sole traders. tion. Many would bear famous brand names and Thus, the informal part is usually constituted look quite similar to the authentic prod u c t . by unaccounted services and deals or the use of In the second place, what had previously an unregistered workforce (as with the patent been sideline activities have now, in the present tax, explained above), or both. In 94 per cent of state of high unemployment and poorer living the 186,000 private firms monitored by NSI in standards, turned into life strategies for many 1998, the average number of workers employed people. The innocence of the previous networks does not exceed one person, i.e. they are pure operating on a friendly basis has been sup- family businesses.17 planted by operations of scale matching normal These considerations have underpinned the enterprise dimensions in the corresponding continuing reference in the foregoing descrip- areas of trade and industry. They start a process tion and analysis to the small enterprise sector reshaping the internal market and backfire neg- for explaining developments in the informal atively on the capacities of local producers. sector. In fact, such companies oscillate all the Two major ways of operating can be identi- time between formal and informal engage- fied, which illustrate the issue – individual

76 traders and groups. There are several destina- celled is very far off. Suitcase trading has tions but the main ones involve axes as follows: ac q u i r ed massive proportions for the Bulgarian from Bulgaria to Serbia; from Turkey to Bul- population in a strip of about 60 km along the garia; from the former Soviet Union republics bo r der between Serbia and Bulgaria. It firs t to Bulgaria. started at the time of the embargo and has con- The cases themselves provide a clear picture tinued until today. Curren t l y , the citizens of of such operations. A young man from Dim- Kula (at the north-western corner of Bulgaria) itrovgrad (near the border with Turkey) gradu- still cross over to Zaichar in Serbia and one visit ated from an art school just at the start of the with a handload of foodstuffs bring back a transition period and found himself without a week’s income at home in Deutschmark. Tra n s - job or any prospects. After a couple of years of ferring fuel is even more profit a b l e . unemployment he started travelling to Nis in In the second case, there is a much more eastern Serbia (near the border with Bulgaria) organized system for the transfer of goods from to sell plastic kitchenware and household arti- the cheap markets in Turkey to Bulgaria. The cles during the period of the embargo against main pattern of operation seems quite simple. Serbia at the time of the Bosnian crisis in the Several people travel in a “tourist” bus on an middle of the 1990s. “excursion”, often without other passengers. The schedule of the trips involves about one On the way back the bus is packed with mer- and a half to two days’ travel by train, one to chandise, mainly foodstuffs and industrial con- two days on average to sell the goods and a sumer goods – clothes, knitwear, shoes, house- return trip. The pattern of operation allows two ware and simple electronic items. At the to three days for proper rest at home every customs there are usually rates for bribes for two weeks and all the rest of his time is spent different sizes of bags or if they are presented in trains, parks or at the marketplace to guard as import, the goods are declared at symbolic the merchandise. This goes on all year round prices. Once paid, the customs official may not even when temperatures are below zero in even bother to check and stamp the passports unheated trains. Stress situations follow upon of the passengers. In fact, in many cases both one another – crossing the borders, overcoming sides know each other well and arrange travel problems with customs control and, to crown it schedules to fit particular shifts of the officers. all, the risk of confiscation by the Bulgarian Afterwards, the goods flow to numerous stalls authorities or worse by the Serbian police. at open markets or just boxes or newspaper Many obstacles are overcome by bribes for kiosks on the pavements of the streets. which there are established rates. Thus described, the case in question consti- With the tightening of the regime after the tutes a clear symbiosis between the informal embargo, it became impossible to carry as much and the illegal, between the needy and the as one could and he switched to car parts in one greedy. Still, rather than engage in arguments, plastic bag only. Over a period of time he was it would be worthwhile to recall first and fore- able to develop relations with car repair most the statement of the Prime Minister to workshops and actually act more as an infor- avoid misinterpretation of the phenomenon. mal supplier. The customs service office at Svilengrad, the Shuttling in this way between Bulgaria and main gate to Turkey on the border, is a good Serbia provided a source of considerable illustration of the phenomenon. income for the young man. In conditions which Most of the traffic just described flows are too difficult for starting a business of his through Svilengrad. To render the operations own and the total lack of motivation, the youth more efficient, the head of the service issued a devoted his energies to securing his basic special order that determines the official rates needs. He bought a flat and a second-hand for guarantees of imported goods – not on the Renault car – an achievement after only three basis of price of purchase but on the basis of the or three and a half years that is unthinkable in vehicle for transportation. Thus “a bus is taxed normal working conditions. The cost, however, US$ 500, no matter if it carries computers or is measured in the sacrifice of any personal life canned fruit. If with a wheeler – US$ 800”. 19 and serious health problems in the form of res- As a result, the circle of interdependent piratory diseases; and, of course, the ever hov- interests closes: it links the poor person at the ering menace of an uncertain future without informal end of the network, peddling all day any marketable profession. At the same time, in the street and selling de facto smuggled there is no illusion that the day the Serbian mar- goods, subjected to intimidation by municipal ket is normalized and informal demand can- authorities and police. His or her whole life,

77 and the family’s, is quite depend on the money levels, incomes and living standards. The pro- earned. At the other end are the networks of duction of the home economy and unregistered middlemen and the bosses of the operations, labour are still the main pillars of survival for reaching the higher levels of state bureaucracy large groups of the population and provide for whom these practices are simply one of the strategic time and space for the unfolding of the sources of lucrative income. It is not surprising economic reforms. It must be borne in mind that in March 1999 the prosecutor lodged a also that the hidden/informal sector can be a complaint against the present and the previous major reserve even for government policy, heads of the national customs services. It must especially in financing the budget if in the near be recognized that over a period of time such future conditions change and the income of networks become the basis for survival of too some “shadow” activities is declared and taxed. many people and start building a social base for In a situation of sharp decline of the pur- criminal activities. chasing power of the large part of the popula- For trade unions, these developments raise tion, informal activities constitute the major complex questions. The case with Serbia is source of supply of goods at low enough prices, straightforward and in a sense it may be con- albeit of low quality, for maintaining life in the sidered to favour trade union interests and poorest groups in society. This in turn feeds production in conditions of shrinking export back some resources and motivation and closes opportunities. The inflow of Turkish goods, the cycle of reproduction of the informal and however, creates acute problems for the corre- hidden sector in the economy. sponding industries and thus threatens the core One step higher, however, the argument interests of members – jobs and salaries on the becomes paradoxical in terms of the policy one hand and on the other their civil and politi- approach of the Government and the IMF. Very cal rights to a democratic, transparent and simply, it may be defined as follows: “Bulgari- responsible state administration. ans do not protest against these tight conditions, which means they have additional 3. The impact on society resources so there is an opportunity to tighten and the economy the belts a bit more.” The natural outcome of such policies in a situation of lack of stable The departure point for this part will touch growth of the economy is a further effort to eke on the concept of “recombinant property”, out additional income in the hidden/infor- developed by D. Stark.20 The essential core of mal/black economy. the concept is the blurring of lines between emerging property forms in post-socialism, Long-term effects which obey a different logic as they change and reveal a different set of dynamics when It should be kept in mind that although the analysed. This is the result of the combined situation being analysed is the “post” socialist action of two processes: “decentralized reorga- period, it still bears the stamp of a “socialist” nization” of property and “centralized man- character whereby many of the old social pol- agement of liabilities”, creating a kaleidoscopic icy structures, based on the principle “free for structure of ownership and society. The out- all” and covered by the state budget, continue come of these processes leads to criss-crossing to provide the framework for action even now. lines of interenterprise networks on the one Just two years ago social funds were still fully hand and on the other debt consolidation, integrated in the budget, virtually drained off which transforms private debt into public lia- in a situation of diminishing revenues within bility. The approach will be applied in more an economy of recurring crisis and intensive general terms for the informal and hidden sec- ageing of the population. tors of the economy. It must of course be under- On the receiving side, the legitimate expec- lined again that it is virtually impossible to dis- tations of the people for a decent life, quality entangle the separate sectors and measure the education and efficient public services, and contribution of each to these overall results. especially pensions and health care, which their former contributions are supposed to Short-term effects guarantee, still maintain demand rather high. Paying pensions periodically necessitated In the first place, there is a general consen- borrowing money from other sources, quite sus about the positive effect of non-formal eco- often from the unemployment and vocational nomic activities on maintaining employment training fund.

78 As has been pointed out in the assessment market problems were to continue for two of the effects of non-institutionalized employ- or three years, the factory may have to face ment and self-employment,21 financial deficits closure. demand new policies. The necessity for change, however, is interpreted mainly as a need for (b ) The combined effect of the suitcase trade and higher social tax rates, and this in turn strength- the de facto “smuggling” of goods from out- ens motivation for tax dodging and informal- side, mainly Tur k e y , has seriously under- ization of the economy and industrial relations. mined the market positions of local light The case of the obligatory pension fund is industry enterprises which had to lower pro- quite instructive: due to the non-respect of duction and lay off people. In a joint letter, minimum wage contracts, combined with “in- the Federation of Light Industry Wor k e r s hand” payments and other similar tricks per- and the corresponding branch chambers of formed within enterprise social pro g r a m m e s , employers expressed their serious concern the revenues of the pension fund started falling about the strained situation in the industry d a n g e rously in 1998. The stru c t u re of the re v- to the Prime Minister and to Parliament. If enues is also a point in question: re g i s t e red pay- the present trends persist and policies do not ing people in the fund are almost equally change, the prospects for these prod u c t i o n s divided between the public and the private sec- ar e quite uncertain. t o r, with only a few per cent more in the latter. The outcome, however, is that more than 90 per Thus, the circle closes and everyone is in the cent of the money comes from public enter- trap. Naturally, the question arises: how far can prises and the rest from private companies. this go? The answer most probably is “not very A round August 1998 the incoming flow was far”, because then the “hidden” or “informal” a l ready substantially below the outgoing pay- will become “visible” and easy prey for tax ments. Estimates of D. Tebeyan (member of inspectors. So the problem is not one of market t h e Supervisory Board of the National Social domination but of reliability in the ways of Security Institute and director of the main running and managing the economic and social employer association) show that more than activities in society and the structures at all 1 million people were paying on the basis of the levels. minimum wage. The persistence of the tre n d would have meant that around the end of 1998 4. Trade union policies the capacity to pay pensions would turn out to be next to ze ro . To address the question of trade union poli- For the unions, the danger was double since cies is in some ways a straightforward task but in such practices also meant setting up anti-social others quite daunting. As has been pointed out, coalitions for tax avoidance between managers, trade union approaches and behaviour diffe r employees and often trade union organizations ac r oss industrial sectors and organizational lev- at the workplace. els. The constellation of factors within the con- The further evil takes the form of the dis- tradictory processes of transformation generates tortions in competition and market structure by di v e r ging dynamics of change in the separate non-formal activities. Resorting to arguments ar eas of economic activities and the corres p o n d - about cutting labour costs and gaining market ing trade union struc t u r es involved. advantage to justify the position will probably The ones most directly concerned, the trade sound quite traditional, but the following two union federations at branch and industry lev- examples will make the case more clearer: els, adopt a low profile, but their attitude is generally positive in terms of their sympathy with (a) A leading clothes producing factory, export- what is going on in the informal sector and trying for major western European companies, ing to help wherever possible. Such sympathy ran into serious troubles as from the middle reaches the point where informal activities start of the 1990s because many highly qualified to be linked up to operations of scale in the hid- employees left and started more than 40 pri- den sector where criminal elements prosper, vate small companies around it. Through eroding markets, depressing industries and informal settlements, they started paying threatening members’ interests. Obviously, higher salaries and attracted other workers trade union policies towards the hidden sector from the factory. It had to be quickly priva- require a different approach, without which tized, since, if this situation of raising costs id e n t i fi cation of problems and priorities becomes to maintain quality and overcome mounting an extremely complex process.

79 As for the general policies of the nationally have usually been undertaken as part of bigger rep r esentative confederations, the task may trade union events – conferences, seminars, ral- seem easier because no special policies have lies – on the same issues. They have been aimed been developed with reg a r d to the informal sec- at mounting pressure in the presence of televi- to r , either for the tripartite bodies at national sion, other media, labour inspectors and police level or in their bilateral relations with govern- to open the gates of private enterprises, notori- ment and employers’ organizations. In fact, ous for violations of workers’ rights, labour th e informal sector is not perceived as a sepa- laws or conducting anti-union policies. Since rate complex of activities with a distinct survival then, some form of action has been organized rationale and logic, compared to the hidden and almost every month in different places. black sectors of the economy. It tends to be dis- The results have brought to the fore gross solved in the general perception of the violations in numerous labour relations areas: “shadow” economy where cases of fraud, cor- health and safety; lack of contracts or fixed- ruption and organized crime make the news, term settlements; minimum wage, supple- focus public attention and generate guilt ac ro s s mented by much higher “in-hand” payments; the board to include the informal sector. people locked in throughout the working day; Of course the other thorny question remains virtually no limits to working time; etc. Penalty of what to do in such situations. In other words, orders have been issued by labour inspectors to what extent can policies geared to priority and imposed on these companies. issues involved in the process of creating a new The effect of the campaign, however, has so system and culture of industrial relations con- far mainly involved bringing the facts to the tribute to improving working conditions and fore. It has been confirmed that frightening sto- arrangements in the informal sector. The fol- ries about patterns of working in some foreign- lowing brief account of ongoing activities in owned as well as Bulgarian enterprises did not these areas will better illustrate the situation fall short of the truth. Still, it is difficult to say and the current approaches. whether the remedies available can effect the changes required. Sanctions are marginal com- 4.1. Campaign for fundamental social pared to the profits gained and it seems that rights at the workplace other authorities dare to act only when such actions are led by the top leadership of the trade Following the adoption by the International union confederation. So far, such actions have Labour Conference in June 1998 of the Decla- made no dents in the armour of invincibility of ration on fundamental principles and rights of the employers practising nineteenth-century work, the Confederation of Independent Trade industrial relations. This raises the question of Unions in Bulgaria (KNSB) started a campaign a strategy for change if the campaign is to suc- in defence of fundamental social rights at work. ceed in real terms. The campaign was aimed at raising the aware- The success of the campaign is of key impor- ness of people of their rights at the workplace tance, not simply for the trade union cause but and involved joint action by KNSB, local rep- for laying the basis for a new industrial rel a t i o n s resentatives of the labour inspectorate and, if cu l t u r e, practically from scratch, that over time necessary, police. will start exerting pres s u r e for implementation The initial stage has been quite successful: of internationally accepted labour standards in not only has the idea spread rapidly but support Bulgarian enterprises. The creation of a more has been whipped up across levels and spheres socially responsible economic environment can of formal power. The campaign has been openly have some influence on pay levels, conditions ap p r oved and the appeal signed by rep re s e n t a - of work, etc. With the current controv e r s i a l tives of the executive, legislative and judiciary tr ends in the economy these prospects seem powers, members of all parliamentary grou p s , quite distant. a number of NGOs, distinguished people and of course many trade unionists and orga n i z a - 4.2. Raising the level tions. This response can prove quite useful as it of the minimum wage has laid a basis for consensus and a framework of ref e r ence for practical implementation of Taking into account the present practices of policies for improving working conditions and dodging taxes and social security payments, democracy at the workplace in real life. another approach has been suggested to contain Forms of direct action have accompanied the causes and guarantee a better functioning of the campaign from the very beginning. These the social policy struc t u r es. The main target has

80 been labour contracts drawn up on the basis of ity of credits on time and on relatively easy minimum wages as a ruse for companies to pay terms. With the financial and especially the lower contributions to social funds. A su b s t a n - banking stabilization measures in 1998, hopes tial rise in that level could secure higher rev - for a new approach have been raised, but the enues for the funds and bring about some fina n - banks have adopted very conservative credit cial stabilization of social policy institutions. policies and again relegated active strategies in In the summer of 1998, when prep a r a t i o n s the area of SMEs to the realm of wishful think- we r e under way for negotiating the three - y e a r ing. Still, with the patent tax, the adoption of a ag r eement with the IMF, the Ministry of Labour law for regulating SMEs, and the creation of an and Social Policy put forward a proposal to agency for SME development, some major pos- in c r ease the minimum wage from 53,500 to itive strides have been made to set the ground 70,000 Bulgarian Levs. At the same time both for more positive expectations in the future. trade union confederations, KNSB and CL Po d - Another significant achievement in solving kr epa, insisted on using a new methodology for the unemployment puzzle has been the setting de fi ning the poverty level, developed within up of the Fund for Regional Initiatives. The idea an ILO project, as a base for fixing the level of th e was launched in 1996 by KNSB following the minimum wage. Ac c o r ding to the new one, the experience of Bolivia and other Latin American poverty line ran at 90,000 Levs and the un i o n s countries with the Social Investment Fund as it insisted on compatibility between it and the was then called. The main purpose of such minimum salary. In the final text, the IMF structures is to create a significant number of ag r eed on 61,000 Levs and the issue was closed. temporary jobs in order to cushion the negative effects of the restructuring of the economy. The 4.3. The problem of “suitcase” fund will be financed through a World Bank trading loan and will support regional projects with grants in the range of DM 17,000-DM 335,000. As mentioned earlier, the problem of “suit- The UNDPagency in Bulgaria will take respon- case” trading led to mounting troubles in the sibility for management in line with Govern- internal market for the production of light ment priorities and the policy of the Ministry industry enterprises. Signals for similar ten- of Labour and Social Policy. The composition of sions came from food, tobacco and agriculture. the board of the fund also provides for trade Reactions to such cases involved organized union representation. protest actions supported by joint letters to All project proposals must be understood to state authorities for a change of policies and contribute to the development of the economic strict customs regulations. The motor has been and social infrastruc t u r e. The expected res u l t s the Federation of Light Industry Workers, ar e measured in tens of thousands of new jobs backed by KNSB and employers in the sector. cr eated through the operation of the fund. Many The protest actions and letters have been of them will probably be in small enterprises accompanied by lobbying on the part of the which may continue to function even after the confederation at the level of the highest politi- fund has achieved its aims and has closed. cal and legislative bodies. The pressure of the protests provided an opportunity and the cus- 4.5. Initiatives of industrial toms boss in Svilengrad has been accused of federations misuse of administrative powers and replaced. It cannot be said that this effected a dramatic Our information does not suggest either change in the situation in the industry imme- that there been any particularly fruitful ideas or diately, but it is clear that corruption cannot be successful efforts by lower-level trade union eliminated overnight. organizations despite their attempts to intervene at one point or another. 4.4. Policies towards SMEs and Federations in the construction industry individual entrepreneurship from both confederations did try to approach workers, especially migrant ones, but the lat- Since the phase of transition set in, both ter’s attitude has been predominantly one of trade union confederations have pressed con- lack of interest. The loose relation between the secutive governments to provide favourable job and the person did not provide a basis for conditions for developing the SMEs sector. The a more long-term rationality nor the necessary two weakest points, always criticized by the motivation. Attempts to use the second possi- unions, have been tax policy and the availabil- ble lever – labour inspectorates – and engage in

81 joint checks of terms and conditions of work The second group of conclusions concerns directly on the sites failed to register significant trade union positions and strategies. In condi- progress since labour inspectors preferred to do tions of declining industries, inefficient social visits on their own and purposely avoided dialogue and falling membership, trade unions trade union representatives. seem to be too overburdened with problems to In their search for ways to preserve jobs and pay proper attention to the issues at hand and raise wages in education, the Union of Bulgar- develop innovative approaches to the informal ian Teachers in KNSB put forward a proposal sector. The core of the problem seems to be the in February 1999 to restore the previous prac- multifaceted nature of the phenomena in the tice of out-of-class activities related to freely non-formal economic sectors which have selected subjects in the schools. These have usu- become virtually indistinguishable from out- ally been organized according to groups of right criminal methods of operation. This also interests or subject circles and can provide alter- outlines the first major necessity for trade union natives to private tutoring, diminishing the policy – disengaging and shielding off informal effect of social exclusion. and small businesses from the pressure of crim- In an attempt to cope with problems of inal factors. informal labour in agriculture, the correspond- To achieve such a target, it would no doubt ing trade union federation, CLPodkrepa, man- be more effective to mobilize potential local aged to set up a Union of Tobacco-growers in actors – local authorities, social partners and the region of Kurdjali, next to the border with other interest groups could be much more effi- Turkey. The organization achieved consider- cient than large-scale operations, relying on the able membership, around 11,000 people, but it readiness of the State to act and the effective- turned out to be more on paper. The region in ness of its policies. At the same time, central question is populated by ethnic Turks and policies can provide a framework of rules that many of them have their families or relatives on might well open up the space and provide a set the other side in Turkey. The lack of permanent of dynamics at the local level. Thus one does settlements is a source of considerable compli- not dispense with the other but they act in a cations since around 7,000 of the members con- complementary manner. stantly move across the border and return only As has been indicated, the central orga n i z a - for the period of tobacco-growing. This duality tions of trade unions so far have tended to rea c t of life inevitably generates diversified interests pr edominantly in cases when the operation of and difficulties in maintaining an organization. the hidden/informal sectors starts to impinge di r ectly on the state of an industry and on trade 5. Conclusions union interests. At the same time, some industry and branch unions, being closer to the issues, As has been presented and analysed in this demonstrate more flexible and tolerant policies. pa p e r , the informal sector and the networks that Still, it is difficult to affirm that any type of effi - support it are by no means a marginal or super- cient win-win solutions of the dilemma of the ficial phenomenon on the road of transition. informal sector is included in the agenda, They are integral elements of the emerging struc - although a general will to do so prevails. The tu r e of the economy and society that will con- need to accelerate the search for other strategic tinue to play a role in maintaining jobs, incomes and practical orientations inevitably prom p t s and a number of social integration proc e s s e s . the necessity for more information and aware- Un f o r t u n a t e l y , they develop in interaction with ness about the real potential of the informal sec- other types of non-formal economic activities – tor and in particular its potential for making a the hidden, shadow economy which cast their si g n i fi cant social and economic contribution in so m b r e shades over the informal activities. the current period of social transformation. Viewed differently, the appearance and development of the informal and especially the hidden sectors are an open question in terms of consistency of the reform policies, based on the IMF’s recommendations. These developments had not been part and parcel of the deal and their scale and influence over the formal economy and society will be posing a serious challenge to policy-makers in the transformation process as it evolves.

82 Notes 9 Minassian. G. 1998. “The Road to Economic Disaster in Bulgaria”, Europe-Asia Studies , Vol. 50, No. 2, pp. 331-249; 1 ILO. 1993. Statistics of Employment in the informal sector, Bristow. John. 1996. The Bulgarian Economy in Transition, Fifteenth International Conference of Labour Statisticians, Edward Elgar, Cheltenham. Geneva, 19-28 Jan. 10 National Statistical Institute (NSI) data. 11 2 ILO. 1991. The dilemma of the informal sector, Report of NSI data. the Director-General (Part 1), International Labour Confer- 12 Kumanova, A.; Dimitrova, R. 1998. “Skritata ikonomika ence, 78th Session, Geneva; C. Maldonado. 1995. “The infor- pres pogleda na eksperti”, Statistika NSI, No. 2, pp. 64-76. mal sector: Legalization or laissez-faire?”, in International 13 Hr i s t o s k o v , Y.; Shopov, G.; Beleva. I. 1996. Ne i n s t i t u t s i o n - Labour Review, Geneva, ILO, No. 6; ILO. 1997. World Labour alizirana zaetost i samonaetost, Institut za pazarna ikonomika, Report 1997-98 – Industrial relations, democracy and social sta- Sofia, unpublished. bility, Geneva. 14 Ibid, p. 16. 3 Pardo. I. 1995. “Morals of legitimacy in Naples: street- 15 Presentations and statements of these experts at pub- wise about legality, semi-legality and crime”, in Archives lic forums. Europeennes de Sociologie, XXXVI, pp. 44-71. 16 4 Hr i s t o s k o v , Y.; Shopov, G.; Beleva. I., op. cit. Sik. Endre. 1995. Network capital in capitalist, communist 17 and post-communist societies, Working paper, No. 212, The NSI. 1998. Statistitcheski barometer, Sofia, 29 Oct., p. 4. Hellen Kellog Institute for International Studies, University 18 Union for Private Enterprising. 1996. Development of of Notre Dame, Notre Dame, Indiana, Feb. small and medium-size enterprises in Bulgaria, Sofia, p. 24. 19 5 Ibid, p. 3. Statement of the Ministry of Finance, Auditor of the

6 Customs Services, Division of the Ministry, Trud, 26 Nov., Sik. Endre. 1994. “From multicoloured to the black and 1998. white economy: The Hungarian second economy and the 20 Transformation”, International Journal of Urban and Regional Stark. D. 1997. “Recombinant property in East Euro- Research. pean capitalism”, in Grabner, G. and Stark,D. (eds.), Restruc- turing networks in post-socialism, Oxford University Press, 7 Standart, 26 June 1997, p. 2. Oxford, p. 38. 8 Pari, 22 March 1999, p. 4. 21 Hr i s t o s k o v , Y.; Shopov, G.; Beleva. I., op. cit, pp. 42-43.

83 Hungary

The major difficulty in addressing the issue lies in the broad alliance of strong interests to maintain the informal sector in place: while it undermines public services, weakens social protection, interferes with economic competition and enfeebles trade union strength, it also contributes to the survival of the most vulnerable groups of labour who have lost their positions in the labour market.

L. Héthy Director Labour Research Institute Budapest

1. Introduction countries, Hungary is characterized by an “underground”, “hidden” economy – or in the In discussing the topic of trade unions and euphemistic term of the 1970s – a “secondary the informal sector, it is necessary to make use economy”, where prevail the types of employ- of certain fundamental building blocks of ment that are characteristic of such economic which our analysis is structured. To analyse – operations. It is true that those engaged in the and simply to understand – what is going on in “hidden economy” are primarily motivated by Hungary, we are to discuss: (a) the informal sec- tax evasion and have much greater access to tor; (b) the trade unions and the trade union public services such as education, health, trans- institutions by which the workers’ organiza- port, etc., than those in the informal sector of tions have their impact felt on public policy for- the developing countries, but at the same time mulation, on employers, on the behaviour of – as will later be argued – such activities are still their membership and workers in general; and associated with survival strategies of the poor. finally (c) guidelines for future trade union For such employment – although unrecorded, action. Owing to the nature of the topic itself, unregistered and unregulated, i.e. informal – systematic, well-founded scientific information the most appropriate term seems to be “unde- is extremely scarce: one should rely on estima- clared” work as applied by the EU.2 tions, perceptions and speculations. Thus, the concept of informal sector is used in a wider sense than the original ILO definition in the present paper, covering primarily the 2. The informal sector “underground” or “hidden” economy and or “hidden economy” employment therein. 2.1. Does Hungary have an informal sector? 2.2. The nature and dimensions of the informal sector Hungary is a country undergoing economic transition. It has brought to term its market Hungary has a vast “hidden economy” or economy institutions and has practically com- informal sector. Research was first conducted pleted privatization process; it is a member of on the sector – in some respect in cooperation the OECD, the Council of Europe and is cur- with the ILO – as early as 1980.3 According to rently negotiating European Union (EU) mem- estimates by economic experts, its size in 1992 bership. amounted to about 30 per cent of GDP and to In this context, it is difficult to pinpoint the date it remains at the same level.4 It consider- presence of an “informal sector” as such, at least ably increased in the period 1985-92 when eco- in the original sense of the ILO’s definition, cre- nomic transformation gained impetus. It is ated primarily for the developing countries.1 extremely heterogeneous: it includes non-reg- More precisely, like most of the industrialized istered activities of (mostly small) business

84 organizations and of individual entrepreneurs, (i) Economic transformation resulted in a home work, seasonal and occasional work per- sharp decline in employment in the first formed by unemployed and inactive people as half of the 1990s. In 1997, of the total popu- well as by foreigners without any work con- lation of 10 million, according to calcula- tract, such as repair work done for the house- tions based on the ILO’s methodology, 7.8 holds, “private lessons” by teachers, moon- million could be qualified as of working lighting and “tips” which supplement income age. Among them, 3.6 million (46.7 per from legal activities (exercised by doctors, cent) were employed, 0.4 million registered nurses, waiters, petrol-station operators), etc. unemployed and 3.8 million inactive. In In terms of employment and income, two the last group 1.6 million were of pension major categories of informal activities seem to age, while 2.2 million of working age.5 exist: firstly, when both employment and (ii) Among the 3.6 million employed, only income originating from it are undeclared 2.99 million were engaged in a “classical” (u n re g i s t e r ed, unrec o r ded); and secondly, when employment relationship, 69,000 were employment and part of the income is declared members of cooperatives, 137,000 mem- (registered and recorded), but another part of bers of joint (small) undertakings, 373,000 the income is not. Such a combination of formal individual entrepreneurs and 41,000 were and informal, declared and undeclared, is assisting family members.6 reported to be extremely frequent. Its typical form among wage earners is legal employment (iii) Real earnings sharply declined in the (based on work contracts and sometimes even 1990s, with drops occurring each year in on collective agreements) and legal pay – at the the 1990s except 1994 and 1997. The real level of the (legally obligatory) national guar- value of the national guaranteed minimum anteed minimum wage – supplemented by wage has suffered similar losses: drops additional payments “from pocket to pocket”, occurred each year except for 1990 and as it is put in Hungarian everyday language. A 1997.7 As for actual labour costs in 1992-95, wide variety of similar combinations also exist average industrial labour costs (for a full among self-employed entrepreneurs. working hour per employee) amounted to Such combinations have their definite 3 ECU compared with 27.8 ECU in the advantages for those involved compared with western parts of Germany.8 those involved exclusively in either totally for- (i v ) Th e r e has been a growing gap between the mal or totally informal activities. In the case of national guaranteed net minimum wages the employment relationship, they save labour and the minimum costs of living. Their ratio costs for the employer (part of the contributions was 84.4 per cent in 1990 decreasing to 70.5 levied on gross earnings) and save costs for the per cent in 1994. Minimum unemployment employee (part of the personal income tax), be n e fi ts, unrelated to minimum wages, while the employer remains legal (labour have kept lagging behind the minimum inspection checks the existence of work con- costs of living to an even greater extent. tracts and the payment of the national guaranteed minimum wage) and the employee retains (v) Gross earnings have remained subject to his/her entitlement for most social security heavy duties levied on them, such as con- benefits. If the employment and income are tributions to the social security (health and totally informal and unemployed or inactive pension insurance) funds and to the labour people registered as such are involved, they market fund (amounting to about 50 per also remain mostly among those entitled to cent of gross earnings of which the greater social security benefits. part has to be paid by the employer) and When the entire production of goods and personal income tax (which has to be paid services or part thereof are kept informal, taxes by the employee). It should be noted that a levied on the production (general turnover tax) portion of the minimum wage is already and on the entrepreneur can also be saved. taxable.

2.3. The foundations of 2.4. The actors in the informal sector the informal sector The existence of the vast “hidden economy” As for the foundations of the hidden econo- or informal sector in Hungary is based on “the my or the informal sector, the following major joint interest” of the unemployed, the inactive, causes can be identiﬁed: individual entrepreneurs, of employees and

85 employers to survive by increasing their net established on the basis of the Labour Code income via the evasion of at least part of the (1992) in business organizations, of the Public duties and taxes levied on them. One can even Servants’ and Civil Service Acts (1992) in pub- risk the statement that most of the population lic and civil services, and of the Armed Forces is related, in one way or another, either as par- Act in the military and other armed forces. The ticipant or a client, to the informal sector. Four pieces of legislation referred to regulate the major groups of its participants, however, can rights and obligations of the employees arising be distinguished: from employment relationship. • individual entrepreneurs as well as employ- In recent years, new legal work forms ers and employees of small undertakings beyond the employment relationship have (especially in sectors like construction, retail a p p e a red in great numbers on the scene, their trade and catering, household services, etc.); legal foundation grounded in civil law rather than in labour law. In the same way that civil • the economically inactive population; law contracts instead of work contracts are • the unemployed, especially the long-term drawn up with individual entre p reneurs to unemployed in economically depressed carry out certain activities, civil law contracts regions where the rate of unemployment a re drawn up with individuals to perform a has consistently been high; and d e finite task. Contract work has rapidly gro w n : • foreigners, entering the country mostly as it is believed (although reliable empirical evi- “tourists”, without a work permit. dence is lacking) that a large part of Hungary’s several hundred thousand individual entre- As reported by the trade unions, the p reneurs are employees “disguised” as entre- younger generations of the population harbour p reneurs for the “glory” of the emerging mar- far less reservations about being engaged in ket economy. totally informal (black) forms of employment The major motivation underlying this tren d than the older generations who are sensitive to is once again to evade (or reduce) tax burde n s the prospects of pension and health care. The and, from the point of the employer, labour costs. choice, however, is open to them only in regions where legal (or semi-legal) jobs are available. It 2.6. Dilemmas related to is reported that in economically depressed the informal sector areas such as in north-east Hungary, there are settlements where there seem to exist practi- The existence of Hungary’s informal sector cally no other forms of employment than is closely related to the employment situation, “black”. The survival of the families in such depressed level of wages and social benefits areas is often based on a combination of social (compared with the minimum costs of living), benefits (unemployment benefits, income sup- the heavy duties levied on earnings and port, childcare allowance, etc.), occasional income, and the inefficiency of state adminis- informal work and small-scale farming. We tration to enforce laws and regulations. Tradi- have no evidence at our disposal that engage- tions which date back even to the 1970s and ment in the informal sector would be differen- 1980s may also have exercised some impact. tiated on the basis of gender. The major difficulty in addressing the issue, Income from the informal sector is most reducing it to an acceptable 4-5 per cent of GDP, probably much differentiated: for some groups lies in the broad alliance of strong interests to it covers only survival, while for others it maintain it in place. It is true, on one hand, that ensures higher than average earnings. it undermines public services provided by the State by cutting their financial resources; weak- 2.5. Contract labour ens the social protection of the working population; contradicts the fairness of competition as Tendencies to make the labour market and it puts semi-legal or illegal entrepreneurs employment more flexible as a concomitant of employers into an advantageous position; globalization contribute to the appearance of aggravates falling trade union membership; certain legal forms of work which tend to but at the same time it is also true that it pro- promote undeclared, or partly undeclared, vides employment, contributes to the survival arrangements. of the most vulnerable groups of labour who In Hungary, work for an employer is carried have lost their positions in the labour market, out within the legal framework of an employ- and compensates other groups for losses in ment relationship. Such a relationship can be “official” real earnings.

86 That is why the trade unions too, when Hungary has developed a relatively well- faced with it, have “divided opinions”: they are functioning system of institutions at national opposed to informal employment, but tacitly level based on the involvement of unions and tolerate and accept its existence. employers, an effort started in 1988-89.10 The national institutions include: 3. Trade union actions in • the Tripartite Council for the Reconciliation the informal sector of Interests (established in 1988). It is the stage for national-level wage bargaining 3.1. Trade unions and institutions and agreements. It takes decisions as to the have their impact felt national guaranteed wage, adopts recommendations with regard to the growth of Hungarian trade unions, at national level, gross earnings in business organizations, are highly pluralized. The National Tripartite and is also a forum for pre-legislative con- Council for the Reconciliation of Interests sultation and agreements (with regard to (CRI), in its workers’ negotiating group, has six labour legislation, draft taxation laws, the trade union confederations as members. budget, etc.); The six trade union confederations are very different in their size, representativity, coverage • the Bipartite Self-Governments of Health and history. The biggest ones with several hun- and Pension Insurance, established in 1993 dred thousand members, are MSZOSZ (Na- to take care of the health and pension insur- tional Confederation of Hungarian Trade ance funds, and dissolved in 1998; and Unions), SZEF (Trade Unions Cooperation • the Tripartite Steering Committee of the Forum) and ASZSZ (Autonomous Trade Labour Market Fund. In 1996 it took over Unions’ Confederation). MSZOSZ has a na- the CRI’s functions in the control of the tional coverage in the (mostly privatized) busi- Labour Market Fund out of which employ- ness sector of the national economy; ASZSZ has ment policies are ﬁnanced. the chemical workers’ union as its backbone, along with unions in several public utility Institutions at other levels include: branches; SZEF unites employees in public ser- • trade unions, as the delegates of the national vices, its most important members being health confederations, are present in the county- workers’ and teachers’ unions. The League level Labour Market Councils which have an (Democratic League of Independent Trade important role in the implementation of Unions) has a couple of organizations in pub- active employment policy programmes; and lic utility companies, mostly in transport and education. ÉSZT (Intellectual Workers’ Trade • the trade unions are one of the two partners Union Confederation) is a union of higher edu- of sectoral- and enterprise-level collective cation personnel and researchers. As for the bargaining and agreements; in business “dividing” line between “old” (successor) and organizations the former cover roughly 10 “newly formed” unions, MSZOSZ and ASZSZ, per cent, while the latter roughly 30 per cent and to some extent ASZSZ, can be looked upon of the workers. as successors to the past National Council of Trade Unions (SZOT), the monolithic trade 3.2. Trade unions and public policy union confederation of the socialist period, while the League and MOSZ (the National formulation and implementation Association of Workers’ Councils) are made up 3.2.1. Trade unions and income of newly formed unions, the same obtaining in policies the ranks of ASZSZ and ÉSZT. The level of unionization is estimated to be 20-40 per cent: Heavy burdens levied on earnings and it is higher in public services and lower in busi- income by the State and the existence of a large ness organizations, especially in small and informal sector, in the view of most experts, are medium-sized enterprises (SMEs) where the closely interrelated. To set contributions and unions’ presence is very rare.9 taxes as well as related legislation belongs to the The unions’ ability to exert pressure on authority of Parliament. Still, it has been a gen- employers and Government is very different erally accepted practice for the past ten years too: it is most probably strongest in the public that they be annually discussed in the national utility branches (transport, electricity, etc.) and tripartite council (CRI) with the trade unions public services (education and health). and employers.

87 The CRI does not negotiate contributions provided an additional incentive for employers and taxes separately but usually as part of and employees to move over to the informal income policy “packages”, including, other sector. For the past years it has become obvious than contributions and taxes, the guaranteed that profound changes in contributions and minimum wage, recommendations for the taxation cannot be realized without a funda- growth of gross earnings in the business orga- mental reform of the health service and public nizations, social policy issues and other items services and their financing in general. The only related to the budget of the coming year. On important achievement so far has been the start that basis, several tripartite agreements have of pension reform discussed and also approved been concluded in the 1990s – in 1991, 1992, by the unions and employers in the CRI in the 1993 and in 1994 and 1997.11 The years in which spring of 1997. negotiations failed to produce such agree- Apart from their solidarity, the Hungarian ments, or produced more limited ones, were the trade unions’ approach towards contributions years of macroeconomic stabilization. to social insurance and taxation has been rather The Government, unions and employers di ff e r entiated, as illustrated by the prec e d i n g have always had the common conviction that ar gument. The diffe r ences are also highlighted contributions and taxes should be reduced. In by the CRI negotiations of the past few years practice, however, the Government has had no with reg a r d to personal income taxation scales. other choice than to maintain them in the con- With a large part of its membership in the lower text of GDPand real-income drop in most years earning brackets, the MSZOSZ has made con- of the 1990s so as to be in a position to finance sistent efforts to reshape these scales in such a public services and to meet the international way that those in the lower wage brackets could debt service, a burden which was somewhat be the beneficiaries of such changes. One such eased by revenues from privatization. The instance occurred at the end of 1995 when trade unions, in their turn, have been in favour Finance Minister Bokros had long discussions of tax reductions, but they also endeavoured to with the CRI about possible personal income maintain social benefits. Public service unions, taxation scales, yielding no results. The AS Z S Z , primarily the SZEF, were aware of the relation- with a membership mostly in the higher earn- ship between the level of state revenues and ing brackets, have been more reserved approa c h public service wages and employment. In addi- on this issue. The big public service confederation, unions, together with employers, were tion, the SZEF, has had a similarly reserved atti- part of the Bipartite Social (Pension and Health) tude as its membership is sharply divided Insurance Self-Governments in control of the between the lower (e.g. health workers) and social insurance funds financed by employer higher (state administration) earning brackets. and employees’ contributions. In these self- government institutions MSZOSZ had a deci- 3.2.2. Trade unions and the sive role, which explains why tripartite guaranteed minimum wage “income policy package” agreements did not exert much of an impact on the general level of In Hungary, it is believed to be a widespread contributions and taxes. practice on the part of employers, mostly in The evasion of contributions and taxes has small enterprises, to hire workers at the mini- been a common concern for Government, mum wage, as indicated in the work contract workers and employers, especially in case of and to complete their earnings legally or ille- the contributions to the social insurance funds gally by additional payments not recorded in out of which the Health Insurance Fund has the work contract. If the additional payment is consistently had serious deficits for the past legal, it is based on a civil law contract, if not it years met by the state budget. As a partial rem- takes the form of paying “from pocket to edy, the tripartite CRI reluctantly approved the pocket” as is said in local parlance. Government’s proposal in 1996 to introduce a In Hungary, the national minimum wage, so-called minimum contribution to the health set by the Interest Reconciliation Council,12 cov- insurance fund, targeting principally enter- ers all those in employment relationships in prises employing workers in the lowest wage both the private and public sectors. brackets or close to the guaranteed minimum Trade unions have consistently been agitat- wage level. It was, and still is, much debated ing for an increase in the minimum wage for the whether this minimum contribution to health past ten years to improve the income positions insurance has had positive results in terms of of the most vulnerable groups of labour in the containing tax evasion, or, on the contrary, it has lowest wage brackets, given the obvious social

88 policy mission of the guaranteed minimum may also be an item included in enterprise and wage. Employers, especially in the private sec- sectoral level collective contracts. These condi- to r , have tried to constrain any growth, ref e r r i n g tions may offer an explanation for the more as they do to the negative impact of grow i n g reserved attitude in the past of ASZSZ in the wage costs on competitiveness and employ- national-level negotiations on the guaranteed ment, as well as to the sensitiveness of certain minimum wage. Public service unions have traditionally low-wage sectors (such as agricul- also lost interest since minimum salaries have tu r e). The Government, as the indirect employer started to exceed the national guaranteed min- of similar traditionally low-wage public ser- imum wage in their sector and ceased to func- vices, tried to slow down minimum wage tion as a point of reference for them. gr owth for many years in the early and mid- 1990s owing to budgetary constraints. As mini- 3.2.3. Trade unions and labour mum salaries in the public services started to inspection exceed the national guaranteed minimum wage, for the first time occurring in 1997, the Go v e r n - In the autumn of 1996, the Hungarian Par- ment’s “social sensitiveness” has become more liament adopted an Act on Labour Inspection. acute: in national wage negotiations for 1998 It pinpointed the primary targets of labour both unions and Government supported the inspection – the implementation of regulations pr oposal for an above-average improvement in concerning the establishment of the employ- the guaranteed minimum wage. ment relationship and respect for the funda- MSZOSZ – the biggest trade union grou p i n g mental rights of trade unions. The Act extended – has had its own proposal for regulating the the field of authority of labour inspectors and guaranteed minimum wage. It goes back to the raised the upper limit of fines labour inspectors early 1990s and is repeated in each new rou n d could impose on employers violating the law of annual national-level wage negotiations. It (to 3 million Hungarian forints13 in case of pr oposes in essence to introduce a “three - g r a d e repeated violations of several legal provisions minimum wage” instead of the present one- perpetrated against a great number of em- grade minimum wage, diffe r entiating on the ployees). This legislation was based on a long basis of the level of qualification of the workers. series of negotiations in the CRI as a result of The first grade, would be on par with the pre- which agreement had been reached on its con- sent one, covering unskilled labour, while the tents. As a further follow-up of this legislation, second and third grades would be higher and a reinforcement of the organization of labour would cover skilled workers and prof e s s i o n a l s inspection was undertaken, one outcome of res p e c t i v e l y . The confederation argues that the which was to double the number of inspectors th r ee-grade minimum wage would have a pos- in the first half of the following year (1997). itive impact on informal (illegal) employment: As for the Act’s mission to be an instru m e n t by radically increasing guaranteed minimum in the struggle against “black” employment, all wages for qualified workers, it follows that it t h ree parties had a single common interest, as would reduce the dimensions of present prac- was repeatedly formulated in the debate. Black tices of combining payments of minimum employment – from the employers’ point of wages on the basis of work contracts and addi- view – undermined fair competition in the tional payments outside of work contracts. So market, as some employers could reduce their fa r , the employers of the tripartite council have wage costs by evading duties levied on earn- consistently rejected the MSZOSZ prop o s a l . ings; and from the unions’ point of view, it While the unions seem to be united in their reduced the number of jobs available for their approach to the guaranteed minimum wage membership by undermining legal employ- and maintain their solidarity, their stances on ment. At the same time, the Government is at this question are different. While the commit- odds with job losses and ensuing losses in state ments of MSZOSZ are obvious, other unions revenues. In this sense, the Act of Labour are less keen with regard to proposals in favour Inspection and the re i n f o rcement of its org a n i- of the growth and structure of the guaranteed zation was a “child of tripartism”, re g a rdless of minimum wage, on at least two grounds. the diff e rences of emphasis in the approach of Firstly, their membership is drawn mostly from the individual parties. the higher wage sectors where the national As for the implementation of the Act on minimum wage is less important. Secondly, Labour Inspection, the social partners have been these workers have strong bargaining positions much more divided. The Government, starting and wages higher than the national minimum out from widely known western Europ e a n

89 examples, called for close cooperation in this This piece of legislation permits types of pr ocess. A pr oposal prep a r ed for the CRI in the work based on entrepreneurial contracts summer of 1997, urged cooperation in the fol- and individual assignments, but it makes lowing fields: (1) the dissemination of in- it incumbent on the labour inspectors to formation about legal regulations; (2) the dis- expose cases when these civil law contracts semination of information about prob l e m s disguise employment relationships which di s c o v e r ed by labour inspection; (3) making are considered unlawful and impede appli- public practices of “black” employment; and cation of the necessary sanctions. An obvi- (4 ) working out programmes in sectors where ous weak spot in the law is that it does not “black” employment was primarily concen- provide any definition of employment rela- trated (such as commerce or construction). It tionship.16 was also suggested to set up an advisory body Labour inspectors have discovered with the participation of unions and employers some cases of obvious disguised employ- to assist the work of the National Labour Safety ment relationships: for example, in a bak- and Labour Inspection Agency (OMMF) and the ery in eastern Hungary, “wage-earner” Minister of Labour. These initiatives by the Gov- bakers and “entrepreneur” bakers were ernment met with reservations on the part of the found working side by side in the same social partners: they restricted their cooperation workshops using the equipment and mate- to the annual discussion in the CRI of the rep o r t rials of the owner-employer. Such clear of the National Labour Safety and Labour cases are, however, relatively rare. Inspection Ag e n c y 14 on its experiences in the implementation of the Labour Inspection Ac t . (ii) Trade unions pronounce in favour of the In the spring of 1998, the Government initi- limitation or elimination of types of work ated an informal expert meeting with the social based on civil law contracts. The best partners to discuss the possibilities of joint known and widely publicized debate on actions once again. This time an informal agree- this issue took place between the Trade ment was reached that such cooperation could Union of Public Collection and Public Edu- be promoted at local (county) level and it was cation Workers (KKDSZ), a militant well- decided that channels for cooperation be pur- organized small union of the employees of sued on an experimental basis in the three public libraries, museums, cultural centres regions (Baranya, Szolnok and Fejér). etc., and the Ministry of Public Education in 1996-97, in connection with the drafting 3.2.4. Trade unions and contract and adoption of the Public Collection Act. labour The union, in a strong lobbying position both in Government and Parliament at that The trade unions are opposed to most forms time, urged “guarantees of employment” of work activities based on civil law contracts, for workers in public collections and pub- for at least two major reasons: firstly, because lic cultural institutions: in its interpreta- such arrangements, or most of them, tend to tion, such guarantees could be provided by undermine the legal guarantees of the protec- a legal provision permitting only an em- tion of workers; secondly, workers engaged in ployment relationship on the basis of the such activities are unlikely to maintain their Public Servants’ Act in this field. The ful- trade union membership and remain part of filment of this demand, however, threat- organized labour. As the phenomenon is rela- ened the institutions with serious financial tively new, its systematic discussion has just difficulties and rigidities in running flexi- started, and involves the participation of the ble programmes. Small institutions em- trade unions experts and leaders. For this pur- ploy accountants, janitors, guards as well pose, an expert meeting was organized in the as professionals running fixed-term pro- spring of 1998 by the Ministry of Labour.15 In grammes on the basis of civil law contracts. terms of trade union response, the following The debate’s dimensions can be character- appraisal may be ventured: ized by the fact that in a critical moment even the Chairman of the Parliament’s Cul- (i) The trade unions are exerting pressure on tural Committee, a supporter of the trade the Government and labour inspection union’s demands, tendered his resignation to stand up firmly against “disguised when the chance of a positive outcome employment relationships” calling on the seemed remote. Eventually, the solution authority of the Labour Inspection Act. turned out to be a compromise which laid

90 down an obligation to employ public ser- mostly inadequate to deal with the problems vants to perform activities considered raised by the informal sector. The weakness of fundamental for the functioning of the employers’ organizations and their poor co- institutions concerned. operation, beyond the lip-service they pay to the fight against illegal employment, have been It still remains an open question for both singled out by the unions as responsible for the unions and the Government how to treat the present state of affairs. problem as outlined. The Workers’ Councils Ac c o r ding to trade union reports in the tex- urge that legal protection by the Labour Code tile industry, employers had been consistently be extended to cover contract labour. There are complaining about “unfair competition” and examples of collective contracts regulating this had been urging trade unions to stand up matter (e.g. Hungarian State Railways).17 against informal (illegal) employment. As a response, the trade unions proposed a joint 3.3. Trade union actions geared union-employer initiative to demand “tar- to their membership and ge t e d investigations” by the labour inspection to employers authorities. The employers, however, quickly wi t h d r ew and refused to be part of such an ini- Although most trade unions in their action tiative. Their major argument was that “labour programmes put forward proposals for pro- inspection pref e r r ed carrying out investigations moting legal employment and fighting against among legal employers, thus adding to their illegal/informal/black employment, there is at bu r dens, and failed to pursue illegal ones”. the same time a general absence of vigorous It was also noted that a number of middle and coordinated action among their member- managers in the textile industry have their own ship and in their contacts with employers. “garage workshops” based on old machines It has been said by trade union leaders and and are engaged in illegal employment. experts that the trade unions’ approach can be For trade unions in the business sector, it is best characterized as “silent meditation”, since often difficult to ensure the cooperation of “it is difficult for the unions to define their rela- employers in collective bargaining, even on tionship” to the informal sector, owing to the fundamental issues such as wages and “there fact that the very workers who lose their legal is no hope to negotiate about such complex and status as workers and join the informal sector sensitive problems as informal employment”. “are lost to the trade unions”. Therefore a major Promoting collective bargaining and agree- challenge for the unions is their absence from ments at sectoral level could help to combat those fields of the national economy and from evils in the informal sector. All trade union rep- those groups of the population where informal resentatives agreed that it would be worth- employment is most widespread (SMEs, indi- while to extend multi-employer agreements to vidual entrepreneurs, the unemployed, eco- sectors.19 nomically inactive people, etc.).18 The representative of one of the confedera- While older generations of workers seem to tions reported on the widespread practice of be much more attached to legal employment “informal collective bargaining” and the trade and to the unions, anxious to secure their health unions’ dilemma of how to tackle the issue. and pension prospects, it is a “stillborn effort” We are not aware, for our part, of the exis- to try to convince younger workers that “they tence of any organization of workers in the risk their future and they lose their protection” informal sector. in the informal sector. A related problem is the Among NGOs the organizations of the workers’ extremely poor knowledge of labour unemployed have the closest links to those legislation and workers’ rights, and the gaps in potentially concerned. such knowledge cannot be compensated by a few trade union training courses. On the con- 3.4. The strengths and weaknesses trary, employers hire the best legal advisers and of trade union action human resources managers to set the terms and conditions of the employment relationship so Trade unions have been highly active in as to fit their best interests, notwithstanding the public policy formulation and implementation labour law provisions. bearing on the informal sector. The results of The classical labour relations institutions, their efforts, however, are still subject to con- such as enterprise- and sectoral-level collective troversy. All the same, their efforts may be bargaining and agreements, have proved to be appraised as follows:

91 (i) Trade unions have been active participants While trade unions have had an active and in policy formulation and drafting of legis- well-documented role in public policy formulation on taxation and contributions to the lation and implementation bearing on the infor- social (health and pension) as well as the mal sector at national level, they appear to be unemployment insurance funds. While, in somewhat perplexed when faced with the defi- principle, they have been in favour of nite forms assumed by informal employment reductions, in practice they were in favour in their everyday activities at the enterprises of maintaining the levies on earnings owing and among their membership. Perhaps it is to their commitment to the maintenance of their awareness of the complexity of the prob- social benefits, their presence in the Self- lems involved, of the importance of the infor- Governments of Health and Pension Insur- mal sector in providing employment and ance and, in the case of public service income – and very frequently complementary unions, their commitment to the mainte- income – for masses of working people which nance of employment in public services. somewhat explains the trade unions’ “mild” (ii) Trade unions have made repeated efforts to and “soft” approach to the problem, as owned raise the guaranteed and legally binding to by the trade unions themselves. national minimum wage. There has been put to the floor a much debated proposal 4. Workers’ protection and the role by a trade union confederation, MSZOSZ, of international labour standards referred to earlier, to introduce a three- grade, in fact a higher, guaranteed mini- The most sensitive issue in the area of the mum wage as a possible means to reduce informal sector – undeclared work – is the pro- informal employment. This proposal, how- tection of workers and workers’ rights. Infor- ever, could not be implemented although mal means unrecorded, unregistered and it has had the support of the Government unregulated, i.e. situated outside of the scope because it has consistently been rejected by of legal regulations, including labour law. From the employers. this point of view work activities related to the informal sector can be classified into at least (i i i ) Trade unions have initiated and firmly sup- three major categories: ported the rei n f o r cement of labour inspection, both by legislation and other means, (i) Undeclared employment, i.e. totally infor- in order to ensure the implementation of mal or, as it is commonly called, “black” labour law, and at the same time contain employment. and reduce illegal employment. As a res u l t Workers engaged in such activities have of other efforts on their part, a new Labour no legal protection under labour law, Inspection Act was passed in 1996 and the although many of them qualify for a social or ganization of labour inspection consoli- protection once they are declared as unem- dated in 1997. The question remained, how- ployed persons, pensioners, etc. ev e r , whether the trade unions would be (ii) De c l a r ed employment and partly declared / willing and able to participate in the actual partly undeclared income. implementation of the Labour Inspection Legal protection covers all those el- Act and in the promotion of the practical ements of the employment relationship work involved in labour inspection. that are declared. As for payments, it guar- (i v ) Trade unions seem to be aware of the dan- antees that the workers get the national ger contract labour – work activities carried guaranteed minimum wage if it is included out on the basis of civil law contracts – in the work contract but does not and can- involves in terms of eroding workers’ pro- not provide any guarantee for “payments tection and trade union membership. To put from pocket to pocket”. In case of the insol- a brake on, or at least slow down, the swift vency of the employer the workers have a sp r ead of such practices, trade unions have good chance of receiving their payment if tried to exert pres s u r e on the Government fixed in the work contract from the Labour to build up legal defences and make use of Market Fund, but they have no chance labour inspection. Apart from one or two whatsoever of getting more. notable exceptions, however, it is not known Workers have access to social security what efforts have been made by the unions services. to counteract these practices in contacts (iii) Contract work, i.e. types of work per- with their members and employers. formed on the basis of civil law contracts.

92 Legally, workers are not perceived as In the past few years, Hungary has had a workers in the strict sense of the term, but couple of rioting cases involving violations of as one of the civil partners – usually entre- trade union rights, mostly in middle-sized preneurs – of a civil law contract and enjoy enterprises run by foreign employers. Apart the protection of civil law instead of labour from these cases, we are not aware of any other law. They will only enjoy social protection violations of fundamental workers’ rights (e.g. if they pay for it as entrepreneurs. the prohibition of discrimination in employ- What does this mean? ment, or any practices involving child labour or No regulations are in place with reg a r d forced labour).20 to working time, payment, termination of employment, etc. While the employer is 5. Conclusions for further obliged to pay at least the guaranteed min- trade union action imum wage in the case of an employment relationship based on the Labour Code, or Having gauged the dimensions, founda- the minimum salary (which is slightly tions and complexity as well as heterogeneity higher) when the employment rel a t i o n s h i p of the “hidden” or informal sector in Hungary, is based on the Public Servants’ Act, in the it is virtually impossible to arrive at definite and case of civil law contracts, no such obliga- practical proposals or guidelines for further tion exists. The individual worker has to trade union action. take personal responsibility for his or her Even so, it would be well worth considering social security and he or she is excluded the following conclusions of an expert meeting fr om unemployment benefits. In principle, which addressed the question: civil law contracts may include even • trade unions should pay more attention to st r onger protection for workers than labour the informal sector, its various forms of legislation, as is the case with managerial manifestation, and its impact on workers; contracts, but these instances extrem e l y ra r e, taking into account the imbalance in • trade unions should make more effective the positions of the two parties involved. efforts not to lose the workers who lost their jobs and became absorbed in the informal What is the impact of informal or semi- sector; informal employment on the implementation • special attention should be paid to young of core international labour standards? workers; It is extremely difficult to ascertain. • more education is needed in the areas of The labour inspection authority is empow- labour legislation and workers’ rights; ered by the Labour Inspection Act to control the implementation of certain essential rights of • legislation should provide the protection of workers (e.g. freedom of association, non-dis- labour law for workers employed under crimination in employment). Its investigations civil law contracts; are based on complaints usually lodged by • collective bargaining and agreements may trade unions functioning in some legal enter- contribute to the limitation and reduction of prises run by employers. The labour inspection employment in the informal sector and authority has limited capacity: it is engaged should be promoted; annually in 25,000 to 30,000 investigations • better cooperation with employers and while the number of corporate and individual employers’ associations is indispensable if undertakings amounts to almost 1 million in trade union efforts are to be more effective the country. at national, sectoral as well as enterprise We have no knowledge of workers’ org a n i- level; zations in the informal sector and on the basis of the information at our disposal, trade union • the extension of multi-employer collective p resence is also extremely rare in the SMEs. It contracts to the relevant sector is a possible remains an open and unanswered question means to regulate the situation; whether this state of affairs re flects the fre e • it is necessary to bring Hungarian wage lev- choice of the workers not to unite in unions els closer – in keeping with the performance a n d be engaged in collective bargaining, or of the national economy – to the European whether it is the tacit expectation of employers wage levels: the only effective deterrent to in this field not to have trade unions on their keep workers from turning to informal p re m i s e s . activities;

93 • reducing taxes and contributions on wages 8 See Héthy, L. 1998. “A megállaposásos bérpolitika would be the only effective means to induce Magyarországon”, (Negotiated wage policies in Hungary) Közgazdasági Szemle, Budapest, Jan. employers not to maintain informal activi- 9 ties; and See Lindnerné Eperjesi, E. 1997. “A magyarországi munkaerõköltségek alakulása az EU csatlakozás tükrében” • labour inspection can have an important, (Labour costs in Hungary in the context of its integration into albeit limited, role, if effective, in informal the EU), I-II, Európai Tükör, Budapest. activities into the organized sector. 10 For a detailed description of trade union characteristics and rep re s e n t a t i v i t y , see Ladó, M. 1994. Wor k e r s ’ and employ- e r s ’i n t e rests as they are rep r esented in the changing industrial rel a - tions in Hungary, UCEMET, Working Papers, No. 3, Krakow. Notes 11 For a detailed description of the institutions see Na t i o n a l tripartite structures in the labour ﬁeld in Hungary, Ministry of

1 La b o u r , Budapest, 1997. For CRI and related institutions, see In preparing this study, the author has drawn on the The State of Reconciliation of Inter- p roceedings of a meeting of trade union leaders and experts Ladó, M; Tóth F. (eds.). 1996. ests 1990-1994 (held on 25 November 1998 at the Labour Research Institute , Helyzetkepaz érdekegyeztetésrõl, 1990-1994. ET in Budapest involving the following participants: T. Wi t t i c h , Titkárság – PHARE Társadalmi Párbeszéd Projekt, Budapest. Vi c e - P resident, MSOSZ, (National Association of Hungar- 12 A typical example for such deals is the 1992 Novem- ian Trade Unions); J. Borsik, Co-Chairman, A S Z S Z ber CRI agreement. For details see Héthy, L. 1995. “Tripar- (Autonomous Trade Unions’ Confederation); E. Szabó, Pre s- tism and public policy formulation in Hungary”, in Kyloh, ident, SZEF (Trade Unions’ Cooperation Forum); L. R. (ed.). Tripartism on trial: tripartite consultations and negotia- Horváth, Vi c e - P resident, LIGA (Democratic League of Inde- tions in Central and Eastern Europe, ILO-CEET, ILO, Geneva. pendent Trade Unions); M. Révész, ÉSZT (Intellectual Wo r k- 13 The procedure for negotiating and setting it is as fol- ers’ Trade Union Confederation); J. Iványi and M. Pásztor, lows: (1) The Tripartite National Council for the Reconcilia- MOSZ (National Alliance of Workers’ Councils); I. Ékes, tion of Interests is entitled by legislation under the Labour Trade Unions’ Institute of Social and Economic Research; E. Code, 1992, to fix the national guaranteed minimum wage. Berki, Senior Researc h e r, and L. Héthy, Dire c t o r, Labour (2) When an agreement is concluded concerning the guaran- R e s e a rch Institute. teed minimum wage, usually once a year, it is automatically 2 While the ILO admits that there is no definition of the turned into a Government decree with legal binding force. informal sector based on “universal agreement”, it under- (The tripartite CRI does not have legislative powers.) lines that it is “misleading to equate the underground econo- 14 Roughly the equivalent of 15,000 US dollars. my of certain developed countries with the informal sector. 15 Where an underground economy exists, it is generally con- In Hungary, the National Labour Safety and Labour stituted in order to evade taxes, control and regulation, some- Inspection Agency (OMMF) is an independent governmen- times perhaps because control and regulation are too bureau- tal organization under the supervision of the Minister of cratic and inefficient; but rarely is it a phenomenon associated Labour (now also the Minister of Social and Family Affairs). with survival strategies of the ppor as in developing coun- It has local units in Budapest and in the 19 regions. The tries. See The dilemma of the informal sector, Report of the Direc- Agency itself has several decades of long tradition in safety tor-General, International Labour Conference, 78th Session, supervision, but an extremely short history in labour inspec- 1991, ILO, Geneva, 1991 and Industrial relations in the infor- tion. Some of its labour inspectors belonged to the labour mal sector, World Labour Report (Industrial Relations, Democ- market service and controlled jobs in undertakings per- racy and Social Stability 1997-98), ILO, Geneva, 1997. formed by persons declared as unemployed claiming unem- 3 ployment benefits. See On Undeclared Work. Communication from the Com- 16 mission, COM (98) 219 final, Office for Official publications See “Munkavégzés különbözñ jogviszonyok keretében: of the European Communities, Luxembourg, 1998. átrendezõdés vagy átváltás? (Work activities in various legal 4 frameworks: restructuring or transformation?)”, in Ónodi, I. See Héthy, L. 1983. “The secondary economy in Hun- (ed.). 1998. A munka világa ‘98. Munkaügyi Kapcsolatok Tár- gary: its impact on industrial work and Government efforts sasága, Munkaügyi Kutatóintézet, Budapest. to control it”, in Changing perceptions of work in industrialized 17 countries: their effect on and implications for industrial relations, Ibid. Research Series No. 77, International Institute for Labour 18 In the Hungarian State Railways the collective contract Studies, ILO, Geneva. prohibits the employment of locomotive drivers on the basis 5 The most widely quoted estimates are drawn from a of civil law contracts. research project initiated by the Blue Ribbon Committee and 19 In recent years the Workers’ Councils have made an supported by the OECD, the Canadian Government, the GKI attempt to organize small (self-employed) entrepreneurs. Economic Research Company (Budapest) and the Hungar- The League has tried to promote the re-employment of ian Central Statistical Office; Árvay, J.; Vértes, A. 1993. Sum- unemployed persons by trying to find jobs for them, but was mary Report on the major findings of the project entitled “Research horrified to learn that most jobs offered were “informal”. Work on the Assessment of the Real Performance of the Private Sec- 20 On the basis of the provisions of the Labour Code, the tor in Hungary” , Budapest, Dec. According to its estimations Minister of Labour can extend collective contracts concluded the hidden economy’s size was 29.6 per cent of the GDP– of by representative unions and employers (employers’ associ- which 11.7 per cent was included and 17.9 per cent was not ations) to the whole sector. included in the official GDP. 21 6 Hungary has ratified all seven core international Labour Research Institute. 1998. Main trends in labour labour Conventions and supported the adoption of the ILO demand and supply,Yearly Labour Market Report, Budapest, Declaration on Fundamental Principles and Rights at Work Apr. and its Follow-Up (1998). It is also in the process of ratifying 7 Ibid. the Social Charter of the Council of Europe.

94 Italy

It is apparent that trade unions need to take steps to secure the representation and protection of workers engaged in the many new patterns of work which have come to the fore in order to avoid improper competition in worker-recruitment methods leading to segmentation and conﬂict in the representation of the federal trade union.

B. Angeloni/M. Giovine/M. Marocco/A. Mocavini/ V. Parisi/C. Prestileo/C. Tagliavia*

The following study was conducted by a The study is organized in the following working group consisting of ISFOL research manner. workers and trade union experts. Coordinated Section 1 analyses the aspects which have by ISFOL (Instituto per lo Sviluppo della For- contributed to the growth of the informal econ- mazione Professionale dei Lavoratori – Institute for omy in Italy from an economic and regulatory the Development of Vocational Training for viewpoint. Workers) on the basis of guidelines set by the Section 2 consists of a quantitative analysis ILO, its aim is to analyse the growth of the infor- of the phenomena described above using data mal economy in Italy. from ISTAT (Instituto Nazionale di Statistica – Italy offers a continuum of work options: National Statistics Institute) and INPS (Instituto between unofficial employment and regulated Nazionale della Previdenza Sociale – National and protected employment, there exists a series Social Security Institute). of intermediate arrangements – coordinated Section 3 examines the role played by the and regular collaboration, occasional collabo- trade unions CGIL(Confederazione Generale Ital- ration, temporary work, training/employment iana dei Lavoratori – Italian General Confedera- contracts, job-insertion plans, job grants and tion of Labour), CISL (Confederazione Italiana training periods. These forms of work are at the Sindacati Lavoratori – Italian Confederation of origin of the debate currently under way in Workers’ Unions) and UIL (Unione Italiana del Italy on the subject of atypical work. The degree Lavoro – Italian Labour Union) in devising cer- of trade union intervention varies according to tain strategies to safeguard the individuals con- the form in question, just as a system of rights cerned by these forms of work, and the extent and protection forms is in many cases yet to be to which those strategies have also led to the developed. adoption of specific regulatory decisions. More Given this situation, the study which follows specifically, we examine the creation of new focuses both on the phenomenon of the under- trade union structures capable of overcoming gr ound economy, especially “unofficial employ- the current lack of information and fulfilling the ment in the sense of work not declared for tax need for representation and protection of the and social-security purposes”, and on rec e n t workers involved. developments in coordinated and continuous The last section looks at the new challenges work, otherwise known as “para-subordi n a t e ” and main guidelines that the growth of the work, “in the sense of an arrangement involv- informal sector implies for future trade union ing the performance of an activity not governed action. Also provided is a description of the by a subordinate bond but within the frame- main provisions discussed during current par- work of a single and continuous rel a t i o n s h i p ” . liamentary debate.

* This research study was conducted by M. Giovine (Coordinator); M. Marocco, A. Mocavini, and V. Parisi for ISFOL; B.Angeloni (ALAI-CISL), C. Prestileo (CPO-UIL), and C. Tagliavia (NidiL-CGIL) for the trade unions. ALAI (Associazione dei Lavoratori Atipici e Interinali – Association of Atypical and Temporary Workers); CPO (Coordinamento Nazionale Per l’Occupazione – Coordination for Employment); NidiL(Nuovo Identità di Lavoro – New Labour Identity)

95 1. The decisive economic sider is that in Italy many micro-enterprises and regulatory factors arise from a need to create work activities 1.1. Economic aspects and specific which often border on subsistence levels and features of Italy’s production which, under the burden of tax and social secu- system rity payments and general uncertainty, may well slip out of sight or into the informal sector. The aim of this section is to highlight a num- Keeping in focus the production system, we ber of elements relating to the production sys- believe that other elements characteristic of tem which, combined with other factors, may Italy may have contributed in recent years to help to explain the magnitude of the informal the spread of unofficial employment. economy in Italy. To begin with, one should not forget that in F rom the beginning of the 1970s on, inno- Italy an important role is played by the agri- vations in the organization of production con- cultural sector where production is often orga- sisting, very briefly, in the transition from the nized around small units with a very low level F o rdian model to the post-Fordian model, led of productivity. In terms of employment, to a fragmentation of production and a ten- whereas in the European Union (EU) agricul- dency to decentralize it by setting up networks ture accounts for 5.1 per cent of aggregate of subcontracts and outsourcing. In Italy, in employment, in Italy the sector takes up 6.7 per recent decades, this has triggered the develop- cent of workers. Moreover, we should point out ment of small and medium-sized enterprises that in absolute terms Italy is the country with (SMEs), which are endowed with a gre a t e r the largest number of workers in agriculture d e g ree of flexibility than large-sized enter- (1,332 thousand units) compared with the rest prises. Their growth then prompted the cre a- of the EU (7,514 thousand units), or in percent- tion of business districts, i.e. local networks of age terms, 17.7 per cent.3 SMEs marked by a high degree of integration Furthermore, in Italy, as in the majority of and coordination. Thus, at the end of the 1990s, the industrialized economies, there has been an Italy’s industrial system is now characterized increase in the role of the services sector where by a prevalence of small-sized enterprises. the proportion of self-employment is greater A c c o rding to a recent survey of enterprises con- than elsewhere. Although in Italy the share of ducted by ISTAT in 1996 in industry and ser- employment in services is in line with the aver- vices, 95 per cent have less than ten employees. age for the EU (respectively around 62 per cent In industry alone, the proportion of small-sized and 65 per cent according to Eurostat figures), enterprises is larger in Italy than in any of the this sector contains a prevalence of small other industrialized countries. Furthermore , traders, again often in response to the need to the survey also reveals that in the early 1990s, invent a job. 23.3 per cent of such enterprises had less than Taken together, these factors mean that the ten employees, which is more than in Germany pressure of labour supply is greater than that of (7.4 per cent), France (7.2 per cent), the United demand and, in the presence of the constraints Kingdom (7.2 per cent) or the United States we have described, it may move towards unof- ( 3 . 3 per cent).1 The enormous importance of ficial segments of the labour market. SMEs in the Italian scenario is further con- Italy’s unemployment rate is higher than firmed by the proportion of workers they the European average (respectively 12.5 per employ: 79.9 per cent of the total (in industry) cent and 10.8 per cent in 1997) despite a lower c o m p a red with 65.9 per cent in the Euro p e a n activity rate (respectively 57.7 per cent and 76.7 Union as a whole.2 per cent in 1997).4 Southern Italy appears to be This majority of small or very small-sized the weakest, with an unemployment rate in enterprises (micro-enterprises) makes control 1997 of 22.2 per cent, compared with 7.3 per by the State more difficult and increases the cent and 5.7 per cent in the north-west and likelihood of evasion of tax and social security north-east .5 laws, as well as of labour-market regulations Among the factors underlying the higher (safety, working hours, etc.). Moreover, micro- propensity to engage in forms of illegal work enterprises often have low rates of trade union we should like, at this stage, to call attention to membership, making the workers themselves the impact of general taxation. There are three more vulnerable, especially those belonging to main elements which prompt recourse to forms the weakest segments of the market, and hence of illegal work: high tax rates and social secu- more willing to accept working conditions rity contributions; a complex and generally verging on the illegal. Another point to con- unclear system as a whole; and little likelihood

96 of detection. In Italy, as indeed in the majority In addition, there is a fair degree of rigidity in of the member States of the European Union, the actual system of safety measures. When an the past decade has revealed the limitations of employment contract is stipulated, the parties a model of social state strongly based on a sys- (employer and employee) have little room for tem of “guarantees” which, when exogenous manoeuvre because the law and collective bar- conditions became unfavourable for popula- gaining have fixed a set of rules which cannot tion- and employment-linked reasons, brought be altered except by clauses favouring the heavy burdens to bear on the community in worker, the aim being to ensure, once the rela- terms of a general increase in taxation. These tionship has begun, that economic and regula- effects have since been aggravated by the adop- tory conditions favour the employee category tion of tight fiscal policies to support Italy’s con- (see Box 1). vergence with the European Monetary Union. However, this legislative framework has Thus, growing uncertainty as to the economic undergone substantial innovations, particu- situation and the increasing globalization of larly since the 1980s, to adapt the body of regu- our economies, where maintaining a competi- lations to the changes which have taken place tive position becomes crucial, have forced some in the organization of production, and has led, enterprises to resort to forms of illegal work overall, to an increase in flexibility. Various phe- guaranteeing lower costs and greater flexibility nomena have been involved, all interrelated of production in the face of unexpected falls in and stemming from the developments in demand. Finally, we would point out that while labour law mentioned above, and partly Italy’s tax system has become increasingly bur- prompted by the need to fall into line with densome in recent years, reforms designed, on European Commission (EC) legislation.6 the one hand, to make it significantly less com- To begin, it is worth recalling the advent plicated in general and, on the other, to improve of certain models of legislation regulating the tools for control have been slow in taking labour which differ from the traditional one: the shape, thereby increasing the possibilities of fixed-term contract, part-time employment, elusion and evasion. apprenticeship, the training/employment contract, job-sharing and, lastly, temporary 1.2. Main features of Italy’s regulatory employment. system of labour protection Other typical features of this trend are the phenomena of “controlled deregulation” – Italy’s legal system to safeguard the perfor- empowering collective bargaining to make mance of work is anchored to the social figure changes, even for the worse, in standards fixe d of the worker in a large-sized enterprise, hold- by law;7 the curbing of labour costs (a signifi- ing a stable, full-time job of indefinite duration. cant step in this direction is the abolition of the

Box 1. Phase of minimum, unilateral and privileged protection In a preliminary phase (1960s-1970s) the aim was to create, notably through legislative measures, a complex network of unavoidable protection in favour of subordinate workers. This stage includes the creation of a public monopoly over placement, accompanied by a requirement for employers to recruit using a numbered application (Law 264/49) and a prohibition to contract manpower (Law 1369/60); another feature is the body of rules governing ﬁxed-term employment contracts (Law 230/62) and the laws on special employment relationships: apprenticeship (Law 25/55), domestic employment (Law 339/59) and home-based work (Law 264/58). This framework also embraces measures to limit the powers of employers: the prohibition to dismiss for marriage (Law 7/63) and the introduction of the “justiﬁed motive”requirement to limit the power to cancel an employment contract (Law 604/66). Above all, the Statute of Workers (Law 300/70) represents the highest and most effective expression of protection for the individual and social rights of workers since its aim is to encourage the stable presence of trade unions in the workplace (anti-discrimination regulations, trade union rights, repression of anti-union behaviour, etc.). With regard to wages, it is worth recalling the agreements on automatic wage mechanisms relating to the so-called wage indexation scale (inter-union agreements of 15/1/1957 and 25/1/1975) to protect real wages and the reform of the labour process (Law 903/77) to guarantee more streamlined procedures.

97 system of wage indexation); privatization of services, area-based contracts) which have public employment; a gradual changeover from effectively found their way into legislative pro- the “call by number” system of job insertion to visions, as we shall see (Box 2). one based on “named calls”; and, lastly, the abo- This latter development in legislation has lition of the public monopoly over placement. been accompanied by a number of important These new trends in labour law are accom- phenomena which have taken shape either in panied, moreover, by growing recognition of the gaps left by the body of regulations, outside the role of “coordination” between the Gov- it, or even against it. Indeed, the coexistence ernment and the social partners, with the result within Italy’s legal system of an area of rigid that the latest trends have often been the out- protection and regulation – as in the case of sub- come of active participation by the trade ordinate employment – and an area exempt unions. In other words, the transformation from absolute rules, where the parties to the would not have been possible without indus- employment contract are free to establish them- trial relations evolving from conflict to partici- selves the conditions for the performance of pation.8 Significant events in this process are the work – i.e. self-employment – has naturally Agreement on Labour Costs of 1993 and the caused this second form to expand in recent Pact on Labour of 1996. years. In other words, Italy’s labour market The 1993 Agreement not only marked the seems to have found in self-employment the end of automatic wage mechanisms and estab- regulatory system needed to restore flexibility, lished a formal system of trade union relations almost as if this form offered a sort of “safety designed to minimize conflict, but also contains valve” against over-rigidity.9 large chapters dedicated to the need to encour- The phenomenon gives rise to concern, age “active control” of the labour market: man- however, when the choice of contract is not the agement of employment crises, youth employ- outcome of the exercise of free will by the par- ment and training, and reactivation of the ties (especially the worker) but in truth conceals labour market. a subordinate employment contract, one with- This same line is evident in the 1996 Pact out the costs and protection safeguards. In this which not only confirms the importance of the case, improper use of this type of contract coordination method but envisages a number makes it justifiable to suspect a case of unoffi- of instruments to combat unemployment and cial employment. promote flexibility (working hours, training The rigidity of the system, along with and research, temporary employment, training adverse economic and productive factors, often periods, part-time employment, employment makes it impossible for an enterprise to cope

Box 2. “Flexibilization” stage After a period severely affected by the economic recession – typical examples of this stage ar e the agreements on the curbing of labour costs (trilateral agreement of 22/1/1983, Memoran- dum of Understanding of 14/2/1984) up to the abolition of the wage indexation scale (Memo- randum of Understanding between the Government and the social partners of 31/7/1992) and creation of the Wage Equalization Fund (Law 164/75 and Law 427/1977) to protect employment levels – more recently, various pressures towards greater ﬂexibility of the labour market have become evident. Expressions of this trend are the laws designed to incorporate special forms of employment contracts into Italian legislation or facilitate their use. This is the case, on one level, of the introduction of the part-time contract (Law 863/84) and the training/employment contract (Law 863/84) and more recently of the contract for the supply of temporary work (Law 196/97). At another level, collective bargaining has been designated for the establishment of other cases of eligibility of ﬁxed-term contracts (Law 56/87), while the system of sanctions governing such contracts has been relaxed and the scope of contracts with a training content has been extended (Law 196/97). Substantial innovations have been introduced on several occasions in public employment contracts to bring them gradually into line with the private sector, a process known as the privatization of public employment (Legislative Decree 29/93). Lastly, other indicators of the progressive “deregulation” of the labour market are the generalized adoption of the principle of recruitment by “named call” (Law 608/96) and the entry of the private sector in placement services following the abolition of the public monopoly (Leg- islative Decree 469/97).

98 with excessive costs and this has led to the 1980-1990 and the second 1990 to 1997. Table 1 gr owth of a special form of undergr ound econo- shows that the aggregate unofficial employ- my due to over-r egulation and heavy tax bur- ment kept increasing until 1990 and then grad- dens. Labour law, in the sense of a rigid model ually declined. In the past three years, unoffi- of regulation for a single type of subordi n a t e cial employment has tended to stabilize at employment, has proved incapable of interpret - around 2,200,000. As for non-resident foreign- ing and keeping pace with the evolution of the ers, their numbers have increased substantially economic and social context, thereby leaving over the whole period (by 444,000 in absolute scope not only for such phenomena as the“fli g h t value and 162 in percentage terms). fr om subordinate employment”, but also for a The decrease in the number of illegal units “fl ight from labour law” in every sense. which can be observed since 1990 (equal to In this framework, a so-called “reaction” has 153,000) can be largely ascribed to a worsening taken place, consisting, on the one hand, of the of employment conditions in recent years, as development of the concept of para-subordi n a t e evidenced by the drop in legal work units dur- employment and, on the other, in the creation of ing the same period (down by 875,000). It is the institution of wage realignment contracts. worth examining these considerations a little closer. As already pointed out, the underground economy is a varied phenomenon with 2. Quantitative analyses a multitude of causes, and it is not always easy 2.1. Unofficial employment in Italy to tell which have exerted the strongest pressure. As has been stated earlier, one of the major Although the phenomenon of unofficial factors sustaining an increased propensity to employment is widespread throughout the engage in unofficial activities is the heavy tax European Union, in Italy it has reached worry- burden. Thus, given the increase in the impact ing proportions and, according to estimates by of general taxation in Italy in recent years (it the CEIS (International Centre for Studies on should be recalled that it was to support Italy’s Economics and Growth) of Rome’s Tor Vergata entry in the European Monetary Union that a University, in 1997 accounted for approxi- second progressive income tax was introduced mately 17 per cent of GDP.10 In this part of the in 1997, the Eurotax, which was added to the study, we analyse in detail the proportion of aggregate burden of personal income tax, unofficial employment in Italy and examine its IRPEF), one would have expected the under- evolution since 1980, using the term “underground economy to expand during the period ground economy” to denote the complex of 1996-97. Obviously, the employment situation paid legal activities which are not declared to deteriorated to such an extent as to counterbal- the authorities and the revenues from which ance this effect and so produce, overall, a drop elude taxation. A quantitative evaluation of the in the number of illegal units. phenomenon can be obtained from ISTAT data In Table 2, we show the distribution of ille- on illegal work units, divided into employed gal units between subordinate employment and self-employed units, and on work per- and self-employment. 12 It is apparent that the formed by non-resident foreigners (see Table 1).11 largest share of unofficial employment is made The period in question can be separated into up of employed workers and that this trend two sub-periods, the first covering the decade remains stable throughout the period studied.

Table 1. Legal and illegal work units (total, employed, self-employed workers); thousand units

1980 1985 1990 1995 1996 1997 Total legal 17 405.9 17 531.7 18 068.9 17 236.0 17 276.4 17 193.2 Official employed 13 054.4 12 831.1 13 237.9 12 629.1 12 640.6 12 600.2 Official self-employed 4 351.5 4 700.6 4 831.0 4 606.9 4 635.8 4 593.0 Total illegal 2 384.2 2 334.7 2 417.5 2 248.1 2 229.9 2 231.1 Unofficial employed 1 476.2 1 399.3 1 518.0 1 395.4 1 389.1 1 405.7 Unofficial self-employed 908.0 935.4 899.5 852.7 840.8 825.4 Non-resident foreigners 274.0 495.0 573.3 683.5 696.9 717.9 Source: ISTAT.

99 Unofficial employment breaks down into just sharp increase in industry and services. On a over 60 per cent of employed workers and just sectoral level, the crisis which overtook agri- under 40 per cent of self-employed workers. culture led to a drop in unofficial employment However, comparing the percentages of legal which was also partly due to an outﬂow of and illegal work units it appears that unofficial workers towards industry. In industry, the self-employed workers greatly outnumber the growth of the phenomenon can mainly be employed. ascribed to the sectors where production is tra- We can now extend the analysis to include ditionally organized around small-sized enter- the distribution of illegal work units among the prises for which the constraint of remaining main sectors of economic activity (agriculture, cost competitive was especially strong during industry, private services). We refer to Table 3 the years of weak cyclical expansion; but in the showing the legal and illegal work units and services sector, on the other hand, it is the result non-resident foreigners. of a sustained rise in demand for personal ser- A comparison of the percentages of legal vices and in the provision of business services, and illegal units points to a heavier concentra- as evidenced, for example, by the spread of tion of the underground economy in agricul- computer-related services, where there is a ture, while it tends to be under-represented in strong presence of self-employed workers often the services sector. An analysis over the whole bordering on the unofficial. period also indicates that compared with 1980, If we now turn to non-resident foreigners, when unofficial employment was present to we can see that the largest concentration occurs much the same extent in both agriculture and in the services sector, which in 1997 alone industry and less so in services, in 1997 there is accounted for approximately 60 per cent of a drop in the share found in agriculture but a their work units. In this case, the phenomenon

Table 2. Legal and illegal work units (total, employed, self-employed workers); percentage breakdown

1980 1985 1990 1995 1996 1997 Total legal 100.0 100.0 100.0 100.0 100.0 100.0 Official employed 75.0 73.2 73.3 73.3 73.2 73.3 Official self-employed 25.0 26.8 26.7 26.7 26.8 26.7 Total illegal 100.0 100.0 100.0 100.0 100.0 100.0 Unofficial employed 61.9 59.9 62.8 62.1 62.3 63.0 Unofficial self-employed 38.1 40.1 37.2 37.9 37.7 37.0 Source: ISTAT data reprocessed by ISFOL.

Table 3. Legal, illegal (total) work units and non-resident foreigners by sector of activity; percentage breakdown

1980 1985 1990 1995 1996 1997 Total legal units Agriculture 9.6 7.2 5.0 3.7 3.5 3.4 Industry 48.5 41.9 41.0 38.9 38.4 38.1 Private services 41.9 50.9 54.0 57.4 58.1 58.5 Total illegal units Agriculture 37.5 34.5 32.9 28.8 27.8 26.7 Industry 35.3 35.2 36.5 39.8 39.9 40.3 Private services 27.2 30.3 30.5 31.4 32.4 32.9 Non-resident foreigners Agriculture 24.1 19.2 18.0 23.5 23.7 23.7 Industry 21.7 18.5 16.5 14.7 14.8 16.0 Private services 54.2 62.3 65.5 61.8 61.5 60.2 Total 100.0 100.0 100.0 100.0 100.0 100.0 Source: ISTAT data reprocessed by ISFOL.

100 is mainly due to the increase in personal ser- 2.2. Para-subordinate employment: vices (such as home help), where there is a “Coordinated and continuous greater proportion of foreigners. As for the collaboration” contracts other sectors, the phenomenon shows a tendency to stabilize in agriculture, while in indus- The post-industrial models of production try it declined until 1996 and then picked up. have given rise to new types of work which can- In Italy, the undergr ound economy is not not be incorporated into the category of subor- evenly distributed throughout the country but dinate employment and have therefore tends to concentrate in the south. The latest geo- remained for a long time on the margins of graphical breakdown of data produced by labour-protection law. The concept of para- IS T AT dates back to 1994 and only relates to the subordinate employment arises from an ag g r egate of unofficial workers (employed) in explicit need to recognize all those “forms of the narrow sense and the sectors of industry and self-employment with the characteristics of services. Out of the total work units per geo- being predominantly personal, continuous and graphical area and ref e r ence sector, illegal work coordinated” by incorporating them within the units account for 8.2 per cent and 35.3 per cent scope of the legal system of guarantees for sub- in industry respectively in the centre-north and ordinate employment. In other words, it was the south, and for 4.4 per cent and 13.3 per cent originally intended that this category should in marketable services.13 Apart from the factors lead to an enlargement of the scope of labour described earlier, this can be put down to the law rather than represent a regression. In this existence of other causes related to the struc t u r e case, the debate is even couched in terms of an of the labour market which have a stron g e r “expansion of labour law”. impact in the south and during periods of poor However, this legislative method of gradu- expansion. As far as the demand for labour is ally “annexing” areas of self-employment or concerned, the following factors play a rol e : “grey” areas, as they may be, to the area of sub- • persistent situation of high unemployment ordinate employment proved not only to have with slack labour demand in the manufac- various shortcomings as a system and to be turing sector and an inability on the part incomplete and inadequate (especially from the of the other sectors to take up the excess social security viewpoint) but also to make this labour supply, combined with an increa s e d type of contract too easily open to the interpre- demand for seasonal labour in the services tation of the parties. In other words, in situa- sector which, failing adequate controls, often tions where the worker is in a particularly weak spills over into the undergr ound economy; position against the employer, the choice of an d work in the form of coordinated and continuous collaboration is not genuine but conceals a • the greater uncertainty which characterizes subordinate relationship without the associ- the economy of the south compared with the ated protection forms and is therefore fraud in other areas of the country; this, on top of an the eyes of the law. The proliferation of this inflexible labour market, prompts entrepre- form of work in recent years is probably the sin- neurs to seek unofficial employment. gle event which has most helped to overturn a On the supply side, instead, we would concept, that of para-subordinate employment, highlight: which originated at a time when the phenom- • the poor ability of weak labour supply enon certainly had less of a social impact. (women and/or young people) to become The profiles in question and the related absorbed in segments of the official market; work thus become somewhat ambiguous; the and borderline between characteristics of subordinate employment and self-employment tends • a growing propensity of young labour sup- to be very fine, to the point where regarding a ply to engage in less regulated activities job as subordinate employment or self-employ- which are less subject to rigid rules regard- ment may depend on the worker’s perception ing, for instance, working hours. and not on any objectively assessable elements. Ba s i c a l l y , in Italy, the undergr ound economy The phenomenon can be explained in part by di f fers in nature and degree according to sector the fact that these forms of work often fulfil the and geographical area. The causes of the phe- role of support and/or reinforcement for com- nomenon are multiple and this explains why it petences and production skills already present is so difficult to find the right tools to solve the in the enterprise, that they are discontinuous, pr oblem within a fairly short space of time. duration and hours are short, social security

101 protection is minimal/absent, but the activity payment. The INPS includes door-to-door is coordinated by the contractor, there are fixed salespeople in this category; working hours and a wage which is often paid • freelance professionals are people who on a monthly basis. habitually perform an art or profession. The A statistical analysis of these forms of work definition is fairly broad and may give rise enables us to assess their volume and offers a to dubious interpretations, particularly in useful key for interpreting phenomena of the case of the provision of services. The cri- increasing labour-market flexibility. We can terion used to distinguish self-employment make this analysis of the volume of coordinated from entrepreneurial activity lies in the and continuous work using data gathered by organizational factor, i.e. in the context in the INPS (Instituto Nazionale della Previdenza which the work is performed (criterion of Sociale – National Social Security Institute) the prevalence of own work); and when social security positions were created for specific categories of contributors. • professionals/collaborators are freelance As will be explained in greater detail further professionals registered with other social on, the law on the reform of the pension system security funds who perform work which is (Art. 2, comma 26, Law 335/95) envisages reg- not part of their main activity, the income istration in a specific social security fund set up from which is subject to INPS social security by the INPS and hence the requirement to pay contributions. They are mainly directors contributions for workers earning incomes and internal and external auditors. from professional activities (the requirement does not apply to freelance professionals The professional groups described above already insured with funds set up by that pro- possess different characteristics as regards their fession, but only as far as pertains to income on position in the labour market. Among the free- which contributions are paid to those funds), lance professions are concentrated the highly from “coordinated and continuous collabora- qualified levels, which are therefore in a position” contracts, and from door-to-door sales. tion of strength on the market, while the “coor- The data provided by the INPS on positions dinated and continuous collaboration” cate- open at 31 March 1998 (i.e. positions opened gory incorporates a small proportion of highly when the law came into force and are still open) professional activities as well as a myriad of groups the categories concerned into three activities associated with tertiary or “poor-ter- major aggregates: freelance professionals, co- tiary” sector services: cleaning, fast food, and ordinated collaborators and mixed profiles: functions contracted out by enterprises. The professionals/collaborators. workers belonging to these groups are atypical It emerges (see Table 4) that over a million insofar as the relationships they establish with workers are registered, 1,153,485 to be exact; the contractors do not possess the elements 85.9 per cent of these are coordinated and con- needed to constitute a typical work arrange- tinuous collaborators (990,304), while 12.5 per ment: inclusion in the company staff roll, defi- cent (143,906) are professionals and 1.7 per cent nition of the time for performance of the work. (19,275) mixed professionals/collaborators. In the first group, these non-standard meth- At this point, it is worth describing more ods of performing work are regarded as a privi- exactly which workers are included in the three lege, whereas in the second group the same con- groups: ditions sometimes make it difficult to qualify the individuals. Collaboration may span short • coordinated and continuous collaborators or even very short periods, earnings may be are, first of all, directors and internal and minimal, and there is little or no regulatory or external auditors of companies and organi- contractual protection. The analysis which zations, contributors to newspapers, maga- follows focuses on the dynamics and charac- zines, etc., members of examination boards teristics of the second group of individuals in and commissions, other collaborators enter- order to highlight the growing flexibility of ing into an arrangement with the contractor labour, including its precarious aspects. Com- which envisages the performance of activi- parisons will be made with the characteristics ties with an intrinsically professional con- of the professional group to help explain the tent but conducted outside a bond of sub- phenomenon. ordination, as part of a single, continuous As indicated earlier, 85.9 per cent of the data relationship not using organized means in question (990,393 individuals) refers to coor- and receiving a pre-established, periodical dinated and continuous collaborators. The

102 103 analysis by age group indicates that the num- of active women has been increasing over the ber of coordinated collaborators tends to past 20 years and now accounts for approxi- increase among the younger categories. Specifi- mately 40 per cent of the total workforce. There cally, from the youngest group (under 25 years are many factors behind the growing presence of age) to the groups aged 26 to 30 and 31 to 35, of women and they include the expansion of the the percentages range from 8.3 per cent to 14.3 tertiary sector, the spread of a culture of equal- per cent and to 15.3 per cent, for an aggregate ity among the young generations, and the total of 37.9 per cent, while in the case of work- increase in levels of schooling among women. ers aged from 36 to 40, from 41 to 45 and from Possibilities of access to the labour market 46 to 50, the percentages tend to decline, going have increased, but as far as women are con- from 12.9 per cent to 11.2 per cent and to 10.6 cerned the market itself continues to be highly per cent, for an aggregate total of 34.5 per cent. segmented. Alongside groups of women who Particularly interesting is the datum on the have largely achieved equality of access and age group of the youngest collaborators (under young women with middle to high-levels of 25); here the percentage is more than double schooling, there are sections of the female that for professionals (8.3 per cent to 4.1 per population for whom this possibility does not cent) and remains higher, although by a nar- exist or is very difficult to attain. rower margin, for the 26 to 30 age group (col- This group manages to enter the market laborators 14.3 per cent, professionals 13.3 per through the new job opportunities offered by cent). Only after the age of 30 do freelance pro- the unqualified tertiary sector, those with fessionals begin to outnumber the coordinated shorter working hours and a marginal position collaborators, and continue to do so until 50 in terms of guarantees and protection, which years of age. are typical of coordinated work. Access to a profession implies a middle to Women collaborators generally display the high-level educational qualification and it is following characteristics: normal, therefore, that this should occur after • they outnumber men until the age of 40; the age of 25. Access to the market by way of a precarious or unstable employment, such as • in the youngest age group (under 25) the coordinated collaboration, takes place at a percentage of women is more than double younger age and therefore is likely to apply to that of men (12.4 per cent to 6 per cent); individuals with a lower level of schooling or • in the following three groups, the difference less self-entrep r eneurial ability and to less quali- between men and women ranges from 8 per fied jobs. The absolute fig u res capture more cent in the 26 to 30 age group, to 4 per cent s i gnificantly the magnitude of the phenome- in the 31to 35 age group and 0.1 per cent in non: very young collaborators (under 25 years the 36 to 40 age group. old) number more than 80,000, while professionals of the same age are fewer than 6,000. It Su r p r i s i n g l y , the figu r es for prof e s s i o n a l would also appear to be confirmed that for women follow a similar trend: women out- young people entry into the labour market is an number men until the age of 40. This appears to arduous process with uncertain results. On the indicate a fair degree of equality of access for other hand, the characteristics of this transition women with a st ro n g position on the market towards work vary according to individual (p r ofessionals) as well as their entry into weaker situations as regards personal pathways, refer- positions, in discontinuous pathways, maybe ence culture and level of training. with shorter working hours, in a world of pre- Lastly, the over-65 age group deserves com- carious and/or marginal employment. Some ment. This category accounts for 3.1 per cent of res e a r ch studies on the struc t u r e of working coordinated collaborators (over 31,000 individ- hours have shown that women reg a r d forms of uals); probably these people are already col- se l f -employment as a means of reconciling time lecting a pension but continue to perform an for work with time for living. This does not activity (a very widespread phenomenon in apply so much to the possibility of shorter work- Italy, but about which little is known) in the ing hours but that of organizing the whole of form of administrative work, dispatch of for- their time. Thus, in the case of coordinated col- malities in public offices, for which the con- laboration, the di s a d v a n t a g e of a place in the tractors are often professional firms (lawyers, labour market offering few guarantees is offs e t solicitors, accountants, etc.). by the ad v a n t a g e of flexible working hours. Finally, it is interesting to make a brief analy- This brief analysis reveals a pseudo-regu- sis of the gender distribution. The proportion lated market allowing access to the young gen-

104 erations and vulnerable sections of the popula- and it was not envisaged to administer these tion, but also points to a situation of difficulty contributions separately, nor that the employer and disadvantage among these same worker should pay in. categories, for which possible measures need to The role of the social partners was fairly lim- be devised. ited throughout that phase. The Government imposed its decision to increase public finance revenues through the entry of a new subject and 3. Trade union action for everyone the overriding concern was to 3.1. Para-subordinate employment: increase the guarantees for older workers about First protection measures and to leave the workforce. However, according to the creation of new trade unions the trade union federations, one of the aims was also to achieve a public pension system which The first regulatory indication of the ten- would prove more balanced and equitable, dency to broaden labour law as described ear- including the different generations. During lier can be found in the law on the reform of those years, both the trade unions and the other labour proceedings (Law 533/73), which political and social forces were becoming extends the rules of pro c e d u re applying to increasingly aware of the magnitude that the individual labour disputes to “other collabo- phenomenon of para-subordinate employment ration arrangements involving the perfor- was attaining in Italy’s labour market, yet until mance of continuous and coordinated work, a few months ago the subject never became a mainly of a personal nature, although not of true centre of attention. From the mid-1990s, a s u b o rdinate type”. As an outcome of this however, various associations grew up along- m e a s u re, jurisprudence has intervened, in side the trade unions to represent these in- alternating periods, to define more pre c i s e l y terests, although they never succeeded in the characteristics of these types of work, sparking a wider debate or involving their t h e reby often remedying gaps in the body of potential reference group. re g u l a t i o n s . In recent years, with the intervention of the Along the same lines, as part of the reform social security system, the new “economic sub- of the social security system enacted by Law ject” created by collaboration-contracted work- 335/95, we have the creation of a special INPS ers has managed to achieve greater visibility fund in favour, among others, of workers and the “phenomenon of para-subordinate employed under “coordinated and continuous employment” has at last become at least par- collaboration” contracts. Since January 1996, it tially quantifiable, causing surprise – because has become compulsory for these individuals of the broad spectrum involved – even among to register with this separate fund, which is those who had always maintained it consti- designed to extend gradually to them, too, the tuted a massive presence in Italy’s employment compulsory, general insurance for invalidity, scenario. As the political and social forces old age and survivors. The fund was initially began to appreciate the extent of the phenom- formed from a contribution of 10 per cent of fees enon from the preliminary figures published by earned, to be paid by the contractor (the larger the separate INPS fund, the idea took root that portion) and by the collaborator. Since then, it would be necessary to adopt broader mea- and notably in the Finance Law for 1998, a plan sures to safeguard these workers. In terms of to increase gradually the contribution to a maxi- trade union initiatives, this “awareness” has mum rate of 19 per cent has been intro d u c e d very recently led to the creation of special trade for individuals not registered with other com- union structures with the statutory aim of pro- pulsory social security funds. One of the tecting the new categories of workers. purposes of this increase is to offer these individuals two further forms of insurance typical CGIL – NidiL of subordinate employment: maternity benefits and family allowances.14 The Executive Committee of the national Prior to this measure, various proposals had CGILapproved, in March 1998, the creation of been put forward for extending compulsory a new “trade union structure” entitled NidiL social security coverage to these individuals as (Nuova Identità di Lavoro – New Work Identity) well. At the beginning of the 1990s, it was sug- to organize and represent temporary workers gested that a much higher contribution rate be and collaborators (i.e. those performing their applied to collaboration contracts (some pro- activities under coordinated and continuous posals spoke of 27 per cent, others 15 per cent) and/or occasional-collaboration contracts).

105 The fairly generic definition of “trade union and support of decentralized struc t u r es, set-up structure” points to some of the difficulties and and coordination of service activities, etc.) and main features of the NidiL: support activities (training, communications, • it is not a trade association (in other words, res e a r ch, etc.). The local struc t u r es (which are it does not act within the context of a spe- pr esent in all the cities and in the main prov i n - cific goods sector); cial capitals) are in charge of decentralized bargaining and of other specific trade union and • although the structure has evident features service activities at local level. The local struc - of a federation, it does not concern itself tu r es are mainly responsible for the prot e c t i o n , with general policies but with those relating or ganization and rep r esentation of workers to the new forms of contract; who, as experience in recent months has shown, • it is not an association affiliated to the CGIL generally apply to the trade union at the begin- but an integral part of it and the workers ning and at the end of an employment contract. belonging to the NidiLenjoy the same rights as those belonging to any other trade association of the CGIL; and CPO – UIL • it is a trade union body, not a service struc- The Coordinamento Nazionale Per l’Occu- ture (although it is expected to organize and pazione (CPO) (National Coordination for coordinate fiscal, social security and legal Employment) is a non-profi t association set up services). under the aegis of the UIL which operates at national and international level to prom o t e The specific nature of the workers repre- labour actions and policies designed to aid the sented has therefore modified the traditional gr oups worst hit by unemployment, including trade union models to give rise to an organiza- young first jobseekers, unemployed workers tional body intended to follow its members seeking new jobs and individuals performing during their vocational pathway rather than in atypical work. The CPO promotes improv e - their job. Whereas in the case of workers ments in the effectiveness of labour policies by recruited under contracts of indefinite dura- co o r dinating measures to combat social mar- tion, trade union representation takes place ginalization with actions to counter exclusion within the workplace – which in most cases is fr om labour. Members of the CPO include non- the same throughout life – the new forms of employed workers, unemployed workers seek- contract often make it necessary to work for ing new jobs, workers reg i s t e r ed on the mobil- more than one contractor, to change work and ity lists, unemployed workers engaged in workplace, to alternate periods of activity and “socially useful job” projects, individuals per- periods of non-employment. This marked forming atypical work and temporary workers. mobility and flexibility make it necessary to The CPO offers a monthly certificate of trade diversify trade union strategies, ensuring they union membership for individuals earning are heavily decentralized and as widespread as income and a yearly certificate for those with- possible. To fulfil these requirements, the NidiL out income. The association is financed with the – which began to operate in May 1998 – has set membership fees paid by members, certain up a national centre and, to date, 40 decentral- grants envisaged under national and reg i o n a l ized structures have spread throughout the legislation, EU regulations and measures, and country. grants provided by public or private bodies, as The national centre consists of a coordi n a t o r well as funds raised through initiatives and a coordination group, flanked by an execu- designed to further its aims. tive board in which rep r esentatives of the CGIL The structures of the CPO are as follows: trade associations and managers of the local • National Coordination Units; operational struc t u r es take part. Locally, a coordinator and an executive board repeat the • Regional Coordination Units; and national model. As for the distribution of tasks, • Provincial Centres. the national centre is responsible for national ba r gaining, the conduct and coordination of The first purpose of coordination units is to political and trade union activities (e.g. agree - prevent a form of social exclusion such as that ments with professional associations, agree - caused by the lack of jobs compounded by ments and pacts for joint action with other trade another form of exclusion due to the lack of union struc t u r es, institutional relations, etc.), direct trade union representation. The need to or ganizational matters (membership, crea t i o n organize a special structure certainly does not

106 stem from a desire to extend the association’s • promotion of vocational training policies as representation, but to bind together a group of well as of social security and supplementary individuals performing work by coordinating health-care funds for its members. their representation within the broader bargaining context of the trade union. The provin- The ALAI CISL has therefore grown out of cial centres incorporate the service centres, a desire to respond to these specific needs for structures which provide first-level informa- information, services, representation and pro- tion and advice and give information about job tection; it is structured nationwide in regional and vocational training opportunities at and local offices. Members of the ALAI can use national and local level: training/employment the system of services and protection forms contracts, public competitions, projects for offered by the CISLon an equal footing with all publicly useful jobs, job grants, practice peri- the other members (social security assistance, ods, etc. They also offer information about tax assistance, etc.). Moreover, they may obtain labour-market regulations embodied in the law answers to their specific requirements from and in contracts and about existing provisions operators at the local ALAI desks. guaranteeing rights and protection, and also perform activities to protect such rights. 3.2.Wage-realignment contracts ALAI CISL In Italy’s system of industrial relations, the model of negotiation for gradual alignment The ALAI (Associazione Lavoratori Atipici ed requires a provincial disclosure agreement Interinali – Association of Atypical and Tempo- (accordo di emersione) envisaging a coordinated rary Workers) is promoted by the CISL trade procedure to regularize the situation which will union and its purpose is to organize, represent gradually lead to full application of the national and provide trade union protection for work- contract from the regulatory and economic ers with atypical employment contracts, start- point of view. The gradual alignment therefore ing with socially and publicly useful jobs, takes place through a series of wage increases temporary work, job grants, practice periods scaled over a fixed period of time. The trade and job-insertion plans. Within this sphere of unions agree to make a temporary exception to representation, the aim of the association is to the basic rules embodied in the collective trade safeguard workers from the viewpoint of work- contracts with the final objective of achieving ing conditions, expertise, regulation of the their broader application and coverage. On the labour market, training needs and social secu- other side, enterprises undertake to give up the rity services, partly through institutional dis- advantages of eluding legal and contractual cussion and coordination of the public author- rules in whole or in part, on condition that they ities and social partners, and partly through obtain significant benefits in terms of tax and contracts and access to the integrated system of social security contributions. By according a CISLservices. sort of “indemnity” for previous violations, the The Compagnia delle Opere (“Company of State achieves a positive sanction of disclosure Works”) has joined the ALAI in the form of a (emersione) by making the indemnity condi- collective membership agreement. One of the tional upon gradual disclosure while encour- reasons for this decision is the search for a social aging acceptance by means of reductions in tax recomposition of the world of work and an asso- and social security contributions. ciation which shares the values and trade union In Italy, the 1990s have seen a revival of strategy of the CISL in order to strengthen the l e gislative initiatives to combat the under- role of social pluralism in democratic proc e s s e s ground economy, accompanied and encour- and its participation in social coordination poli- aged by a growing preoccupation with the phe- cies. Because the association rep r esents a spe- nomenon on the part of all the economic and ci fi c area of the world of work, it accords prior- social forces in the country.Ajoint commitment ity to the following commitments: by the social actors to combat unofficial • active policies regarding the labour market, employment (as will be further discussed guidance, training and first job insertion of below) was made explicit in the Pact on Labour young people, equality of opportunities; of 1996. Throughout the agreement, and in many parts of it, the signatories reiterate their • regulation of atypical work; desire to encourage enterprises to regularize • development of policies for the “tertiary situations of illegal work, from the regulatory sector”; and as well as the social security and tax point of

107 view. It is in this context that the wage-realign- advantage of this offer: provincial and com- ment contract, already conceived during the pany-level agreements had to be deposited by 1980s, has taken centre stage in the political and 31 May 1991. trade union debate; and it was during the inter- Under pressure from the social partners16, val 1995-97 that two regulatory measures the mechanism was re-presented, after a long played a crucial role in launching again the series of regulatory provisions which were only gradual-alignment agreements (Law 608/96 – temporarily effective, in the form of Law Law 196/97). 608/96, which reopened the possibility of stipu- Before any regulatory recognition was lating these agreements for a period of one year. forthcoming, collective bargaining took steps to The regulations were to some extent innova- remedy a perverse practice which is widely tive: on the one hand, the scope of the benefits adopted, especially in the south of Italy, and was limited to enterprises in the south operat- creates fertile ground for the spread of forms of ing in the industrial and craft sectors; on the illegal work. In fact, many enterprises, espe- other, the incentives implemented in favour cially small and very small ones, constrained by of employers envisaged not only a general a precarious economic and market situation, “indemnity” against all previous unpaid con- have adopted practices of “underpayment” by tributions, but also the possibility of paying not applying the national trade contracts, espe- social security and health-insurance contribu- cially the minimum wages they envisage. In tions on the basis of the reduced wage set out this “uncovered” area, the ordinary mechanism in the realignment programme. Moreover, an for the reduction of labour costs paid by enter- important novelty concerned the trade union prises, consisting of contribution facilities in the organizations authorized to stipulate provin- form of the Treasury taking over part of insur- cial agreements. To begin with, the requirement ance payments and of reduced contributions,15 that they should be the most representative fails to produce any effect. In order to combat organizations was eliminated, thus extending these practices, the law makes the benefits of the number of subjects authorized to stipulate this mechanism conditional upon the payment agreements to include all those signing the of the minimum wages fixed by collective bar- national collective contract in question. In this gaining. To break this vicious circle while help- connection, it should be pointed out that elim- ing the trade unions to establish themselves in inating this requirement concerning trade this area, the practice has begun to develop of union representation has caused concern drawing up company-level contracts centred among the trade union forces: there are fears around programmes for the gradual realign- that it may turn out to be an “unguided mis- ment of wages to the standards set out in sile” within the Italian system of industrial rela- the trade contracts so that the signatory enter- tions. The “permissiveness” it implies could prises can take advantage of the contribution lead to the stipulation of “pirate” collective con- facilities. tracts: i.e. not only would trade unions lacking This system of gradual wage re a l i g n m e n t any link with the workers be able to stipulate was enacted in Law 389/89, which envisages provincial agreements (involving, as we have for enterprises located in southern Italy (as well said, reduced wages) simply because they as for insufficiently developed enterprises in adhere to the national contract which is the the centre-north) a suspension of the above object of realignment, but the national contract legal re q u i rement for the enjoyment of contri- itself could be stipulated by trade unions bution facilities (i.e. compliance with the wage “favouring employers or at least seeking to gain levels fixed by national contracts) if this is niches (...) by means of unusual strategies and “based on a gradual programme of re a l i g n- contractual tactics (...)”.17 In this eventuality, the ment” of wages. For this suspension to be eff e c- wage levels with which realignment should tive, the Ministry of Labour had to intervene by take place might themselves be lower since they issuing a decree to grant the benefit in question. represent the outcome of “pirate national Only later (Law 210/90) was the role of the contracts”. Ministry eliminated. It then became suff i c i e n t The often-mentioned Law 196/97 (known for the enterprises concerned to draw up the as the “Treu Package” from the name of the Ital- minutes of a meeting receiving the pro v i n c i a l ian Minister of Labour who presented it) not a g reements stipulated by the most re p re s e n t a- only postpones the deadline for stipulation of tive trade unions at national level in which was the agreements until 19 July 1998, but also intro- set out the programme of gradual wage duces further changes in the institution, enlarg- realignment. The law set a deadline for taking ing its field of application and granting addi-

108 tional advantages to the enterprises taking part. violations of the law on this subject are extin- Access to the system is again opened up to all guished. The rule that the realignment wages sectors, as was indeed suggested in the Pact on are to be used as the basis for calculating social Labour of 1996. security and health-insurance contributions is However, as we shall see, it is in the area of confirmed and set out in detail:18 the law fixes incentives that real progress has been made. Yet a minimum percentage with respect to con- strengthening the tool in this way has aroused tractual levels, below which the benefit is not serious doubts and concern: there are indeed available. And as a crowning factor, the indem- some who maintain that it should not be nity for enterprises also applies to fiscal mat- revived because by effectively extinguishing ters. Employers are allowed to regularize in every past violation, it could generate perverse general all taxes evaded in respect of unde- effects and encourage rather than combat the clared remuneration paid to workers involved phenomenon of unofficial employment. Hon- in the realignment agreements. est enterprises, which may be hit by competi- Finally, again following a suggestion con- tion from those participating in the realignment tained in the 1996 Pact, another large “pre- programme, could be prompted by the enor- mium” is awarded to enterprises which have mous facilities to veer towards illegality. It successfully completed the programme of should be recalled, first of all, that the new regu- wage realignment to the levels envisaged in lations mark a change in the area of unofficial trade contracts stipulated by the “compara- employment targeted by the legislator. Origi- tively most representative” trade unions:19 for nally, the measure was addressed to enterprises the workers participating in the company-level which did not apply contractual wage levels agreement, they may take advantage of the and encouraged them to realign by offering enormous facilities granted for new jobs.20 contribution facilities; the range of subjects con- As far as evaluating the impact of this cerned has now changed and expanded. The instrument is concerned, the first thing to point premiums described below are in fact also out is that the majority of provincial agreements addressed to enterprises which are entirely for wage realignment have been stipulated in “underground”, enterprises which have never precisely the least developed areas where we reported their employees to the social security have seen that the proportion of unofficial institutes and therefore have never paid any of employment is highest. The experience of the the contributions due. textile and agricultural sectors offers a good More specifically, in addition to extending basis for evaluating the impact and the effec- existing benefits, the Treu Package introduces tiveness of the instrument. In the textile sector, others. The characteristics of the social security 46 provincial agreements have been stipulated: contribution “indemnity” are stated in clearer 12 in Apulia and 9 in Campania. The instrument terms so that it now encompasses every contri- has been used by over 600 enterprises and has bution owed by enterprises, and all offences involved nearly 14,000 workers. It is important and administrative sanctions associated with to bear in mind that 77.7 per cent of the indi-

Advantages of applying gradual-realignment contracts for…

Enterprises Workers If they observe the employment contract, they Payment of social-security and health-insur- can access ﬁnancing, facilities and concessions ance contributions is guaranteed. envisaged for disadvantaged areas.

A new employment status is assigned to the Immediate application of rights pertaining to “realigned” employee, thus giving access to the sickness, leave, holidays and feast days. advantages envisaged for new recruitment of Gradually the wage reaches the same level as workers. that ﬁxed by the national trade contract.

In agriculture, the contracts envisage the pos- The work experience is regularized and can be sibility of having wages which are not equal credited in the event of mobility between one throughout the country, thus allowing locally job and another structured wage policies

109 viduals concerned belong to the first of the two might later instigate proceedings against them regions considered. By contrast, in the agricul- for earlier periods. The cost of regularizing past tural sector the realignment has involved violations might also prove too high and ren- nearly 26,000 enterprises, 20,000 (77.4 per cent) der vain any realignment process already initi- from Apulia, and has affected over 131,000 ated. Although the succession of laws enacted workers (nearly 61 per cent again from Apulia), may be justified by a need to make the legisla- for 33 provincial agreements. A number of tive rules accommodating, it threatens to pro- provincial agreements have also been stipu- duce a series of inequalities of treatment among lated in the trade sector (specifically, three in enterprises falling under very different sys- Sicily, Apulia and Calabria) but there has been tems; and since the last law is always the most no practical application. flexible and indulgent, for many subjects it is There are differences in the application and worth their while to await more favourable impact of these contracts in the various sectors, conditions. closely related to the specific characteristics of Overall, however, the realignment contracts the latter. In industry, illegal work often stems have proved to be of marked social usefulness, from outsourcing of single phases of the pro- primarily because of the advantages gained by duction process by large-sized enterprises (or many workers, although they do not remove leader enterprises) to the detriment of marginal the danger of increasing precariousness of outworking enterprises. In agriculture, many either employment or the economy. The con- specialist workers are not just agricultural cluding document approved by the Committee employees and work not only on farms but also on Labour of the Chamber of Deputies upon in commercial and industrial companies, and completion ofthe “Inquiry into illegal work and therefore raise very special problems. Although child labour” expressly states that: “Illegal work a fair number of entrepreneurs had decided to does not create growth, but in some cases bears follow the course of gradual realignment in the witness to a vitality and adaptability which do early 1990s and until the amendments of 1996, not produce real growth in the long term and in recent months there has been a sudden fall- th e re f o r e must be guided back to offi c i a l d o m off in participation. with the use of appropriate instrum e n t s . ” What are the reasons for this? To begin with, it should be pointed out that 4. New challenges and guidelines for the vast majority of enterprises undertaking for future trade union action the disclosure process, realignment wages actually constitute a critical threshold, beyond Examining the situation as described so far which they do not wish to step, and this is why and considering the speed with which the cur- the instrument has failed to achieve its objec- rent processes are taking place, it is apparent tives. Moreover, now that the incentives have that the trade unions need to take steps to bring been reduced following Italy’s new agreements the perspectives for representation and protec- with the European Union, many enterprises tion of the many up-and-coming forms of work have been dissuaded from starting realign- within a more generally coherent structure. ment. Another deterrent is the fact that the dis- They will thus avoid improper competition in closure process has in the end worsened the worker-recruitment methods, leading to seg- competitive conditions of the enterprises con- mentation and conflict in the representation of cerned. An example may help to explain the the federal trade union. phenomenon better. In Lecce, a town in Apulia Apart from the problems raised by the many where the largest number of realignment con- experiments in the tool of realignment contracts, tracts has been recorded, it has been observed which will be discussed further at the end of this that contractors have moved some production section, at present the trade unions seem to be activities to other provinces where a more or concentrating their efforts on matters relating to less total state of “unofficialdom” offers addi- atypical work. Indeed, the identity and struc t u r e tional savings on production costs. Neighbour- of the new work forms are still taking shape and ing provinces with a very low proportion of it is theref o r e too early to outline a specific type company-level realignment contracts in the of trade union as if it were definitive. Never- end prove extremely attractive and offer a com- theless, we can describe the basic features of the petition which is difficult to overcome. More- models adopted for the rep r esentation and pro- over, a major factor in reducing participation in tection of the new work forms. realignment is the fear on the part of many The first step will be to make interactive use enterprises that the tax authorities or INPS of a multitude of juridical sources, such as leg-

110 islation, negotiation, bilateral and associative • facilitation of access to the labour market forms of mutual assistance, but each with a dif- with measures such as information, training ferent value according to the type of employ- and guidance; and ment contract and offering, at the same time, • creation of pension funds and supplemen- assistance in legal, social security, insurance, tary health insurance for these workers. legal and relational matters. It is easy to imag- ine that this will lead the new workers to On these points, the trade union federations interact differently within the trade union orga- have begun discussions with the Confindustria nizations, especially at local level; thus, special (Italian Manufacturers’ Federation), Parliament care should be taken not only during the first and the Government. contact with the subject, but also with the strate- More particularly, at institutional level, the gies for maintaining the relationship with the CGIL, CISL and UIL have attempted to intro- association. Consequently, it will be necessary duce amendments in legislation now before to extend the relationship from the actual time Parliament designed to achieve the following of performing the work to the phases preced- aims: ing job insertion. As far as forms of protection are concerned, • to prevent para-subordinate employment those which are essential and cannot be fore- becoming a parallel and alternative channel gone will have to be distinguished from those of recruitment with respect to traditional open to negotiation. In other words, a general methods; body of regulations should be maintained with • intervene directly in defined professional ample provisions to allow possibilities of and operational areas; exchange when drawing up the individual • to allow negotiation to take place during the employment contract. In particular, as far as definition of the new forms of work and the protection and the validation/certification of structuring of protection in their favour; and the contract are concerned, it could be envisaged that in the event of conflicts forms of con- • to envisage, during the definition process, ciliation and arbitration will be used. intervention by local bilateral centres for Se c o n d l y , it is important to consider the employment-contract validation/certifica - matter of rep r esentation in the exercise of ti o n to prevent and resolve possible con- autonomous bargaining power. The best solu- flicts, as part of an approach based on the tion in this case may be to adopt a similar sys- auxiliary role of the social partners and insti- tem to that used for temporary work, i.e. the tutional bodies. comparatively most rep r esentative trade union, 21 Furthermore, the trade union federations as established by law or by negotiation. There also believe measures should be taken as fol- do not appear to be any major obstacles here lows: reg a r ding the rep r esentation of the workers in question. There are some problems, however, on • avoiding para-subordinate employment the entrep r eneurial side. In fact, since these new being used for the performance of merely forms of work are not exclusively linked to a sin- executive tasks; gle contractor, they cannot be absorbed and gov- • ensuring there is a close correlation between erned by traditional systems of trade union rel a - the fees of para-subordinate workers and tions, which are organized by trade category. the wage levels fixed by national bargaining As a result, it is more likely that the struc- for similar tasks; and ture will be based on the representation of these • raising pension contributions to levels workers using the forms of organization already which will allow enjoyment of the services. adopted by the three main federations of trade unions. These forms of organization should The overall trade-union strategy should envisage the following features: focus on strengthening certain services that the NidiL, ALAI and CPO have already made • inclusion of health insurance among the available to this vast army of workers: infor- services provided, with the help of the social mation, guidance and tutoring. Assuming that security institutes; a para-subordinate worker is able to ensure • the trade union assumes the role of prov i d e r continuity of employment if his/her expertise of assistance and service coheren t l y , taking is up-to-date and competitive, the trade unions into account the autonomous nature of the should set up a network of information, guid- work considered ; ance, updating and vocational training services

111 as well as identify the professional profiles most centre of the system of protection there is work in demand among enterprises resorting to without adjectives”. However, in this second para-subordinate employment. proposal, para-subordinate employment was Regarding the process of creating new forms to be guaranteed “a minimum threshold of of protection, it is worth noting that attempts common protection forms”, while subordinate have been made to introduce legislation on this employment, insofar as it involves “hard sub- matter; we refer more particularly to a govern- ordination”, would “enjoy the full and uncon- ment bill (presented by Senator Carlo ditional application of labour law as histori- Smuraglia) now before Parliament entitled cally handed down”. “Rules for the protection of atypical work”.22 Very briefly, then, these are the proposals Before this development, the Confindustria and some of the positions adopted within the and trade union federations had attempted to trade unions concerning the subject of regulat- create an agreement for the contractual regula- ing para-subordinate employment. tion of this sphere of employment, but without At this point we come to the Smuraglia Bill success. The aspects on which negotiations had mentioned earlier, relating to what are known broken down were the definition of the field of as “atypical work”, the term being taken to application of the agreement and the identifi- mean the performance of work with character- cation of the target group. The proposal of the istics which are very similar to those of the pre- Confindustria tended to restrict the application sent category of coordinated and continuous of the agreement to high-level qualifications. collaboration.23 The reaction of the trade unions was that The text of the law is at the centre of politi- although this group constituted part of the cal debate, partly because it tries to fulfil con- world of para-subordinate employment, it flicting requirements: fixing certain essential would be wrong to limit regulatory interven- guarantees, but without over-constricting tion to this group alone, which apart from any- employment contracts to the detriment of the thing else is also the strongest. Only after the flexibility of production which is often at the agreement between the social partners had root of their recent popularity. It is for precisely failed did the attempt to achieve regulation by this reason that even the report accompanying legislative means acquire importance. Obvi- the provision recognizes the “hesitancy” and ously, the role of the social partners has dimin- “experimental” nature of the intervention. Fur- ished, since the initiative has passed into the ther evidence of this difficult approach to the hands of political decision-makers. Neverthe- subject is the tortuous process of approval: to less, some of the early elements on which the begin with, two “extraordinary” sittings of the debate has developed were in fact the work of parliamentary committee to allow the Govern- juridical bodies operating within the trade ment to present its major amendments,24 then union organizations. the many, new changes which weigh on the One of the proposals suggested reorganiz- progress of the parliamentary debate. ing the performance of work so as to overcome To date, the Smuraglia Bill making its way “the gradual marginalization of the employ- through Parliament is a body of rules on which ment contract safeguarded by law and by col- the opinion of the social partners, by no means lective sources”. The idea was to create an uniform, has been either formally sought or “employment contract sans phrase” in order to heard. Again, the main differences concern the unite the various segments of employment and field of application of the law and other aspects overcome the distinction between self-employ- not of secondary importance, such as the meth- ment and subordinate employment. ods of certifying the employment contract, The proposal centred on the notion of wages and the role to be performed by bar- extending the protection forms typical of sub- gaining. The debate continues: very slowly in ordinate employment to the majority of para- Parliament, more lively outside with the direct subordinate employment in order to avoid involvement of the trade unions. Not only have sidestepping the typical protection offered by the trade unions promoted differently struc- guaranteed employment, to the detriment of tured forms of organization of these subjects, as the individuals concerned. we have seen, but also research activity to put The second project, also conceived within into focus, qualitatively and quantitatively, the the advisory legal bodies of the trade unions, characteristics of the phenomenon, the needs, sought to redistribute the forms of protection, the internal differences, the demands for repre- presently concentrated on subordinate employ- sentation and early forms of company-level ment; this redistribution implied that “at the bargaining, wherever there is a strong presence

112 Bill No. 2049, “Rules for the protection of atypical work” Field of application: contracts for collaboration, not of an occasional nature, performed without any subordinate relationship, mainly personally, coordinated with the activity of the contractor and pertaining to work performed autonomously, at least from the operational point of view, for a fee. Training and information rights: the collaborator has the right to receive all the information envisaged in the collective contracts, including that relating to the protection of health and safety. The collective contracts may envisage the ﬁnancing of training initiatives with a contribution from the contractor as a percentage of the fee paid to the workers. Fo r m and duration of the contract: it must be stipulated in writing and may not be for a period of less than three months, except in special cases associated with the nature of the contract. Notice and early termination: the contract must envisage a period of notice in the event of cancellation which is sufficient and proportionate to the total duration of the contract, and include an indication of the reasons justifying the early termination of the contract. Right of preference and indemnity for termination of the contract: the person performing the work is recognized as having the right of preference if the contractor wishes to stipulate a similar contract and for the same type of work. Collective bargaining has the power to envisage an indemnity for the worker at the time of termination of the contract. Social security: the requirement to register with the separate INPS fund (now applying to coordinated and continuous collaborators only) is extended to all workers, and a special fund shall be set up and run by a management committee consisting of representatives of the members, of the Ministry of Labour and of associations of entrepreneurs. Trade union rights: in addition to the extension of certain provisions contained in the Statute of Workers (freedom of opinion, prohibition to investigate opinions, prohibition to perform acts of discrimination), collaborators are expressly accorded the right to organize themselves in associations, to join trade union organizations and to take part in trade union meetings held in enterprises.

of para-subordinate workers and the will of the newly recruited workers at the end of the parties to create preliminary forms of regula- realignment programme. The Government has tion for this condition and method of work. explicitly admitted that these limitations are the With respect to unofficial employment, on result of intervention by the EU authorities, the other hand, it should be recalled that the bill concerned by the fact that an overly encourag- is linked to the Finance Law for 1999 and envis- ing system could disrupt free competition ages renewing the institution of disclosure con- among enterprises. The proposals of the Com- tracts for a year. This measure takes account, mittee on Labour, on the other hand, are to be among other things, of the results reached by found mainly in the sections regarding “orga- the Chamber of Deputies’ Committee on nizational measures in favour of the disclosure Labour as part of the “Inquiry into illegal work process” and in the “measures to repress illegal and child labour” carried out during 1998. It work”. To deal with the first aspect referred to, contains some major novelties, although they a “committee for the disclosure of illegal work are still being discussed before Parliament. with the task of analysing and coordinating ini- Briefly, it would appear that the approach is not tiatives” is to be set up within the Presidency of only one of promotion, as may be said of the the Council of Ministers. The creation of this body of regulations contained in the “Treu body does not envisage the participation of the Package”. Indeed, while the indemnity is social partners. At regional and provincial lev- extended, by a complex mechanism, to include els, committees have been set up “with the task the duties of employers regarding the health of analysing unofficial employment at local and safety of workers, it also embodies a greater level”. These bodies also offer assistance to degree of prudence. enterprises stipulating realignment contracts First of all, the local area of application is “including through the presence of a special narrowed (in practice, the regions of Abruzzi tutor”. This presence of a tutor echoes a sug- and Molise are excluded) but, above all, it gestion contained in the concluding report to would appear that the main advantage offered the inquiry mentioned earlier. by the previous system has been abolished: the Meanwhile, control measures against illegal possibility to enjoy the benefits envisaged for work are to be stepped up by requiring that var-

113 ious public bodies (Ministry of Labour and and therefore not declared for tax purposes. These are then Finance, INPS, INAIL – Istituto Nazionale per included in the broader category of illegal units, which includes, in addition to that segment, also the group of unde- l’Assicurazione contro gli Infortuni sul Lavoro – clared workers in employment (residents who do not declare National Institute for Insurance against Occu- they are employed in statistical surveys but whom subse- pational Accidents) and local health agencies, quent investigations reveal to have performed work during all involved in repressing the phenomenon, the reference week), non-resident foreigners (not captured by the surveys) who perform work (including foreigners whose should coordinate their inspection and control residence permit has lapsed and those without a residence activities, including specific “training initia- permit and therefore illegally present in Italy), and additional tives” for the personnel involved and the crea- work units with respect to the main unit declared. In the nar- tion of “integrated operating units”. It would row sense, unofficial employment (i.e. work not reported for tax and social security contributions) is given by the aggre- seem, therefore, that we are on our way towards gates of unofficial employment and, secondly, by the aggre- a single, integrated system of coordination of gate non-resident foreign labour, while the other components all the bodies with inspection duties relating to indicate subjects falling somewhere between unofficial and violations of the laws for the protection of official employment. These aggregates are those considered for the purpose of our analysis. labour and the health and safety of workers, as 12 We should point out that this breakdown is not avail- well as of social security and tax legislation. able for non-resident foreigners. 13 These figu r es are quoted in the report to ISTAT’s manager for employment estimates and are published in the sur- Notes vey La v o r o nero e minorile (Illegal work and child labour), XI Committee, Parliamentary Acts, XIII Legislature, 1998. 1 These figures are quoted in the report to the Head of 14 The Ministry of Labour has begun to make disburse- the Research Department of the Bank of Italy contained in ments under a decree issued on 27 May 1998, which also the survey Lavoro nero e minorile (Illegal work and child establishes specific rules for the operation of the measures. labour), XI Committee, Parliamentary Acts, XIII legislature. 15 When the Treasury takes over part of insurance pay- 2 Eurostat, Yearbook 1997. ments, this reduces the amount of the contributions due by 3 Idem. employers for the national health system, while the reduc- 4 tions in contributions offer partial or total relief from social See OECD. “Statistiques de la population active 1997”, security payments. in Perspectives de l’emploi, June 1998. Please note that the activ- 16 ity rate and the unemployment rate are defined in relation to In this connection, it is worth recalling the Pact on the active population (aged between 15 and 64 years). Labour of 1996, which expressly takes into consideration 5 these gradual realignment contracts. The document, which These figures are the outcome of ISTAT data repro- recognizes the positive results achieved to that date, sug- cessed by ISFOL. gested extending the application of the system of encourag- 6 One of the latest examples of this “arduous” adaptation ing the stipulation of other contracts by granting new incen- is the abolition of the public monopoly over placement in tives to enterprises. As will be explained, these measures are Italy to conform with a sentence of the European Court of only embodied in subsequent legislation. Justice, which declared this exclusive right to be illegal, being 17 Details of this may be found in Bellavista, A. 1998. the abusive exploitation of a dominant position. “ I c o ntratti di riallineamento retributivo e l’emersione del lavoro 7 An example of this is allowing the social partners to sommerso” (Wage-realignment contracts and disclosure of introduce options for the stipulation of fixed-term contracts unofficial employment), in Riv. Giur. Lav., 1, 1998, pp. 106 ff. in addition to those envisaged by the law (Art. 23, Law 18 It is worth pointing out in this regard that the legisla- 56/87). tor had to intervene repeatedly in the case of this rule 8 Napoli. M. 1998 “Dallo Statuto dei lavoratori allo Statuto because, owing to doubts as to its interpretation, the National dei lavori”(From the statute of workers to the statute of work), Social Security Institute (INPS) refused for a long time to in Diritto della Relazione Industriale, 3. apply it and continued to use the minimum wages fixed by 9 See Ichino. P. 1996. Il Lavoro ed il Mercato (Labour and trade contracts as the basis for calculating social security and the market). health-insurance contributions. 19 10 Castellucci, L.; Bovi, M. 1998. What do we know about It should be emphasized that in this case the legislator, the underground economy in Italy beyond the common wisdom? probably in response to the problems of trade union repre- Some empirically tested propositions(mimeo). According to the sentation raised earlier (i.e. the so-called pirate contracts), authors, since 1990 Italy’s underground economy has tended only grants the new benefit to enterprises realigning with the to stabilize and indeed to decline in recent years. Indeed, its wage levels envisaged in contracts stipulated by the trade share rises from 15.5 per cent in 1991 to 18.5 per cent in 1993 union organizations which are comparatively most repre- (when the increase can be ascribed to the first measures to sentative at national level. rehabilitate public finances introduced by the Government) 20 For example, an enterprise in the south which has com- and to 18.9 per cent in 1994, then declines to 17.2 per cent in pleted the realignment programme and fulfils the require- 1996 and 16.99 per cent in 1997. ments may be exempted from paying social security and 11 It is worth looking more closely at these definitions. health-insurance contributions for three years. Work units indicate not the number of workers in employ- 21 The Italian system of industrial relations discusses the ment but a measurement close to employment in terms of pr oblem of the effectiveness of collective bargaining (known hours worked where the work units are converted into as effectiveness er ga omnes). The solution most often adopted homogeneous units. Regarding the definitions adopted by by the legislator in this reg a r d is to attribute effectiveness to ISTAT, illegal-work units are work units (main or only) not the agreements stipulated by the trade unions identified using recorded in the wage lists of enterprises or self-employees a comparative evaluation of the degree of rep re s e n t a t i o n .

114 22 The text to which reference is made is that approved area of subordinate employment and development of new by the Senate Committee on Labour during the night session types of work (para-subordinate but also working partners, of 30 June 1998. self-employment, etc.) provisionally entitled “Statute of 23 Very briefly, it is worth recalling that the debate ranges Work” to indicate the fragmentation of the classical model of from the “abstentionist” positions of some who fear, in real- work. The project envisaged rewriting the Statute of Work- ity, that the creation of new types of work will be the first step ers to incorporate a single, but articulate vision of subordi- towards a further, general reduction in the protection for sub- nate, para-subordinate and self-employment. The idea was ordinate employment by attracting into the atypical employ- to extend part of the forms of protection at present exclu- ment contracts which are now qualified as subordinate sively pertaining to the first category to the other two as well, employment, to those who suggest revising in various forms and at the same time to reduce the system of guarantees and ways the classical division between subordinate employ- applying to subordinate employment (in particular, one idea ment and self-employment in order to restructure the scope was to amend the rules governing individual dismissal by of the protection forms to be granted to the single types of suspending for two years, under certain conditions, the work. requirement of a just cause for dismissal). Part of this project 24 The Ministry of Labour had commissioned a study on has been transformed into a series of government amend- the gap in protection caused by the gradual narrowing of the ments to the Smuraglia Bill.

115 Latin America

Colombia

For Colombia’s trade union national centres, the organization and claims of informal sector workers have not so far been a priority in their present platform and day-to-day business, but they must take prompt action to set up activities aimed at organizing and training informal sector workers and responding to their claims.

Ofelia Londoño Urrego Specialist in International Cooperation/ Management of Development Projects

1. The pattern of social development still remains high. In other words, the country has a pattern of social development that down- 1.1. Reasons for the predominance plays the importance of combating inequality, of the informal sector in overall instead attempting simply to reduce extreme employment poverty without trying to change inequality, 1.1.1. Colombia’s social inequalities distribution of economic power and, by exten- and patterns of social exclusion sion, political power. Colombia continues to be bedevilled by acute social problems especially in catering to 1.2. Dimension and make-up of the unmet basic needs. Since the 1970s, the cover- informal sector by age, gender, age and quality of education has been losing job category and geographical dynamism. Social security coverage is still low distribution (53 per cent); 1 million families have no 1.2.1. Informal sector workforce dwelling and 34 per cent live in overc ro w d e d c i rcumstances; 15 per cent of the population The following factors were considered in has no access to drinking water and basic san- determining the informal sector workforce: itary amenities; 9 per cent of the adult popula- • persons working in establishments, busi- tion is illiterate (not including functional illit- nesses and enterprises that employ up to eracy); 26 of every 1,000 live births die during ten staff across all their agencies and the stage of breastfeeding; 18 per cent of chil- branches; d ren under 5 years are underweight, which is evidence of malnutrition; gross school re g i s- • domestic workers and unpaid family tration at all levels does not exceed 70 per cent; workers; the mortality rate among children under 5 is 50 • self-employed workers not including proper cent higher than in industrialized coun- fessional independent practitioners such as tries; there are 1,064 inhabitants per doctor, doctors, lawyers, dentists, engineers and while in Mexico that ﬁg u re is 621, in A rg e n t i n a the like; 329 and in Panama 562; 15 per cent of child- • private employees and workers em- births are not assisted by trained personnel; ployedin enterprises with a maximum staff and the maternal mortality rate is 100 per of ten; 100,000 live births. In a nutshell, the country’s Gini* coefficient • employers with up to ten workers; and remains high and stable and even though GDP • government workers and employees are not ﬁgures show a gradual reduction of poverty, it included in this sector.

117 1.2.2.Total workforce 1.2.4. Formal and informal sector workers as a proportion In June 1996, the total workforce in the coun- of the total workforce, try’s ten leading metropolitan areas1 was by branch of activity 5,353,438, of which 2,497,049 were working in the formal sector and 2,856,389 in the informal Over the period studied (June 1984 to June sector. 1996), the highest proportion of informal sector workers in industry was recorded in 1988 at 1.2.3. Informal sector workers as a 46per cent, and in June 1996 at 43.6 per cent. In proportion of the total work- the formal sector, that number remained at 56.4 force per cent for the period of reference. Within the informal sector workforce, the The proportion of informal workers peaked share of the construction industry increased by in 1988 at 56.1 per cent; in the other years, it fluc- 6.9 points from 56.2 per cent in June 1994 to tuated at around 54 per cent. The highest pro- 63.1 per cent in June 1996; the number of for- portion of male workers in the sector was mal sector workers declined by the same pro- recorded in June 1988 with 54.4 per cent; in June portion (6.9 points) from 43.8 per cent to 1996 the figure stood at 52 per cent. In turn, the 36.9 per cent respectively. highest proportion of female informal workers Over the same period, the share of trading was also recorded in June 1988 at 58.8per cent. in the informal workforce diminished from Since then that figure has declined, then risen 77.5per cent in June 1988 to 72.2 per cent in June again in 1998 to 55.7 per cent (see Table 1). 1996. The share of formal sector workers has remained constant at 27.8 per cent since 1992.

Table 1. Informal sector workers as a percentage of the total workforce, by gender. Seven metropolitan areas 1984-1998 (June)

Gender 1984 1986 1988 1992 1994 1996 1998 Total 53.7 54.5 56.1 54.2 52.5 52.1 54.7 Men 51.4 52.1 54.4 52.6 51.3 52.0 53.9 Women 57.5 58.2 58.8 56.3 54.3 52.3 55.7 Note: Data expanded with population projections estimated on the basis of the ﬁndings of the 1993 census. Source: National Administrative Statistics Department (DANE). National Household Survey, phases 76 to 100. Bogotá, Barranquilla, Cali, Medellín, Bucaramanga, Manizales and Pasto.

Table 2. Informal sector workforce, by gender and branch of activity. Ten metropolitan zones* (June 1996)

Informal sector workers as a percentage of the total workforce Branch of activity Total Men Women Agriculture 53.1 63.5 20.0 Mines 29.1 53.1 19.1 Industry 43.6 41.4 46.8 Electricity, water, gas 3.9 3.2 6.4 Construction 63.1 65.1 32.1 Trading 72.2 73.7 70.5 Transport 59.0 62.2 32.8 Financial services 26.6 28.1 24.0 Services 49.4 56.0 52.3 No answer 17.5 13.7 23.6 Total 53.4 53.4 53.3 * Bogotá, Barranquilla, Cali, Medellín, Bucaramanga, Manizales, Pasto, Villavicencio, Pereira and Cúcuta. Source: National Administrative Statistics Department (DANE).

118 During the period in question the number 1.2.8. Average working hours for of informal workers in the transport sector the overall workforce, by sector reached a maximum of 59 per cent in June 1996. In the financial services sector, the number Over the reference period (June 1984 to June of informal workers reached its lowest for the 1996) the informal sector recorded higher aver- reference period in June 1996 with 26.6 per cent. age weekly working hours than the formal sec- The formal sector workforce was 73.4 per cent tor, though in 1992 and 1996 working hours for that same year. Informal employment in the diminished slightly. communal, social and personal services fell as In the case of private workers and em- from June 1988 (54.3 per cent); it stood at ployees in the formal sector, average working 49.4per cent in June 1996. The share of the for- hours remained stable over the period mal sector increased to 50.6 per cent in 1996. In (48hours); the informal sector turned in a mar- the remaining sectors 2 the share of informal and ginally higher figure (49 hours). Government formal workers remained at 34.2 and 65.8 per employees maintained a constant figure of cent respectively as from 1992. 46 hours. The average for weekly working hours is higher for self-employed workers in 1.2.5. Formal and informal sector the informal sector than for their formal sector workers as a proportion of the counterparts (47 versus 41 hours in 1996). The total workforce, by age group highest average was registered by the employer category, in both the informal sector (53 hours) Apart from the 20-29, 30-39 and 40-49 age and the formal sector (51 hours). groups, the percentage of informal sector workers largely surpasses that for formal sector 1.2.9 Average weekly working hours workers in all other age groups, the trend being by educational level in much more marked in the age groups under15 the formal and informal sectors and over 60 years. For the reference period, formal sector 1.2.6. Distribution of formal workers with no education or primary educa- and informal workers tion recorded the highest working hours at by occupational position 54.6hours in June 1994; next came workers with secondary education with 49 hours and those All 100 per cent of unpaid family workers with higher education with an average of are in the informal sector (June 1996), followed 44.4hours per week. The average weekly work- by domestic workers (99.8 per cent), self- ing hours for these categories declined margin- employed workers (90.8 per cent) and small ally in 1996. employers (84.6 per cent). Private employees account for the smallest share (36.7 per cent). 1.2.10. Average working hours The full 100 per cent of government workers by branch of activity and employees belong to the formal sector, fol- in the formal and lowed by private workers and employees informal sectors (63.3 per cent), employers with 15.4 per cent and self-employed workers with 9.2 per cent. Over the reference period, the transport sector posted the highest average of hours worked 1.2.7. Formal and informal sector in the formal sector. In 1996, the figure was 53.6 hours, followed by construction (49.9 workers as a proportion 3 of the total workforce, hours), trading (49.5 hours), other sectors (49.1 by educational level hours), industry (47.7 hours) and communal, social and personal services (45.6 hours). Persons with higher education, followed by In June 1996, informal workers in the elec- those with secondary and primary education tricity, gas and water sectors showed the high- comprise the bulk of the formal sector. In the est average number of hours (56.4 hours), informal sector, in contrast, those most repre- followed by transport (53.9 hours), trading sented are persons with no education at all, fol- (50.1 hours), construction (49.4 hours), other lowed by those with primary, secondary, then sectors (49.8 hours), industry (46.4 hours) and higher education. communal, social and personal services (46 hours).

119 1.2.11. Average years of schooling 1.3. Factors underlying the expansion for the total informal of the informal sector and formal workforce, 1.3.1. Causes of the surge by occupational position in unemployment and the bur- The highest average number of years of geoning of the informal sector schooling within the overall working popula- • High interest rates that keep the cost of bor- tion was among government-employed man- rowing prohibitive, stagnating investment ual workers, with 12.6 years (June 1996), fol- by small enterprises owing to their lack of lowed by small-scale employers with 9.8 years; credit-worthiness and the impossibility for private manual labourers or employees with micro-enterprises to obtain loans. 9.3 years; family workers with 8.1 years, self- employed workers with 7.6 years and domes- • The disappearance of small and medium- tic workers with 5.0 years. size enterprises which find it impossible In the formal sector, self-employed workers to stay afloat for lack of money to invest posted the highest average number of years of and owing to falling consumption of their schooling – 13.5 years in June 1996 – followed products. by employers and government employees with • Elimination of jobs as a consequence of 12.6 years and private manual labourers and falling output and dwindling sales. employees with 10.0 years. • The slump in the construction sector. In the informal workforce, small-scale • Contracting sales induced by the rising cost employers turned in the highest average num- of using “plastic money” (credit cards) and ber of years of schooling (9.3), ahead of unpaid of borrowing in general. family workers and private manual labourers or employees with 8.1, self-employed workers • The large numbers of jobseekers. Of a labour with 7.0 years and domestic workers with force of 6,672,904, a total of some 5,735,574 5.0 years. are employed, which leaves almost a million persons in quest of a job. 1.2.12. Average years of schooling • The rapid and sharp increase in the urban for the total formal workforce, swollen by internal displace- and informal workforce, ment resulting from the armed conflict and by branch of activity the search for a better standard of living. • Restructuring programmes that have cut the Financial service workers displayed the public sector payroll and led to declining highest average number of years of schooling real wages in many instances. (11.5) in both the aggregate workforce and in the informal sector (10.2). They are followed, in • The indiscriminate opening up of the econo- the total workforce, by electricity, gas and water my undertaken by the Gaviria Government and continued by succeeding ones, which workers with an average of 10.9 years, mines has meant the closure of countless small and and communal, social and personal services (9.6 and 9.5 years respectively), industry, trad- medium-size enterprises for lack of coming, mining, transport, agriculture and con- petitiveness and markets. st r uction averaging 8.8, 8.4, 8.3, 7.8 and 6.9years of schooling respectively in June 1996. Over the period studied, the population with social security coverage tended to decline: in 1988 the percentage was 56.9, while in 1996 it was down to 53.4 per cent. The formal sector showed some improvement in this regard: in 1984 the proportion of formal sector workers with social security coverage was 20.8 per cent, while in 1996 it was 30.0 per cent.

120 1.4. Legal and institutional factors – Article 127. Basis for the payment of associated with the phenomenon: social security contributions; recognition, social security, access – Article 145. Minimum wage; to funding and to services – Article 161. Working hours; 1.4.1. “Work is a right and a social – Article 233. Family workers; obligation and enjoys the spe- – Articles 309, 310, 311. Construction cial protection of the State in all workers. its forms. All persons have the right to a job in dignity and fair- • Law 10 of 1991. Partnership enterprises; ness” (Article 25 of the National • Law 100 of 1993. Social security; Constitution) – Article 15. Voluntary registration by inde- Colombia has no specific regulations gov- pendent workers bearing the full amount erning work in the informal sector. In general, of contributions; the relevant rules are embodied in the Police – Article 91. Independent workers; Code, the tax statutes and in the powers and functions of municipal and departmental • Law 222 of 1995 setting out and authorizing authorities. the creation and operation of one-person As the economy of solidarity embraces enterprises; informal activities and for them represents • Decree 210 of 1953. Article 6. Home work; some possibilities for organization, funding and technical support, mention should be • Decree 468 of 1990. Articles 1 and 2. Part- made of the recently enacted Law 454 of 4 nership enterprises; August 1998 “establishing the conceptual • Decree 1100 of 1992. Partnership enter- framework governing the economy of solidar- prises; ity, transforming the National Administrative Department for Cooperatives within the • Decree 2150 of 1995. Elimination of repre- National Administrative Department for the sentations before the Public Administration. Economy of Solidarity, creating the Super- intendency of the Economy of Solidarity, set- 1.5. Assessment of the regulatory ting up the Guarantee Fund for Financial, Sav- framework, evaluation ings and Credit Cooperatives, laying down of interviews and review rules on the financial activities of cooperative of successful cases entities, among other provisions.” As stated above, Colombia has no regula- 1.4.2. Ordinary labour laws applicable tions specifically governing informal work. to the informal sector Generally speaking, the relevant rules are embodied in the Police Code, the tax statutes • Law 188 of 1959, Article 1. Apprentices and in the powers and functions of municipal contracts; and departmental authorities. This means that informal activities are regarded as a problem of • Law 36 of 1984. Definition of categories of public order owing to the insecurity that they craftsmen; generate and because of the encroachment on • Substantive Labour Code (CST); public areas. The legalization of these activities – Article 6. Casual labourers; consists essentially of tax collection. The exercise of the right to organize is limited largely by – Article 23. Wages as recompense for the very characteristics of the economic and services; labour activities involved and by the low cul- – Article 34. Independent contractors; tural level and scant solidarity among the – Article 35. Intermediaries; workers themselves. In principle the formation – Article 37. Oral or written contract, forms of trade unions in this sector is not as problem- of duration, casual or temporary work; ridden for the Government or for employers as it is in the formal sector. – Article 46. Temporary and fixed-term Regulations on health-related social secu- workers; rity, the tax and subsidy system and the Pen- – Article 62. Termination of contract; sion Solidarity Fund would seem to be applic- – Article 89. Home work; able to the informal sector of the economy, but

121 isolation, lack of timely information and the invariably find themselves: uncertain wages, complexity of these systems do not make for partial or incomplete financial rewards, partial timely access to these services. fulfilment of their social security obligations, compulsory financial contributions that under- 1.6. Access to funding mine wages. The Government has set up a comprehen- 1.7. The problems facing workers sive credit system (Sistema Integral de Crédito) in the informal sector, level for micro-enterprises through FINURBANO, a of organization and possible line agency of the Industrial Development assistance from government, Institute (Instituto de Fomento Industrial), IFI. NGOs and other institutions Users of the system must grapple with countless difficulties in gaining access to the funds; The fundamental problems facing informal above all, in making the requisite presentation sector workers may be described as follows: of investment projects, owing to the high cost • limited social security coverage, with the of borrowing that considerably undermines result that despite being sick and approach- profitability in a situation of ferocious compe- ing retirement age, many of them are tition. Financing is also being provided by some presently without protection. NGOs that administrate funds from the Inter- American Development Bank (IDB). Low com- • limited and difficult access to soft and petitiveness is suffocating micro-entrepreneurs timely loans; who must compete with contraband goods • no possibility to avail themselves of protec- entering the country or simply with foreign tion against occupational risks; products present on the domestic market • overwork and unpaid vacations; thanks to the indiscriminate opening of the economy. • lack of time and resources for training them- Attempts are under way to provide system- selves and improving their qualifications; atic training to organized groups in setting • low educational levels of the majority (hav- upcommunal banks that would make it possi- ing barely completed primary schooling); ble to constitute an active credit fund with • less than 5 per cent are organized into trade simple, rapid and low-cost procedures. Simi- or professional unions; larly, support is being sought through the • businesses not recognized by the Chamber of National Service for Training (Servicio nacional Co m m e r ce, which means that most of them de aprendizaje), SENA, for coaching in project operate beyond the scope of the law; and formulation. In pursuit of its policy of stimulating job crea - • persistence of the phenomenon in develop- tion, the Colombian Government has given legal ing countries over many years regardless of form to cooperative and partnership enterprises. the number of coercive measure taken. The first category falls under the legal framework and principles of the cooperative move- 1.8. NGOs and trade union ment and the second groups together associa- confederations: interest tions of small producers or prof e s s i o n a l s and concern operating on an individual profi t basis. The motivation behind these legal forms of support Some NGOs have taken an interest in sup- for partnership work clearly emerges from the porting trade union organization in the infor- pr escription that it must entail self-management mal sector, examples of these being the (Article 1 of Regulatory Decree 468 of 1990). National Trade Union School, ENS (Escuela Even though they are guided by the rules Nacional Sindical), in Medellin, the Maria Cano and principles of partnership work, working Trade Union Institute, ISMAC (Instituto Sindi- conditions in these enterprises or cooperatives cal María Cano), and other regional NGOs. are inferior to those that prevail when work is Nevertheless, we consider that comprehensive regulated by a work contract. assistance should be provided to pave the way A comparative look at the terms and condi- for as many modules as deemed necessary to tions of a work contract and those of a com- further the entrepreneurial and commercial mercial contract between a cooperative and its development of human resources. members reveals the inferiority and precari- To that end a task force was set up in 1996 ousness in which this class of workers almost including representatives from second- and

122 third-level trade union organizations existing attitude and reaching even minimal agre e- in Bogotá. The participants were: the Single ments. It is recognized that some headway has Central Organization of Workers (Central Uni- been made towards understanding the phe- taria de Trabajadores), CUT, the General Confed- nomenon and that it is useful to have a per- eration of Democratic Workers (Confederación manent forum of accompaniment by national General de Trabajadores Democráticos), CGTD, the and international organizations such as the Confederation of Workers of Colombia (Con- ILO in combating the hitherto spontaneous federación de Trabajadores de Colombia), CTC, and evolution of this type of work, with a view to the Union of Workers of Cundinamarca (Unión p rompting informal sector trade union leaders de Trabajadores de Cundinamarca), UTRACUN. to develop a more rounded view of the insti- The task force operated on a regular basis. tutional problems they are facing, both indi- In that framework a series of seminars was vidually and collectively. o rganized so as to validate the diagnosis, com- pile the support needs stated by those con- 1.8.3. Knowing the mechanisms cerned and to foster r a p p ro c h e m e n t with public of access and assistance and private institutions that establish policies and conduct programmes targeted at the infor- Furthermore, meetings with institutions of mal economy. On the basis of the diagnosis government control (Attorney-General of the a n d recommendations made, a strategic action Nation, District Inspectorships and Legal Rep- plan was drawn up based on coord i n a t i o n resentation Offices) have enabled the partici- amongst the re p resentatives of the trade union pants to familiarize themselves with the access confederations which, although sharing the and assistance mechanisms that those institu- general criteria, have their own action plat- tions can provide. forms based on their particular principles and Between 7 and 25 September 1995, each con- c o n c e p t s . federation held a seminar that produced a document on their action platform in the informal 1.8.1. Updated diagnosis sector. and rapprochement After an ILO review of the document, some points were clarified and modifications made – At present there is at least one up-to-date above all concerning the factors underlying low diagnosis of the social, economic, cultural and trade union membership in the informal sector or ganizational situation of unionized informal – and a modified and corrected version was sector workers in Bogotá. The findings of that submitted for eventual publication, with the diagnosis were studied by the leaders of these request that it should include the following: same organizations in May 1995 and were “The trade union confederations expressed enriched by further suggestions and rec o m - their concern over the large numbers of people mendations. These actions also helped to bring working in the informal sector, a majority unionized informal workers closer to govern- (54per cent in June 1998), bearing in mind that ment institutions that provide them with sup- apart from the seven capital cities, internal dis- port services in the spheres of financing, train- placement has affected over a million people ing and technical assistance, commerci a l i z a t i o n , and it is believed that, of that number, at least health and social security. This was aimed at 800,000 are economically active, which would securing res o u r ces to enhance the prod u c t i v i t y suggest that they operate in the informal sector and competitiveness of their enterprises. or are jobless, a problem compounded by the Besides, preliminary contacts were made fact that many of them cannot register them- with the National Confederation of Micro- selves or fail to do so because of fear, their enterprises (Confederación Nacional del Microem- unstable situation or simply because there is no presarios), CONAMIC, which represents micro- entity to register them. entrepreneurs at national level. “The aforementioned confederations are striving to promote and strengthen informal 1.8.2. Lack of a positive and flexible sector organizations so as to mobilize res o u rc e s , attitude of fer protection for their members and to influence the policies that affect them. During the The achievements of the federation of org a- 1990s, they have been drawing up a diagnosis nized traders fell short of expectations, owing of the potential and demands generated by affi l - to the lack of initiative on the part of each of iated informal worker organizations, followed the parties in adopting a positive and fle x i b l e by a strategic action plan. To implement it, coor-

123 dination is indispensable amongst the trade According to ENS figures, there are 874 union confederations and the affiliated worker trade union organizations, with legal personal- or ganizations in the informal sector based on a ity, with 116,523 members. On the one hand, diagnosis of the situation and their needs. these numbers show the very low level of trade Fu r t h e r m o r e, the leadership of both umbrel l a union membership in the sector and, on the trade union bodies and grassroots informal sec- other, the high degree of atomization into tiny tor organizations should be trained in order to organizations (ENS, 1998). ba r gain effectively with the various government institutions, employers and business people in the main areas of interest identified in the 2.3. Activities undertaken by trade di a g n o s i s . ” unions, by sector and target group, in particular for women and young people 2. Study of consequences and responses of the trade union 2.3.1. House for Working Women movement to the spread of Heads of Household unorganized work, in the informal In 1995, reacting to the massive wave of dis- sector in particular missals from government institutions, the 2.1. Institutional, organizational, Women’s Bureau of CUT started working out legal and financial factors strategies designed to provide labour and that have hampered vocational retraining. This gave birth to the the action of trade unions, House for Working Women Heads of House- and their successes hold (Casa de la Mujer Trabajadora Jefa de Hogar) . T h rough SENA it later started to train women In Colombia the law provides possibilities in non-traditional trades by means of pro- for establishing trade unions in the informal grammes in finishing and silver plating, elec- sector (an example of this is the directory of trical fitting and graphic arts. An agre e m e n t over 800 trade unions created in the area of was concluded with the Universidad Pedagóg- trades and services). This notwithstanding, the i c a for remedial courses for completion of overriding institutional reason for the failure t h e school-leaving certificate (b a c h i l l e r a t o), a of these unions to pro g ress to the point of p re requisite for entering SENA t r a i n i n g becoming industrial unions stems from the p ro g r a m m e s . p roblems facing the confederations in curbing Together with the Department of Social Wel- atomization and in tabling a coherent national fare of the Capital District, a contract was p roposal, by branch of industry. Repre s e n- signed with the “Bosque Popular” home for the tations were initiated this year before the aged under which general services would be Ministry of Labour and Social Security in an performed (washing and ironing of clothes, attempt to bring about a law to support this preparing meals, among others), thereby p ro c e s s . employing a group of 22 women who also The goal of establishing industrial unions in undertook to pursue SENA training courses. the informal sector goes hand in hand with the Given the tendency to think in the short term, aspiration to ensure harmonized social security the expectations of these women and their pre- services, occupational health, to find a way of carious home situations, of a group of 20, only formalizing employment and to create enter- five completed the programme. prises that generate occupations and services Even so, this programme opened the way affording access to new technologies and the for discussions with other institutions, such as relevant training. the Universidad Nacional, with which agreements now exist covering occupational therapy 2.2. Directory of informal sector and internships for students from other uni- trade unions versities who provide treatment programmes at the aforementioned house. The most up-to-date and reliable informa- Today the house has programmes such as: tion on unions in the informal sector is the prod- (a) a maintenance unit (five women); and (b) a uct of the ongoing endeavours of the ENS. The project for women from the informal sector as Ministry of Labour and Social Security – as the a proposed model of comprehensive services official body with which trade unions register for production units, which implies support for – has no database in this domain. the initiatives under way.

124 As far as the CUT is concerned, as stated by 3.2. National Trade Union of Child- its president at the Third National Congress of care Workers in Family Welfare Working Women (III Congreso Nacional de la Homes (Sindicato Nacional Mujer Trabajadora) held in August 1998, the de Trabajadoras al cuidado activities of the Women’s Bureau and the house de la infancia en hogares programmes are the most successful. de Bienestar Familiar), SINTRACIHOBI 2.3.2. Trade Union of Rural Women of the Atlantic (Sindicato The members of this union (“community de Mujeres Campesinas del mothers”) are women from the community Atlántico) offering their services to care for an average of 15 children in their homes. The programme was This trade union was set up in Barranquilla launched in 1987 under the Barco Government at the initiative of a group of women trade to eradicate poverty and child malnutrition in unionists from the formal sector garment manu- level 1 and 2 districts. The Fathers’ Association facturing industry. At present they have was set up in 1989 and encompasses between 36 organized groups comprising 2,224 rural 10 and 25 homes. women. This programme has been supported Family Welfare provides 0.5 dollars per day by the CTC and by international bodies such as in assistance to feed each child, 3 dollars per the International Confederation of Free Trade month for learning materials, a small supple- Unions (ICFTU) through its branch, the Inter- ment of 9 dollars per month towards fuel and American Regional Organization of Workers refuse collection and an allowance of 80 dollars (ORIT). It has an active loan fund and is head- monthly for the “community mother” for the quartered in Barranquilla. It has concluded services rendered. training agreements with SENAand with Fam- At present there are 76,000 “community ily Welfare and other institutions that provide mothers” throughout the country in urban and services. The groups become management and rural homes servicing the traditional pro- bargaining resources in their communities. gramme: children of 6 months to 7 years and the Fami (Family and Children) programme, which involves caring for 12 children from birth 3. Successes in traditional trade to 2 years old, six pregnant women and six union activities: labour relations, nursing mothers. bargaining, worker education, This union was established in 1989 when among others Family Welfare announced a cutback in the items being made available for care in homes. 3.1. National Federation of Initially an NGO (MENCOLDE) working with Professionals and Workers young people in Cuidad Bolívar advised them of Independent Associations on organizing themselves. One of the basic of Colombia (FENGRICOL) problems was obtaining recognition for these mothers as workers. In 1992, at the suggestion A CUT affiliate, this federation was estab- of a teacher, they sought advice from CUT lished in 1985. It has had the support of ORIT- whose Women’s Bureau assisted them in draw- ICFTU and the Netherlands Trade Union Con- ing up their statutes and in obtaining legal sta- federation (FNV) in organizing and developing tus. They started their operations with some its training programmes. According to its presi- regional offices in Bogotá, Florencia and Huila. dent, it has brought together as many as CUT also began supporting visits to the regions 120 unions. Plans are afoot to create the House and bringing “community mothers” together for Informal Sector Workers (Casa del trabajador through its regional offices. del sector informal). It is now preparing for its The Board of Directors of SINTRACIHOBI ﬁfth Congress scheduled for 1999. Besides, this has completed several rounds of bargaining: organization has submitted to the Congress of the ﬁrst was in 1989 when it obtained a 24 per the Republic a draft law “regulating the most cent increase in the allowance; the second came precarious forms of work in the informal sec- in 1994 when agreement was reached for their tor, encouraging its organization, among other affiliation with the Social Security service and provisions”. membership of the Pension Solidarity Fund under which the Government pays 80 per cent and the mother 20 per cent towards the grad-

125 ual constitution of a retirement pension. The la Construcción), CAMACOL, for the follow up third round took place in 1997 when a defini- and enforcement of minimum rights, the tive agreement was concluded with the Min- implementation of the occupational risk pre- istry of Labour establishing a procedure for vention programme and the pension solidarity receiving medical attention under Social Secu- fund. It has become affiliated with the Wo r l d rity in which Family Welfare undertook to send Federation of Trade Unions (WFTU) and the updated diskettes with the relevant lists. Fur- UIS at the international level, and with the ther, a compensation rate was negotiated of FLEMACOM at the Latin American level, approximately 3 dollars to be collected for each w h e re a range of policies have been discussed child and allocated as follows: 34 per cent for for coping with the situation. The union is now recreation and 66 per cent towards the public- faced with the challenge of coming up with utility bills of their own home, which also innovative strategies for tackling the crisis in serves as the community home. the construction sector, a matter of interest to the confederations. 3.2.1. Agreements with foundations 3.3.1. National Association of Small At present, the union has 36 sections nation- Public Transport Vehicle Owners wide and its members have received training (Asociación Nacional courses in leadership, project design and recrea- de Pequeños Propietarios tional teaching, for which Family Welfare has de Transporte Público), concluded agreements with foundations. Its APETRANS level of organization has now become attractive to political schemers and opportunists who This association came into being in 1995 make their appearance with a myriad of based on Law 105 of 1993 which set 1990 as the promises at election time. The trade union is cut-off date for the useful life of all public trans- now striving to improve its profile and to nego- port vehicles. Those concerned spontaneously tiate agreements for the validation of school- came together and sought the advice of CUT. leaving certificates. In regions such as Barran- They launched a publicity campaign “Spread cabermeja, the oil company Empresa de Petróleos the Word” (Pasela Voz), using fliers, posters and (ECOPETROL) has supported the union in meetings at bus termini. The cost of member- obtaining a trade union headquarters and ship in the association is 3 dollars per vehicle attempts are now under way to systematize owner. member contributions by direct deduction It was clear that the majority of them were from wages (1 per cent of the basic wage), completely ignorant of the law and the regula- and to secure affiliation with an international tions governing public transport. The associa- organization. tion’s membership now includes 5,000 owners and it has joined the Chamber of Commerce, of 3.3. National Trade Union of whose services it had been unaware. Construction Workers This organization is presently setting up a (Sindicato Nacional fund for vehicle replacement, thereby being able de Trabajadores de to compete in the Tra n s p o r t e Tra n s m i l e n i o pro j e c t la Construcción) now being organized by the Office of the Mayor of Bogotá and the Ministry of Transport. The During the construction boom, this union’s strike of November 1998 won them rec o g n i t i o n membership rose to as many as 26,000. Now, as fr om these authorities and awakened their a result of the crisis, it has approximately 4,000 in t e r est in talks with the association about its in the city of Cali. No data is available for other demands. Even so, the dispute continued and cities. Despite being casual labourers, they do yet another strike was called in December 1998. join the union – whether employed or not – They are now establishing sectional divi- motivated by the comprehensive services it sions with their correspondent offices and an offers: sports, recreation, legal advice, agree- advisory team which is to be permanently ments with evening schools for the validation available to users considering that none of them of the school-leaving certificate and assistance can pursue this activity on a full-time basis for with funeral expenses. the lack of any guarantee of a trade union In 1997 an agreement was signed with the allowance. Its president is a former CUT leader Ministry of Labour and with the Colombian well known for his work in defending the inter- C o n s t ruction Chamber (Cámara Colombiana de ests of small transport operators.

126 3.3.2. Public retail market (outside fully occupying the small staff (not the full the “Paloquemao” Shopping tally of hours), whose wages were set on the Plaza), Bogotá basis of the legal minimum wage and all their statutory and labour contributions paid; A la r ge group of vendors squatting on the (c) meticulous payment of the set rent, with gr ound and selling small amounts of fruit, veg- services, of some 600,000 pesos monthly; etable and other products on the fringes of the Paloquemao Shopping Plaza in Bogotá have (d) from the very beginning, appointment by been and continue to be persecuted in two the staff of their administrative organs, their equally sadistic ways: on the one hand, the accounting personnel, their auditor and wholesalers (owners of the large department their duly authorized salesperson; and st o r es and warehouses inside the Plaza, armed (e) successful management of a programme of and constantly hostile to this category of work- higher-level training and apprenticeship, ers whose “capital” is more than laughable and improvement of equipment, more industri- ba r ely enables them to remain alive); and on the alized production and processing of fruit ot h e r , the “conﬁscation” by the authorities (rea d and fruit by-products. “r obbery”) of their paltry goods which are a matter of survival for them and their large families. A loan (soft and with a grace period) is now being negotiated for an already projected 3.3.3. Proposed change investment: the purchase of a warehouse with administrative annexes to which the present These workers had a union that was set up equipment will be moved, together with any after overcoming formidable stumbling blocks, other equipment that may be bought for the including their total lack of education (illiter- purposes of the new initiatives planned. ates), which was completely destroyed. FEN- GRICOL, the national federation with which 3.3.4. The case of the second-hand they had been affiliated, proposed at a trade garment vendors (former union meeting that they should opt for a pro- Plaza España), Bogotá gramme to set up an integrated partnership- based enterprise (that could entail creating a Some 287 families are involved in this activ- fr uit-pulp processing enterprise) once they it y , rep r esenting 1,200 people who depend on it. could obtain the equipment needed for this. The For 40 years now these vendors have been Family Wel f a r e Institute of the District (In s t i t u t o occupying the entire area of what used to be Pl a z a de Bienestar Familiar del Distrito) would loan them España. Aseries of meetings has been under way the equipment and provide them with prem i s e s to discuss a special programme, with the advice for setting up the enterprise. For its part, FEN- of the National Federation of Professionals and GR I C O L would provide cultural and adminis- Workers of the Independent Associations of trative training through SENA for a small grou p Colombia (Federación Nacional de Profesionales y of workers who would begin their business on Tra b a j a d o r es de los Gremios Independientes de Co l o m - the premises of the District Social Wel f a r e Offi c e bia), FENGRICOL, in quest of formula for shift- (Bienestar Social del Distrito) at Plaza España. ing the second-hand garment market to another After more than 60 workshops involving location in the city, based on unambiguous rul e s classes given by experts from SEDECOM, this of the game for both parties. The prog r a m m e tiny group of volunteers learned to read and involves assigning modules or premises by the write, elementary and practical accounting, the District, together with a long-term solution, rudiments of marketing and the management among others, for such aspects as cleanliness and and start-up of fruit-pulp production. At the co o r dinated programmes between the industri- end of one year of operation under the trade alists and the present occupants of the site. The name “Frutas y Conservas La Unión”, and after aim is for the recovery of the public space to take veriﬁcation of supply contracts with some enti- place in an atmosphere of give and take. ties, the following were the results: (a) the Partnership Enterprise has purchased all 3.3.5. The case of food vendors within the production equipment and returned to “sports stadiums” Social Welfare the loaned equipment; Some 400 workers make up three trade (b ) rental of premises from which to meet the unions that have been providing their services demand of an almost active market thereb y to empoyers known as “resellers”, who peri-

127 odically sign rent contracts for places such as bargaining with the administration to obtain a the Estadio el Campín, the Plaza de To ro s, the C o l- lot, with suitable stalls, basic services and iseo Cubierto and the P a rque del Salitre . Th ro u g h advertizing to ensure that information reaches their office staff, the employers demand that customers. b e f o re every event or festival each union sub- mit lists of member workers showing those 4. The basic rights: ILO rules who will be working at the location of the embodied in laws e v e n t . Each worker is given an inventory of the The organized trade union movement has amounts to be sold. They receive a small per- endeavoured to secure its rights under the centage on actual sales and whatever is missing existing body of ILO rules and conventions rati- is deducted. In spite of the time they have been fied by Colombia. Nevertheless, when it comes doing this type of work, they are not reg i s t e re d to safeguarding their jobs, all the arguments with the Social Security, they have no vacations wielded are of little avail in the face of local or any social security benefits whatsoever. agreements established – in most instances The present concern of these unions is, imposed – from the government side and which th r ough their leaders, to enter into direct con- hardly leave room for legal actions. tracts with the District and thus eliminate the Very strong pressure is exerted by the orga- middlemen, provided that they demonstrate the nized and formal business sector, which justi- ability to prep a r e the goods and handle sales dis- fies its attitude: according to a 1997 study by the tribution. The percentage saving would make it Bogotá Chamber of Commerce: “The over- possible to set up a revolving fund that would whelming presence of the informal sector is minimally cover some aspects of social security. helping to lower productivity levels, to the Again, this calls for coordinated action. detriment of improved standards of living for Bogotá’s residents. In one way or another, the 3.3.6. Association of United Traders informal sector affects all facets of life, the pub- of Galería Antonio Nariño lic at large and public spirit in the city.” (Asociación de Comerciantes The conventions have been applied in an Unidos de la Galería Antonio attempt to formalize trade in the informal sec- Nariño), “ACUGAN” tor and in the pre - b a rgaining stages when the o rganizations are accompanied by the trade This association came into being in 1962, union confederations. But those conventions comprising displaced persons from Tolima, a re basically drafted to protect formal work. Santander and Los Llanos. It subsequently The small gains made by the informal sector became the Small Traders Association (Aso- have gone hand in hand with org a n i z e d ciación de Pequeños Comerciantes ), APECO, and p rotests and claims have tended to be favoure d concluded Agreement 80 of 1962 under which by the process of formalization, as in the case the Municipal Council created the Restaurant of the small-scale transport operators in Fund (Fondo de Restaurantes), which signalled B o g o t á . the start of food sales. In 1972 Agreement 25 was concluded, set- Freedom of association: ting up the Bogotá Public Vending Fund (Fondo Conventions Nos. 87 and 98 de Ventas Populares). They started out with 62 stalls and now have some 640 registered stalls. Freedom of Association and Protection of The Inter-Union Committee was later set up the Right to Organise Convention, 1948 (No. and is now supported by the CGTD with 37 87), ratified by Colombia on 16 November 1976. affiliate unions and some 8,000 members. The Right to Organise and Collective Bargaining union collects rent of about 4 dollars per square Convention, 1949 (No. 98), ratified by Colom- metre. All members pay social security contri- bia on 16 November 1976. butions. Their profit is roughly equivalent to two minimum wages. The stalls are passed Forced labour: down from parents to children and are Conventions Nos. 29 and 105 regarded as family property. They specialize in garment manufacturing. Many of them have Forced Labour Convention, 1930 (No. 29), workshops attached to their own houses. In the ratified by Colombia on 4 March 1969. light of the restructuring of public areas being Abolition of Forced Labour Convention, 1957 carried out by the Alcalde Mayor**, this union is (No. 105), ratified by Colombia on 7 June 1963.

128 Non-discrimination: support in one dispute or another. On many Conventions Nos. 100 and 111 occasions the initiative to get organized has been spurred by an abuse of workers, by the Equal Remuneration Convention, 1951 (No. need to defend themselves against the author- 100), ratified by Colombia on 7 June 1963. ities, or in reaction to a regulation that workers Discrimination (Employment and Occupa- consider to be prejudicial to their interests. It tion) Convention, 1958 (No. 111), ratified by has also been observed that the leaders are for- Colombia on 4 March 1969. mer members of formal sector trade unions who are attempting to reproduce the trade Key Conventions not yet ratified union model in circumstances quite different by Colombia from their own. One of the stumbling blocks to the more or less normal functioning of these Minimum Age Convention,1973 (No. 138) organizations is the absence of union dues and Worst Forms of Child Labour Convention, of mechanisms for collecting and administrat- 1999 (No. 182) ing such dues.

5. The new challenges of the informal 5.1.2. Policies of the CUT sector and thoughts on future action by trade union organizations The Secretariat for Informal Affairs was formed when the CUT was created and, with 5.1. Interviews with trade union the first amendment of its statutes, became the confederations: CUT, CTC and CGTD Department of Construction, Informal Econo- my and Cooperatives. 5.1.1. The informal sector in the The head of this Department said in an inter- context of the trade union view: “In Colombia, the CUT has always confederations worked with our comrades in the informal sector, but we have not achieved the needed level The Colombian trade union federations of integration and development; furthermore, have been gaining in awareness of the impor- the information we have is so sketchy that there tance of the sector, which makes up more than are unions existing of which we have never half the workforce. The vast majority of the peo- even heard, although they are affiliated to some ple in it are without social security coverage, of our sub-offices. The rights of association and whether owing to the precariousness of their collective hiring are very limited in this sector occupation or the absence of flexible mecha- and, together with cooperatives, we need to nisms allowing them access to it. For a long time take up the matters of social security, training the confederations were reluctant to become and presence in rural sectors so as to provide involved in organizing informal sector work- incentives for work and development towards ers, being daunted by the magnitude of the and with them.” problems and because it was easier to act in the The most important work in Colombia has formal, structured sector. In some trade union undoubtedly been that done through the Infor- circles the belief has taken hold that supporting mal Urban Sector (SIU) project carried out in the informal sector serves the interests of the conjunction with the ILO, the Ministry of very neo-liberal model that is at the root of the Labour and the National Service for Training deregulation of the labour market and the loss (SENA), the first phase of which produced of formal sector jobs. good results. Nevertheless, the various confederations are today endeavouring the find viable strate- 5.1.3. Policies of the Confederation gies for bringing these millions of people of Workers of Colombia (CTC) together and offering them real alternatives that will organize and give them a sense of At present, there is a “Secretariat for Self- direction and improve their living standards. employed and Independent Workers”. The For pragmatic reasons, it is also considered nec- head of that Secretariat said: “Throughout essary to tap the informal sector for new its long history, this confederation’s member- recruits so as to offset the decline in trade union ship has included several groups of self- membership. It is often the initial group or the employed and independent workers who have base union already created in the informal sec- set up their own organization, for example, tor that approaches the confederation for its watchmakers, photographers, hairdressers,

129 transport operators, carters, sand vendors, ven- fragmented. The workers concerned have no dors of games of chance, craft workers, ﬁsher- trade union involvement, which, on the one men, itinerant vendors, washerwomen and hand, is consistent with the informal nature of rural working women. These sectors are orga- the sector and, on the other, with the apathy and nizing as unions to safeguard their work, start- in d i ff e r ence towards trade union membership ing with the legalization of their particular revealed by studies of the garment manufac- activity.” turing sector as a whole. Most of the workshops The organization intends to overhaul the ar e not reg i s t e r ed with the Chamber of Com- organizational model and examine how the me r ce. The relationship between home workers labour law can be applied to informal sector and the big companies is minimal. Opportuni- workers and seek ways of creating trade unions ties and time for training are very scant, with the by branch of industry so as to provide them result that qualiﬁcation levels remain low, at any with social security and occupational health rate as far as modern technology is concerned. coverage, housing plans and better guarantees for the management of loans. Its policies have 5.2.1.Types of workshops paid special attention to organizing young people and informal sector workers as a matter There are three types of workshops in the of priority and efforts are now under way to garment manufacturing sector: devise suitable strategies. • satellite workshops; • independent workshops; and 5.1.4. Policies of the General Confederation of Democratic • micro-enterprises in the form of partner- Workers (CGTD) ships and cooperatives. As stated in its magazine No. 107 of Sep- The systems of contract labour, involving tember/November 1998, this Confederation is payment based on piecework, lack of worker deeply concerned about the growth of the guarantees, exhausting working hours, insta- workforce on the informal labour market and bility, casual labour, overcrowding, unpaid is therefore striving to continue to organize and family work, women’s work, lack of control provide opportunities for improving the qual- over the process and means of production, the ity of life of itinerant vendors, whom it has presence of middlemen, the lack of control over organized into the Inter-Union Committee, the market, as well as overexploitation and low comprising 37 unions and sectional offices in salaries have all along characterized the gar- several regions across the country. ment manufacturing industry. One of its foremost leaders is a member of The launching of any organizational or the Confederation’s managing committee, participatory process is a very complex under- which provides training opportunities, liaises t a k i n g . with organizations and represents it at the different events. 5.3. Trade unions and the expansion of the informal sector 5.2. Trade union action among home workers and those working under Forms of informal sector work are increas- contract labour arrangements ing rapidly across all developing countries as a result of the policies for privatizing govern- The process of using contract labour in the ment enterprises, the trend towards reducing case of home workers has hardly been studied the payroll of government bureaucracies, in Colombia. Not much attention has been adjustment and deregulation policies, the drawn to this particular form of work in the removal of subsidies protecting domestic sociology of labour. Even so, based on a few industries against foreign products and the isolated cases, we are able to understand the increasing use of technology without accom- problems involved, as in the garment manu- panying alternative employment policies. In facturing sector in Bogotá for instance. absolute and relative terms, the number of for- One essential feature of the garment-manu- mal sector jobs available for the workforce as a facturing industry is the system of subcontract- whole is dwindling steadily. The forms of col- ing. Asubcontract is a means of interlinking the lective hiring typical of the formal sector are formal and informal sectors whereby the pro- becoming ever less applicable to forms of work duction process becomes decentralized and in the informal sector. The trade union move-

130 ment needs to evaluate the impact of the bur- drug trafficking, peace, the guerrilla problems geoning informal sector on its activities, espouse and so on, in an attempt to participate democ- the sector’s claims, support its demands and ratically in all forums of the country’s eco- incorporate its needs into the movement’s own nomic, social and political life. action platform. A battle must be waged for improved con- It is important for the trade union movement ditions of work, safety, stability, training, to support the claims of informal workers from health, housing and so on. The trade union the standpoint of professional associations in movement must resolutely support all draft or der to give some balance to the development laws in defence of stable work and eliminating of economic associations (micro-enterprises, co- casual or informal work. operatives, and so on). The bargaining agendas Accordingly, the trade union movement of tripartite coordination processes or barga i n - should, inter alia, help shape the following eco- ing with governments should include topics nomic, political, social and cultural claims: concerned with work in the informal sector. The leadership structure of federation- and (a) Economic claims: confederation-level trade union bodies should • wages, that is, a wage policy for home aides, include appropriate divisions for dealing with employees of micro-enterprises and domes- informal sector work. Such divisions should be tic workers; under the responsibility of the sector’s trade • benefits, that is, social security mechanisms union leaders themselves. Similarly, more flexible forms of organiza- that benefit all informal sector workers and being more flexible, make it possible to meet tion of informal sector workers should be para-fiscal payments: to the National Ser- adopted, bearing in mind also the possibility of vice for Training (SENA), the Colombian their direct membership in national trade unions, industry unions or even in the trade Institute of Family Welfare (ICBF) and to Family Allowance Agencies; union confederations themselves. • technological and legal order: upgrading production units to incorporate new tech- 5.3.1. Elements for a list of claims nologies, both hard and soft, in order to for the informal sector make for genuine development; Trade union organizations of the first, sec- • moderate interest rates, subsidized and eas- ond and third levels should jointly finance slots ily accessible credit; in all the communications media – television, • tax policy: waiving some taxes (industry and radio, newspapers, seminars, and the like – so trading, etc.) for micro-enterprises or self- as to foster a culture of democracy which, employed workers with a view to red i s t r i b - among other things, defends the right of asso- uting income for periods of at least fiv ey e a r s ciation and offers a positive image of the trade until a stable working capital is built up; union movement in Colombian society. Trade union leaders must be trained by • retrofitting with special credit facilities, etc.; means of clearly defined projects and pro- • putting in place mechanisms enabling small grammes so as to overcome the mistakes of the production units to gain access to resources past. Here again, a vital role falls upon schools, such as working capital, technical training, institutes and in general the NGOs that support specialization and vocational training; and workers. Confederations, federations and trade • promoting and supporting forms of self- unions must wage joint campaigns, at least each managed production within the framework qu a r t e r , to set up new trade unions by branch of of the economy of solidarity. industry and to strengthen already existing ones. All organizations must participate actively (b) Labour claims: in national life, take positions and draw up pro- • employment and job stability for workers in posals on the country’s problems rather than micro-enterprises and domestic service; restrict their activities exclusively to trade union or labour-related matters. For example, • elimination of underemployment and the they should take positions and formulate pro- monitoring of service contracts under sub- posals with regard to foreign policy, economic contracting arrangements; and policy, monetary and fiscal measures, gover- • implementing a regulatory framework in nance, the behaviour of political parties, the defence of workers. Apprising all informal decisions of professional employer groups, workers of their labour rights and duties.

131 (c) Political claims: sion-making capacity – specifically as • using all participatory mechanisms pro- regards policies and measures affecting vided under the Constitution, such as informal trading – in the different forums inspectorships, legal capacity, attorneys, and seminars held in 1995 with the support due process, etc. Inclusion in coordination of the programme; and bargaining mechanisms that make deci- • the need to create permanent coordination sions or discuss problems inherent in the mechanisms that guarantee constructive sector; and dialogue among the parties aimed at de- • demanding the practice and defence of termining durable policies, forums and human rights. solutions; • the urgency of knowing the results of a (d) Social claims: qualitative study on informal trading in • social security and health protection and Bogotá, the policies in place and their pensions, promoting specialized mutual impact on that activity; and health enterprises in the sector; • the importance of encouraging an initial • policies for covering the basic needs of meeting between the competent municipal health, nutrition, education and housing; bodies and the organizations representing • defence of jobs and the right to work (itin- stationary and itinerant vendors in the erant vendors), taking care not to prejudice informal sector, in order to coordinate short- other sectors of the population; and and medium-term actions. • generating processes for integrating the During the ILO mission of March 1996, the informal sector with the other organized dialogue was continued with the Alcalde Mayor sectors so as to pool endeavours. of Bogotá with respect to two initiatives: (e) Cultural claims: • holding a first “panel discussion on the problems of street vending in Bogotá”, with • providing training at all levels of the popu- the participation of the Alcalde Mayor and lation, with preferential guarantees making his advisers (Departments of Social Affairs, it possible to overcome professional back- Communal Action, Public Vending, Plan- wardness; ning and the use of public areas) and repre- • providing recreational and cultural ameni- sentatives of organizations of stationary and ties at preferential prices; and itinerant vendors; and • running environmental improvement • setting up mechanisms for cooperation with campaigns. the Municipal authorities, to be responsible for the problems of incomes and urban pro- 5.3.2. Agreements reached under ductivity (Strategic Plan Bogotá 2000), the Informal Urban Sector-ILO designed to increase the productivity of programme micro-enterprises. We should highlight the role of the trade union delegates in the various bodies of the SIU- 5.3.3. Needs, challenges, strategies ILO Programme, which ensured the inclusion and means of trade union action of the viewpoint of organized workers in the in the informal sector Tripartite Orientation, Coordination and Fol- Generally speaking it may be said that for low-up Committee as well as their participation Colombia’s trade union confederations, the in the Inter-Institutional Task Forces on social organization and claims of informal sector pr otection, the legal and regulatory framework, workers are not a priority in their present plat- social and labour conditions, productivity and form and day-to-day business. Those confed- or ganizational processes in the informal sector. erations work essentially in formal sector enter- The first mission carried out by the ILO in prises, both public and private. The country’s December 1995 provided the occasion to initi- largest confederation, the CUT, by virtue of its ate dialogue with the Alcalde Mayor of Bogotá, strong political presence and the number of Mr. Antanas Mockus, with whom the following affiliate organizations, mainly represents the matters were discussed: public sector trade union movement. • the lack of a representative from the munici- Nevertheless, there has been constant con- pal authority with deliberative and deci- cern over the phenomenon, both as an expres -

132 sion of the major structural economic and social (10) the Department of Social Welfare of the dislocations and the precarious living and work- District (DABS) should draw up jointly ing conditions of the thousands of people with the trade union movement, a plan of engaged in informal sector activities. In rec e n t action designed to offer services to inde- years, the three Colombian confederations have pendent workers and their families in the been displaying greater understanding in inter- informal sector; and pr eting the national reality and are exerting pres - (11) SENA, in coordination with the DABS and su r e so as to participate in those forums where the sector’s trade union movement, decisions are taken on the country’s fundamen- should set up technical training pro- tal problems, naturally including those arising grammes for workers and their families. in the process of negotiations associated with the internal armed conflict. This political vision These initiatives, intended for Bogotá, can undoubtedly makes it easier to tackle the prob - serve as guidelines for the development of lems of the informal sector, which are closely labour nationwide, being tailored to suit related to trends towards de-industrialization, regional or local conditions and using each area de r egulation and contracting employment. It is to the optimum, whether at the tripartite level becoming increasingly clear that peace is a con- (workers, government, employers or profes- dition for reversing these negative trends in the sional associations) or at the bilateral level nation’s development and that the resolution of (workers, national, regional or local govern- the internal conflict must entail sweeping eco- ment or with businesspeople), but on the nomic, social and political change. understanding that what is essential is that Nevertheless, the trade union confedera- workers should be capable of organizing to tions and organizations in general must insist improve the correlation of forces and, from the on carrying out immediate actions aimed at the trade union movement, forcefully to promote organization, training and support for the real possibilities for improving the working claims of informal sector workers. In that con- conditions and quality of life in the sector. nection, the initiatives and proposals by trade union confederations arising from the SIU-ILO programme are important and we may high- Bibliography light the following: Bernal Medina, Jorge. 1998. Propuesta sobre política económica (1) recognition of the sector; y social para la paz, 22 and 23 September. CUT: House for Working Women. Project “Model for com- (2) safeguarding the right to work; prehensive care in production units run by women in (3) ending repression on account of using Bogotá”. public areas; Fuentes Vásquez; Lya Yaneth. 1997. Women’s work in annexed workshops and home work in the garment-manufacturing sec- (4) coordinated relocations; tor in Bogotá, CUT/House for Working Women, National (5) restructuring and regulation of the public Department of Equity for Women, October. vending fund; Gazette of the Congress, House of Representatives; Law 454 of 1998 establishing the conceptual framework govern- (6) designing and implementing concrete and ing the economy of solidarity, transforming the National socially fair and legal solutions; Administrative Department for Cooperatives within the National Administrative Department for the Economy (7) taking a census to quantify the population of Solidarity, creating the Superintendency of the Econo- in statistical terms, by gender, age, apti- my of Solidarity, setting up the Guarantee Fund for Financial, Savings and Credit Cooperatives, laying tude, work and intellectual capacity; down rules on the financial activities of cooperative enti- (8) in the District, budgetary and planning ties, as well as other provisions. measures, with the support of NGOs General Confederation of Democratic Workers (CGTD) 1998. andother institutional agencies created to Democracia Real, No. 107, September-November. support programmes in the informal sec- ILO. 1991. The dilemma of the informal sector, Report of the Director-General to the 78th Session of the International tor as a planned response to the problems Labour Conference (Part I). of traders in the informal sector of the —. 1993. Report of the Conference, 15th International Con- economy; ference on Labour Statistics, Geneva, 19-28 January. (9) setting up a bipartite commission with —. 1999. List of ratifications by Convention and by country. Report III (Part 2) to the 87th Session of the International equal representation (office of the Alcalde Labour Conference, Geneva. Mayor and trade union organizations of all Maldonado, Carlos; Hurtado, Montserrat. 1997. The Informal levels) so as to study and analyse the prob- Sector in Bogotá. An Interdisciplinary Approach, ILO, Min- lems comprehensively; istry of Labour and Social Security, SENA.

133 Ministry of Labour and Social Security, SENA. 1998. Employ- Rodríguez Maldonado, Hernando. FENGRICOLma n u s c r i p t s . ment Observatory: Labour Market Trends (September 1995 to Sepúlveda, Juan Manuel; Espinoza, Ignacio; Herrera, September 1998), DTE. Beethoven. 1997. Tripartism and the informal sector. Molina García, Oscar Alberto. 1998. Salvage and render labour coordination more efficient, FESCOL, June. National Administrative Statistics Department. 1996. Notes National Survey of Households, Job-holders (1884-1996), For- 1 mal and Informal Sector, June. Bogotá D.C., Medellin, Cali, Barranquilla, Bucara- manga, Manizales, Pasto, Villavicencio, Pereira and Cúcuta. National Trade Union School of Medellin (EN). 1998. Regis- 2 ter of trade union information. List of national trade union Agriculture, mines and electricity, gas and water. attachés, p. 28. 3 Idem. Navarro, Norberto Ríos. 1988. “Partnership Work”, National * Gini coefficient: measure of inequality based on the Trade Union School, Cultura y Trabajo, No. 46, Septem- income distribution of the population. A coefficient equal to ber, Medellin. one (1) indicates perfect inequality, and a coefficient equal to Rivera, Carlos Fernando; Montoya, Angela. Legal frame- zero (0) perfect equality. work for the informal sector in Bogotá. Approaches and ** Alcalde Mayor: magistrate exercising ordinary juris- applications. The perspective from the institutions. diction in the city.

134 El Salvador

Trade union organizations must understand the important contribution of the informal sector to the country’s social and economic life, the trend towards informalization of work, and hence the need to organize the sector, not only because of their role in improving the living conditions of workers, but also because the very future of the trade union movement largely depends on organizing in this sector.

José Víctor Aguilar Guillén Research Economist

The burgeoning of the so-called unstruc- defence and representation of the interests of tured or informal sector is a social and eco- informal workers, within the context of the nomic phenomenon now assuming global country studies being prepared by the ILO proportions. It is with good reason, therefore, Bureau for Workers’ Activities to buttress the that the International Labour Organization work of trade unions on behalf of informal sec- (ILO) has been taking an interest in the matter. tor workers. A vast informal sector is already in place in The first part examines the informal sector developing countries, but it is also growing in within the national context; the second part developed countries, albeit on a smaller scale. analyses trade union activity in the sector; and Accordingly, the Report of the Director-General the third attempts to suggest possible strategies to the 78th session of the International Labour for strengthening trade union work in favour Conference in 1991 states: “Developed coun- of informal sector workers. tries also have pockets of urban poverty, with often fairly large numbers of people engaged in poorly remunerated marginal activities. Many 1. The informal sector developed countries have a large ‘underground in the national context economy’, and various forms of unregistered 1.1. Employment in the informal (or ‘black’) labour; and the trend towards sector deregulation and a greater decentralization of production, made possible by technological The informal or unstru c t u red sector can be changes and induced by the efforts of enter- described as “consisting of units engaged in prises to cut costs in the face of increased the production of goods or services with the competition, has resulted, in developed as in primary objective of generating employment developing countries, in greater recourse to and income to the persons concerned”. These subcontracting, in greater casualization of units typically operate at a low level of org a- labour and, to some extent at least, in lower nization, with little or no division between levels of social protection for the workers labour and capital as factors of production and concerned.”1 on a small scale. Labour relations – where they Official figures on urban employment in El exist – are based mostly on casual employment, Salvador show that almost half the working kinship or personal and social relations rather population is to be found in the informal sec- than contractual arrangements with formal tor, which encompasses an array of activities g u a r a n t e e s .2 and forms of job organization characterized by As in most developing countries, the infor- instability and precariousness, low incomes mal or unstructured sector in El Salvador has and the extreme poverty of the workforce. become a significant source of employment and This paper will focus on the role of trade income for a large proportion of the economi- unions in improving the working and living cally active population. conditions of informal sector workers. It will Data from the Multipurpose Surveys car- also examine the organizational work for the ried out in El Salvador show that almost 50 per

135 cent of the urban working population is cations, accounting respectively for 67, 66 and employed in the informal sector. Table 1 shows 55 per cent of the working population. that in 1996, the informal sector accounted for It is noteworthy that women make up 53 per 47 per cent of the working population. cent of the total workforce in the area of trade. Abr eakdown of the urban workforce by gen- Besides, of the urban working population, 81 der (see Table 2) shows that 59 per cent of the per cent of the women engaged in trade work men work in the formal sector and 41 per cent in the informal sector (see Table 2). in the informal sector, while 44 per cent of the A geographical breakdown of informal sec- women work in the formal sector and 56 per tor workers shows that 37 per cent work in the cent in the informal sector. Hence, more than Metropolitan Area of San Salvador (AMSS) and half of the working women are employed in the the remaining 63 per cent in other urban areas. informal sector. These ﬁgu r es attest to the less As to the importance of the AMSS in generat- favourable working conditions for the female ing informal employment, it is observed that wo r k f o r ce. It is more difficult for women to this area accounts for 37.18 per cent of informal obtain employment in the formal sector because work in industry as a whole, 26.71 per cent in of discrimination in employment and their construction, 41.36 per cent in trade, 43.72 per domestic res p o n s i b i l i t i e s . cent in transport and communications, 37.20 An analysis of informal work by branch of per cent in ﬁnancial institutions and 50.50 per activity reveals that the areas in which the bulk cent in services. of the workforce is engaged in informal work An analysis of the share of each branch of are trade, agriculture, transport and communi- activity in informal job creation in the AMSS

Table 1. Employment in the informal sector by activity and gender (% of total employment)

Ge n d e r Branch of economic activity and sector Tot a l Ag r i c u l t u r e Mi n i n g In d u s t r y Elec., Gas, Co n s t ru c . Tra d e Tra n s p . , Fi n a n c i a l Se rv i c e s Hu n t . & FIsh. Wat e r Co m m . es t a b s . Total 100 100 100 100 100 100 100 100 100 100 Formal sector 153 134 175 153 100 161 133 145 198 173 Informal sector 147 166 125 147 1– 139 167 155 112 127 Male 157 189 170 152 188 195 147 192 146 145 Formal sector 134 128 146 132 188 157 123 137 145 140 Informal sector 123 161 125 121 1– 138 124 155 111 115 Female 143 111 130 148 112 115 153 118 154 155 Formal sector 119 117 130 121 112 114 110 117 152 133 Informal sector 124 115 1– 126 1– 111 143 111 111 122 Source: 1996 Multipurpose Household Survey, Ministry of the Economy, El Salvador.

Table 2. Urban working population by economic activity (% by gender and sector of employment)

Ge n d e r Branch of economic activity and sector Tot a l Ag r i c u l t u r e Mi n i n g In d u s t r y Elec., Gas, Co n s t ru c . Tra d e Tra n s p . , Fi n a n c i a l Se rv i c e s Hu n t . & FIsh. Wat e r Co m m . es t a b s . Total 100 100 100 100 100 100 100 100 100 100 Formal sector 153 134 175 153 100 161 133 145 198 173 Informal sector 147 166 125 147 1– 139 167 155 112 127 Male 100 100 100 100 100 100 100 100 100 100 Formal sector 159 131 165 161 100 160 149 141 198 189 Informal sector 141 169 135 139 1– 140 151 159 112 111 Female 100 100 100 100 100 100 100 100 100 100 Formal sector 144 159 100 145 100 189 119 191 197 160 Informal sector 156 141 1– 155 1– 111 181 119 113 140 Source: 1996 Multipurpose Household Survey, Ministry of the Economy, El Salvador.

136 Table 3. Employment in the informal sector in the AMSS

Informal employment Informal employment (% per branch) in total (%) Agriculture, hunting and ﬁshing 5.75 1.57 Mining 0 0 Industry 37.18 23.14 Electricity, gas and water 0 0 Construction 26.71 4.19 Trade 41.36 42.30 Transport and communications 43.72 8.90 Financial establishments 37.20 1.0 Services 50.50 19.79 Total 37.39 100.0 Source: Based on the 1996 Multipurpose Household Survey, Ministry of the Economy, El Salvador. shows that trade generates the bulk of informal 2.1. Reasons for the labour situation employment, representing 42 per cent of the in the informal sector total for the AMSS. Industry generates 23 per cent and services 20 per cent (see Table 3). (a) Social and economic factors Another important statistic is that 71 per The following factors provide some insight cent of the female working population in the into the behaviour and scale of the Salvadorian AMSS is employed in the informal sector. informal sector: 2. The informal sector: social and • The inability of the structured economy to economic indicators3 absorb the labour available. Agriculture, where most jobs are created, has always The social and economic conditions of infor- been of a highly seasonal nature and there- mal sector workers are highly unstable. Some fore unable to offer steady employment. indicators in this regard are given below: This has fuelled the rural-urban drift, with the resulting labour surplus in urban areas (a) Educational level and the growth of the informal sector. • Another factor that contributed appreciably One of the major shortcomings of the infor- to swelling the ranks of the informal sector mal sector workforce is its low educational was the massive migration from rural to level. According to the 1996 Multipurpose urban areas, mainly to the capital, triggered Household Survey, 17.3 per cent of both male by the armed conﬂict in country during the and female informal sector workers have no 1980s. The result was that the urban popu- education. Besides, another 47 per cent have lation surpassed the rural population, schooling ranging between 1 and 6 grades. thereby reversing the pre-war situation. In 1980, El Salvador’s rural population (b)Wage levels accounted for 58 per cent of the overall population. By 1996, according to the Multipur- In 1996, 53.33 per cent of the informal work- pose Household Survey, that sector of the force earned less than 1,000 colóns. The legal population represented 45.3 per cent of the minimum wage that year was 1,150 colóns (or total. Over the same period, the AMSS US$ 115). population grew by 67 per cent from 865,998 in 1980 to 1,448,240 in 1996. (c) The informal sector: social security coverage • The displacement of the rural population with little or no academic or technical train- Another critical problem affecting informal ing has been one of the causes of the growth workers is lack of access to social security. In of informal trade, which is the sector most El Salvador, only 6 per cent of the working readily accessible to the jobless. In 1996, population in this sector is covered by the social trading accounted for 38.2 per cent of all jobs security system. in the informal sector.

137 • The reintegration of ex-combatants from Department, let alone the array of accounting both sides of the conflict into productive books and systems that must be certified. All of activity and the demobilization of the secu- this requires the work or counsel of lawyers and rity forces following the signing of the peace accountants, involving costs unaffordable to agreements also contributed to the expan- informal sector businesses. In addition, there is sion of the informal sector. the high cost, in terms of money and adminis- • Furthermore, on account of poverty, a large trative work, entailed in keeping accounts, pay- part of the population is unable to save ing taxes and social contributions, all of which andbuild up sufficient capital to set up any are beyond the capabilities of low-income busi- other type of business. According to official nesses with little or no profit. figures, 51 per cent of the Salvadorian population live in poverty. (c) Government and NGO support • The processes of privatization and State to the sector reforms have led to the shedding of staff. As stated above, the Government has no Many of those laid off have turned to the clear-cut policy to address the problems of the informal sector, some using their redun- informal sector, though it is pursuing some pro- dancy payments to start up their own micro- grammes under agreements with international enterprises. bodies. The European Union has helped to set • Corporate restructuring and the introduc- up the Genesis Programme (Employment-gen- tion of new technologies for the sake of eration in the Informal Sector in San Salvador) greater competitiveness and cost cutting and the FOMMI Programme (Promotion of have displaced labour, especially the least Micro-enterprises in Marginal Areas). These qualified. programmes provide support in training, tech- • Owing to the low productivity and prof- nical assistance and credit. These are secondary itability of informal sector activities, many programmes operating through various of which barely break even, it is difficult to national NGOs. give them formal legal status, as that would Support to the informal sector is provided entail the payment of taxes and social secu- mainly through programmes set up by inter- rity contributions. national cooperation agencies and NGOs that assist the sector through loans, education and • Another contributing factor is the absence vocational training, entrepreneurial advice and of sectoral policies to underpin productive market-information services. activities and this has led to the abandon- The institutions and NGOs working with ment of important job-creating sectors such the informal sector include:4 as agriculture and livestock. In addition, the Government has been unilaterally and rapidly opening up the economy, displacing International institutions national production in so doing. • International Development Agency (IDA), • The lack of an active Government policy to which through an agreement with FINCA generate employment and improve work- International has created the Centre for Sup- ing and living conditions in the informal port to Micro-enterprises (CAM) to assist sector. low-income sectors through community banks and by means of individual loans for micro-enterprises. (b) Legal and institutional factors • Catholic Relief Service (CRS), an interna- Besides the social and economic factors that tional NGO that assists subsistence micro- explain the size of the informal sector in El Sal- enterprises through community banks. vador, there are also legal and institutional considerations at work, such as the financial cost of National NGOs formally constituting an enterprise and the complicated red tape involved. Registration of Th e r e are several national NGOs that prov i d e a company must pass through at least six insti- assistance to the informal sector. These include: tutions: the Mayor’s Office, the Superinten- the El Bálsamo Association, the Community Pro- dency of Companies, the General Office of Sta- jects Association (PROCOMES), Women’s As s o - tistics and Censuses, the Ministry of Finance, ciation for Organization and Entrep re n e u r i a l the Trade Registry and the Social Security Education (OEF), Salvadorian Foundation for

138 Re c o n s t r uction and Development (REDES), Sal- 3.2. Organizational experience vadorian Association for Integral Development in the informal sector (ASALDI) and the Duarte Foundation.5 These institutions provide services such As previously stated, a third of the trade as loans, marketing assistance, entrepreneur- unions re g i s t e red with the Ministry of Labour ial advice and the promotion of trade union belong to the informal sector. This study out- organization. lines some of the experiences of these trade unions but does not purport to paint a complete picture of the sector’s richness or its 3. The trade union experience p ro b l e m s . in the informal sector 3.1. Trade union organization 3.2.1. Home workers in the informal sector According to the Ministry of Labour, in The organization of informal sector workers 1997, the Trade Union of Self- employed Work- is a fundamental aspect of the defence of their ers of Various Professions and Crafts of the interests and the improvement of their working West (SINDICO) had 324 members. Current and living conditions and incomes. The ILO information received from the leaders of the states it as follows: “We must point out the organization reveals that the number has since importance of freedom of association because grown to 800. workers in this sector can only apply sufficient The organization is mostly made up of home pressure to effect the necessary changes in the workers from the city of Santa Ana in the west, policies, attitudes and procedures which are who are involved in home repairs, plumbing, impeding the development of the sector and the domestic work and sewing. The trade union’s improvement of working conditions if they join work includes training construction foremen to organizations which they consider to be in their improve their qualiﬁcations, representing interest.”6 workers before contractors, and providing Trade union organization in El Salvador is members with legal counsel. The union has grappling with a number of problems which are designed a model contract stipulating the type weakening the movement: low membership, and duration of a job, details of payment, etc., fragmentation, sectarianism, poor public image which would cover workers should contractors and lack of leadership, among other things. breach the contract. Members pay the union a As for trade union organization in the infor- monthly due of 10 colóns (US$1.15). mal sector (see Table 4), in 1998, of 141 trade One of the services provided by this union unions registered with the Ministry of Labour, for its members is that of a labour exchange. It 47 worked with the informal sector, represent- prepares a curriculum vitae for each member, ing a third (33.3 per cent) of the total. Yet when locates clients for them based on their trade, it came to membership, the informal sector and signs up workers on construction con- accounted for a mere 5.67 per cent of the total, tracts. Its membership includes 30 women which reﬂects the degree of organizational frag- engaged in domestic work and sewing. mentation in the sector. Some of these trade unions are affiliated to both de jure and de facto 3.2.2. Self-employed professionals federations or confederations. Besides the trade and traders union organizations listed in Table 4, there is another type of organization, whether de jure or The Trade Union of Self-Employed Workers de facto, which operates like an informal sector of Various Professions and Trades (SITIN- workers’ association. Several of these organi- PROVA) comprises self-employed profession- zations are affiliated to different trade union als and traders. According to the General Sec- confederations such as the National Union retary of SITINPROVA, membership currently ofSalvadorian Workers (UNTS), the Confeder- stands at 190. ation of Democratic Workers (CTD), the One of the outstanding features of this trade Autonomous Confederation of Salvadorian union is that it has promoted the training of Workers (CATS), and the Confederation of Sal- other trade unions in the informal sector in the vadorian Workers (CTS). Although they do not west of the country, including the Sindicato de have trade union status, they function as such Trabajadores Independientes de Vendedores y and participate in activities organized by the Arrendatarios del Mercado de Santa Ana (SITRA- confederations. VANSA) and SINDICO.

139 Table 4. Informal sector trade unions, 1998

Name of trade union Membership Economic activity

1 Sindicato de Trabajadores Independientes de Comerciantes del Mercados 42 Trade Municipales de El Salvador (Union of Self-Employed Traders of El Salvador Municipal Markets) 2 Sindicato de Trabajadores Independientes del Comercio, Productos de 35 Trade Alimento del Mercado La Tiendona (Union of Self-Employed Traders and Vendors of Foodstuffs of the La Tiendona Market) 3 Sindicato de Trabajadores Independientes de Vendedores y Arrendatarios del 32 Trade Mercado de Santa Ana (Union of Self-Employed Vendors and Lessees of the Santa Ana Market) 4 Sindicato de Trabajadores y Pequeños Comerciantes Estacionarios y 35 Trade Ambulantes de El Salvador (Union of Workers and Small Stationary and Itinerant Traders of El Salvador) 5 Asociación de Trabajadores Comerciantes Independientes Cantón El Cuco 95 Trade (Association of Self-Employed Traders of the Canton of El Cuco) 6 Sindicato de Trabajadores Independientes del Comercio Cantón Penitente 50 Trade Abajo (Union of Self-Employed Traders of the Canton of Penitente Abajo) 7 Sindicato de Trabajadores Independientes del Comercio de El Salvador 86 Trade (Union of Self-Employed Traders of El Salvador) 8 Sindicato de Trabajadores Independientes del Comercio de la Ciudad de Santa 70 Trade Ana (Union of Self-Employed Traders of the City of Santa Ana) 9 Sindicato de Trabajadores Independientes del Comercio de Moneda Extranjera 40 Trade (Union of Self-Employed Traders of Moneda Extranjera) 10 Sindicato de Trabajadores Independientes del Comercio de Productos Varios 36 Trade de Zonas Francas San Bartolo (Union of Self-Employed Traders of Various Products of San Bartolo Free Zones) 11 Sindicato de Trabajadores Independientes del Comercio Informal 66 Trade (Union of Self-Employed Informal Traders) 12 Sindicato de Trabajadores Independientes del Comercio Informal de Acajutla 36 Trade (STICIA) (Union of Self-Employed Informal Traders of Acajutla) 13 Sindicato de Trabajadores Independientes del Comercio Lago de Ilopango 41 Trade (Union of Self-Employed Traders of Lago de Ilopango) 14 Sindicato de Trabajadores Independientes del Comercio Planes de Renderos 60 Trade (Union of Self-Employed Traders of Planes de Renderos) 15 Sindicato de Trabajadores Independientes del Comercio Quezaltepeque 50 Trade (Union of Self-Employed Traders of Quezaltepeque) 16 Sindicato de Voceadoras Independientes de El Salvador 47 Trade (Union of Self-Employed Town Criers of El Salvador) 17 Sindicato Gremial de Visitadores Médicos Salvadoreños 41 Trade (Craft Union of Salvadorian Medical Sales Representatives) 18 Sindicato Independiente de Vendedores y Comerciantes de El Salvador 35 Trade (Independent Union of Vendors and Traders of El Salvador) 19 Sindicato Nacional de Trabajadores del Comercio 367 Trade (National Union of Traders) 20 Sindicato Gremial de Trabajadores Especialistas en Pisos 115 Construction (Craft Union of Construction Workers) 21 Sindicato de Trabajadores de Productos de Cemento, Arcilla y Similares 226 Manufacturing (Union of Workers in the Cement, Clay and Similar Products Sector) 22 Sindicato General de Costureras 535 Manufacturing (General Union of Dressmakers) 23 Sindicato Gremial de Obreros de Productos de Cementos 47 Manufacturing (Craft Union of Workers in the Cement Products Sector) 24 Sindicato Nacional de Trabajadores Sastres 293 Manufacturing (National Union of Tailors)

140 Table 4. (continued)

Name of trade union Membership Economic activity

25 Asociación de Luchadores Profesionales y Espectáculos Públicos de El Salvador 64 Services (Association of Professional Wrestlers and Public Performing Artistes of El Salvador) 26 Sindicato de Fotógrafos Salvadoreños 35 Services (Union of Salvadorian Photographers) 27 Sindicato de Trabajadores de las Artes Fotográficas Independientes 90 Services de El Salvador (Union of Self-Employed Photographic Artists of El Salvador) 28 Sindicato de Trabajadores Independientes de Nueva San Salvador 119 Services (Union of Self-Employed Workers of New San Salvador) 29 Sindicato de Trabajadores Independientes de Profesionales y Oficios Varios de 324 Services Occidente (Union of Self-Employed Workers of Various Professions and Trades of Occidente) 30 Sindicato de Trabajadores Independientes de Profesiones y Oficios Varios 91 Services (Union of Self-Employed Workers of Various Professions and Trades) 31 Sindicato Gremial de Artístas Circenses de El Salvador 321 Services (Craft Union of Circus Artistes of El Salvador) 32 Sindicato Gremial de Artistas de Variedades 200 Services (Craft Union of Variety Artistes) 33 Sindicato Gremial de Artistas y Músicos Salvadoreños 825 Services (Craft Union of Salvadorian Artists and Musicians) 34 Sindicato Gremial de Electricistas Independientes de El Salvador 41 Services (Craft Union of Self-Employed Electricians of El Salvador) 35 Sindicato Gremial de Limpiabotas Migueleños 75 Services (Craft Union of Miguelenean Shoeblacks) 36 Sindicato Gremial de Pintores Salvadoreños 745 Services (Craft Union of Salvadorian Painters) 37 Sindicato Nacional de Músicos y Similares 80 Services (National Union of Musicians and Similar Artistes) 38 Sindicato Unión de Empleados Particulares 642 Services (Union of Private Employees) 39 Unión Sindical de Matarifes de Oriente 175 Services (Trade Union of Matarifes de Oriente) 40 Asociación Sindical de Pilotos Automovilistas y Trabajadores del Transporte 53 Transport (Trade Union Association of Drivers and Transport Workers) 41 Sindicato de Trabajadores Transportistas Independientes de El Salvador 35 Transport (Union of Self-Employed Transporters of El Salvador) 42 Sindicato Gremial de Motoristas y Actividades Afines 60 Transport (Craft Union of Drivers and Other Related Activities) 43 Sindicato Gremial de Operadores y Conductores de Maquinaria Pesada en 73 Transport General (Craft Union of Operators and Drivers of Heavy Machinery in General) 44 Sindicato Gremial de Pilotos Automovilistas de El Salvador 75 Transport (Craft Union of Drivers of El Salvador) 45 Sindicato Nacional de Trabajadores de la Industria del Transporte, Similares y 107 Transport Conexos (National Union of Workers in the Transport and Other Similar and Related Sectors) 46 Sindicato Unión de Trabajadores del Transporte 50 Transport (Union of Transport Workers) 47 Sindicato de Trabajadores Independientes del Transporte Colectivo Liviano de 44 Transport Sonsonate (STICLIS) (Union of Self-Employed Workers in the Collective Light Transport Sector of Sonsonate)

Source: Based on data from the Ministry of Labour, Department of Labour Organizations

141 SITINPROVA employs a team of legal 3.3. Attitude of the second- and third- experts who offer counsel to union members as level trade union structures well as workers of other labour organizations towards trade union organization in both the formal and informal sectors. This in the informal sector union’s plans include creating a market on wheels to boost the incomes of its members. It Trade union federations, confederations and is also negotiating with the town council for the trade union centres recognize the importance of grant of a plot of land on which to locate stalls trade union organization in the informal sector. for selling food and other items, for the benefit As can be seen in Table 5, of the 47 informal sec- of informal sector workers. It is furthermore tor unions, 28 belong to a federation, and of the making representations to the Ministry of Edu- others not belonging to a federation, five are cation for the introduction of a programme of af filiated to a confederation and 14 are inde- formal education by distance learning for its pendent. In other words, over two-thirds are members. It has arranged with the Salvadorian af filiated to a federation or confederation. Institute of Vocational Training (INSAFORP) Virtually all the federations and confedera- for its members to take courses in computer sci- tions consist of trade unions and associations ence and cutting and sewing. from the formal and informal sectors alike. There are two associations for stationary vendors, affiliated to trade union confedera- 4. Impacts and successes of trade tions: the National Association of Small Traders union activity in improving and Vendors of Light Snacks (ANPECOVAL), the working and living conditions an affiliate of the National Union of Salvado- of informal sector workers rian Workers (UNTS) and the National Associ- ation of Vendors and Small Traders of El Sal- Trade unions conduct a range of activities vador (ANTRAVEPECOS), an affiliate of the for the benefit of informal sector workers in Autonomous Confederation of Salvadorian general and of their own members in particu- Workers (CATS). These associations have rep- lar. These include: resented vendors on several occasions when • representing informal sector workers, they have been confronted with eviction orders mainly traders, before local authorities with issued by the municipal authorities, though whom they often have disputes over vend- they are usually unsuccessful in halting these ing locations and municipal taxes; measures. The organizations also assist members in obtaining loans, and with training pro- • negotiating and arranging for credit and grammes. technical assistance and training programmes with government and municipal bodies, private companies, NGOs and other 3.2.3. Informal sector trade union entities on behalf of their members; experiences spearheaded by women • providing legal aid to informal sector workers in the interest of defending their rights One such case is the Acajutla Trade Union vis-à-vis contractors or other parties; of Women in Informal Trade (STICIA), com- • serving as a mouthpiece for the interests and prising 82 women who work as cosmetologists. proposals of informal sector workers with The services the union provides for its members respect to economic and social issues or pro- include technical training in cosmetology. In so grammes instituted by government, town doing, the union opens up employment and councils or private entities; earning opportunities for women in a city where jobs are scarce, at the same time seeking • channelling information on job opportuni- to act as an intermediary between the workers ties by creating labour exchanges, as well as and the municipal authorities who control the on market opportunities, inputs, etc.; and informal sector. • establishing regional and international net- STICIA operates in a port city, which is works for safeguarding and representing a high-risk area for the spread of AIDS. In the interests of informal sector workers, thelight of this, the union has received training in the context of regional openness and and organizes public AIDS prevention integration. campaigns. All these activities yield economic benefits for informal sector workers by opening up

142 opportunities for employment, income genera- organization in the informal sector and the fact tion, loans and training. They also provide is that all the confederations include unions support in dealing with contractors and other from the sector. players in the informal sector. All this makes for improved living standards and working 5.2. Obstacles to trade union conditions for the sector’s workforce. Moreover, organization in the informal the trade unions provide workers with chan- sector nels for airing their problems and interests and making proposals concerning the sector and These factors include: even regarding broader issues such as partici- (i) The heterogeneity of activities and inter- pating in regional and national development ests among informal sector workers, even plans. within the same organization. For instance, during the discussions with the Municipal 5. Factors impacting positively Council of San Salvador on how to deal or negatively on the development with the problem of street vending in the of trade union organization city centre, the informal sector organiza- in the informal sector tions were incapable of presenting a uni- ﬁed proposal in that regard. Indeed, some 5.1. Factors positively affecting of the self-employed professionals repre- trade union organization in the informal sector senting informal sector unions took no interest in the matter as it did not concern them directly. In the Salvadorian context, these factors include: (ii) The difficulty in getting informal sector The existence of legal machinery for estab- workers involved in organizational work lishing trade union organizations with infor- due to the resulting loss in income. mal sector workers. The Labour Code recog- (iii) Labour instability and movement in the nizes ﬁve types of unions: sector. For example, subcontracted work- – craft unions; ers do not have steady, secure employment – company unions; and are likely to change activity at any – industry unions; given moment. Geographical mobility also – inter-company unions; and impedes organizational work in the sector. – trade unions of self-employed persons. (iv) Some formal sector trade union leaders view their informal sector counterparts The unions which favour organization in with contempt. the informal sector are the craft unions, which a re made up of workers belonging to the same 6. Strategic alliances between trade p rofession, art, trade or specialization, and the unions and other sectors of civil trade unions of self-employed persons com- society to organize informal sector prising own-account workers with only occa- workers sional employees. There are several craft unions in El Salvador, grouping, for example, An important aspect of the work of trade painters, photographers, circus artistes and unions in the informal sector is establishing drivers among others, and a number of trade alliances with their counterparts in the formal unions for self-employed persons, consisting sector and other organizations or bodies of civil mainly of traders, who are the largest gro u p so c i e t y . One form taken by these alliances is the a c c o rding to Ministry of Labour rec o rd s . incorporation of informal sector orga n i z a t i o n s Another factor spurring trade union orga- into de jure or de facto federations, confederations nization in the informal sector is the prevailing and trade union centres. All the confederations vulnerability and the absence or paucity of eco- in El Salvador include workers’ associations or nomic resources and credit for its workers. trade unions from the informal sector. Several They therefore organize to protect their inter- moves are now afoot to unite Salvadorian trade ests and channel or manage resources for their union organizations, including informal sector activities. ones. These endeavours could do much to rei n - The federations, confederations and trade fo r ce organization and safeguard the interests of union centres are aware of the importance of workers in the informal sector.

143 Table 5. Informal sector trade unions by federation, confederation and trade union organization (TUO)

Union TUO Confed. Federation

1 Union of Workers in the Cement, Clay and Similar Products UNTS CUTS FEASIES Sector 2 Independent Union of Vendors and Traders of El Salvador UNTS CUTS FEASIES 3 Union of Salvadorian Photographers FESINCONSTRANS 4 Craft Union of Variety Artistes FESINCONSTRANS 5 Craft Union of Salvadorian Artists and Musicians FESINCONSTRANS 6 Craft Union of Operators and Drivers of Heavy Machinery FESINCONSTRANS in General 7 Craft Union of Salvadorian Painters FESINCONSTRANS 8 Craft Union of Construction Workers FESINCONSTRANS 9 National Union of Musicians and Similar Artistes FESINCONSTRANS 10 Trade Union of Matarifes de Oriente FESINCONSTRANS 11 Union of Workers and Small Stationary and Itinerant CGS FESINTRABS Traders of El Salvador 12 General Union of Dressmakers UNTS CUTS FESTES 13 National Union of Tailors UNTS CUTS FESTES 14 Union of Self-Employed Traders of the Canton of Penitente CTS FESTICES Abajo 15 Union of Self-Employed Traders of the City of Santa Ana CTS FESTICES 16 Union of Self-Employed Traders of Lago de Ilopango CTS FESTICES 17 Union of Self-Employed Traders of Planes de Renderos CTS FESTICES 18 Union of Self-Employed Traders of Quezaltepeque CTS FESTICES 19 Union of Self-Employed Transporters of El Salvador CTS FESTICES 20 Union of Self-Employed Traders of El Salvador Municipal UPD FESTRAES Markets 21 Association of Self-Employed Traders of the Canton UPD FLATICOM of El Cuco 22 Union of Self-Employed Workers of New San Salvador UPD FLATICOM 23 Union of Self-Employed Traders of El Salvador UPD FLATICOM 24 Union of Self-Employed Informal Traders UPD CUTS FLATICOM 25 Union of Self-Employed Town Criers of El Salvador UNTS CUTS FLATICOM 26 Union of Self-Employed Traders of Moneda Extranjera UNTS CUTS FUSS 27 Union of Self-Employed Traders and Vendors of Foodstuffs UNTS FUSS of the La Tiendona Market 28 Union of Private Employees CTD FUSS 29 Union of Self-Employed Workers of Various Professions and CTD NONE FEDERATED Trades of Occidente 30 Union of Self-Employed Workers of Various Professions and CTD NONE FEDERATED Trades 31 Union of Self-Employed Vendors and Lessees of the Santa CTD NONE FEDERATED Ana Market 32 Union of Self-Employed Workers in the Collective Light OSILS NONE FEDERATED Transport Sector of Sonsonate 33 National Union of Traders NONE FEDERATED 34 Association of Professional Wrestlers and Public Performing NONE FEDERATED Artistes of El Salvador 35 Trade Union Association of Drivers and Transport Workers NONE FEDERATED

144 Table 5. (continued)

Union TUO Confed. Federation

36 Union of Self-Employed Photographic Artists of El Salvador NONE FEDERATED 37 Union of Self-Employed Traders of Various Products of San NONE FEDERATED Bartolo Free Zones 38 Union of Self-Employed Informal Traders of Acajutla NONE FEDERATED 39 Craft Union of Circus Artistes of El Salvador NONE FEDERATED 40 Craft Union of Self-Employed Electricians of El Salvador NONE FEDERATED 41 Craft Union of Miguelenean Shoeblacks NONE FEDERATED 42 Craft Union of Drivers and Other Related Activities NONE FEDERATED 43 Craft Union of Workers in the Cement Products Sector NONE FEDERATED 44 Craft Union of Drivers of El Salvador NONE FEDERATED 45 Craft Union of Salvadorian Medical Sales Representatives NONE FEDERATED 46 National Union of Workers in the Transport and Other NONE FEDERATED Similar and Related Sectors 47 Union of Transport Workers NONE FEDERATED

Source: Based on Table 4.

Alliances are also being forged by joining 7. Conclusions and action guidelines regional or national civil society networks for trade unions in the informal which include various labour sectors, peasants, sector communities, NGOs, small and micro-enterprises, women’s movements and the like. 7.1. Role of trade unions At the Central American regional level, in the defence of informal there are two civil society groupings: the Civil sector workers Initiative for Central American Integration It is clear that trade unions can play an (ICIC) and the Central American Committee for important role on behalf of informal sector Intersectoral Coordination (CACI) which bring workers in a number of ways, such as: together various organizations of Central • helping to organize informal sector workers American civil society. Workers’ organizations so as to protect their interests and foment from both the formal and informal sectors par- programmes which will serve to improve ticipate in these groupings through regional working conditions, income levels and stan- associations such as the Confederation of Cen- dards of living in the sector; tral American Workers (CTCA), the Central • representing the sector and negotiating with American Coordinating Committee of Workers various government, municipal, private (COCENTRA) and the Latin American Central and civil society entities in relevant areas; of Workers (CLAT). It is all the more important for labour organizations to be a part of these • promoting their own training programmes regional networks so that they can inﬂuence the for workers in the sector or arranging for integration process and promote regional pro- such programmes with other bodies that grammes for improving working conditions, run them; incomes and the quality of life of informal sec- • providing information and advice on credit, tor workers. employment, training and other opportuni- Trade unions can even strike alliances with ties that could beneﬁt the sector; private or state entities to provide training, • supporting sector organizations in formu- technical assistance and credit for informal sec- lating and implementing sectoral develop- tor workers. ment programmes, either with their own funds or with cooperation funds negotiated for such activities; and

145 • promoting legal and institutional reforms 7.3. What trade unions need related to the sector and formulating pro- to succeed in the informal sector posals with regard to policy or legal measures introduced by government, municipal Trade union organizations must be aware of or private bodies. the signiﬁcance of the informal sector in the country’s social and economic life, the trend With re g a rd to the potential role of trade towards informalization of work, and hence of unions in the informal sector, the ILO has the need for organization in the sector, not only stated: “The usefulness of informal sector pro- because of their role in improving the living ducer and worker organizations is obvious as conditions of the sector’s workers but also they make it possible to evaluate needs and because the future of the trade union move- d i fficulties and to devise appropriate strategic ment largely depends on it. m e a s u res. The organizations assist economic The International Confederation of Free units to pool their re s o u rces in order to attain Trade Unions (ICFTU) and the Inter Am e r i c a n common goals. They also serve as intermedi- Regional Organization of Workers (ORIT) see aries with respect to the State and/or other the work of trade unions in the informal sector institutions. They can help to correct market as essential to the survival of the trade union imperfections with re g a rd to the supply of cap- movement. They have stated the following: ital goods and raw materials or provide sup- “The trade union movement has been male- port services through collective bargaining on dominated and reserved for formal sector p roduction prices in the case of subcontract- employees, and is struc t u r ed accordi n g l y . For its ing. They can even help to effect changes in own survival, it must open up to women, with- s t a n d a rds. They can negotiate with other inter- out fear or prejudice. It also needs to open up to est groups competing for the same re s o u rc e s other speciﬁc groups, such as unsalaried infor- and services, work towards achieving re c o g- mal sector workers, in-bond processing indus- nition and support their claims. They can also try workers and those of service or subcon- help to re a ffirm the social identity of their tracting enterprises.”8 members and facilitate regulation and social In practical terms, to implement their strat- integration. More o v e r, for practical re a s o n s , egy vis-à-vis the informal sector, trade unions public authorities prefer to deal with an org a- need to: nization acting on behalf of a group of people • analyse the informal sector and strategies rather than with an ‘invisible’ segment of the needed; p o p u l a t i o n . ”7 • prepare teams for organizational work and support in the sector; 7.2. Resources currently available to trade unions • strengthen ties of cooperation with non- for developing strategies trade union organizations of the informal for the informal sector sector, government, municipal and private bodies so as to promote joint development Trade unions have several resources at their programmes; and disposal, albeit limited, to develop their activi- • foster unity between the different ties on behalf of the informal sector population. confederations, trade union centres and These include: other trade union bodies. • the setting up of labour exchanges; • the creation of teams of legal advisors; 7.4. Alternative organizational strategies for trade unions • the promotion of job-creation projects, for in defence of the interests example markets on wheels or mobile fairs; of informal sector workers • agreements with government and private entities and NGOs that support informal These are: sector workers in the areas of training and (i ) Trade unions need to adopt new attitudes, credit; and actions and strategies to bolster their work • the development of credit programmes for in the informal sector and enhance any gains the informal sector either with their own made on behalf of the sector’s workforce . funds or by negotiating funds with coopera- (ii) As in the formal sector, trade unions must tion agencies for that purpose. be the defenders of the rights of informal

146 sector workers, striving to ensure respect (vii)Trade unions can offer services to various for their human rights, monitoring com- bodies engaged in education and technical pliance with labour standards and pro- training. In that way, while benefiting moting legislation suited to the circum- informal sector workers, trade union orga- stances of the informal sector. nization can also be strengthened and income earned for the unions. This they (iii) Trade unions must enhance their role as could use to finance efforts to improve both forums for the articulation and defence of working conditions and organizational the interests of informal sector workers vis- work in the sector. à-vis government and municipal bodies, the private sector, support organizations such as NGOs, youth and women’s movements and so on. They should also assist Bibliography these workers by providing opportunities for employment, training and education, David, Natacha. 1998. “Inventar el sindicalismo del sector informal”, El Mundo Sindical, ICFTU/ORIT, No. 9, Sep- access to credit and the like. Besides creat- tember. ing opportunities, trade unions can supply ICFTU/ORIT. 1997. Democracia, desarrollo y sindicatos, Execu- information to concerned parties on these tive version, a political trade union document approved matters. by the 14th ICFTU/ORIT Continental Congress, 22-24 As regards training and education, April, Santo Domingo, Dominican Republic. trade unions can promote programmes to ILO. 1998. “How training matters”, World Labour Report 1998- improve the qualifications of informal sec- 99: Employability in the global economy, Geneva, Septem- tor workers, teach them how to use new ber. technologies and to better manage micro- —. 1997. World Labour Report: Industrial relations, democracy and social stability, 1997-98, Geneva. enterprises. Programmes for the children of infor- —. 1993. 15th International Conference of Labour Statisti- cians, Report of the Conference, Geneva, 19-28 January. mal sector workers would yield good —. 1991. The dilemma of the informal sector, Report of the Direc- results in the short and medium term by tor-General (Part I), International Labour Conference, improving the incomes and living condi- 78th Session, Geneva. tions of families earning their livelihood in Kandel, Susan; Lazo, Francisco. 1998. Créditos para los sectores the sector. populares en El Salvador, San Salvador, FUNDE. (iv) As legal entities, trade unions can carry out Ministry of Planning and Coordination of Economic and Social Development. 1990. Economic and Social Indicators, credit, training, employment-generating 1987-1989, San Salvador. and other programmes jointly with lend- Ministry of the Economy. 1996. Multipurpose Household Survey. ing agencies, special funds for assisting the informal sector, vocational training institu- UNDP. 1998. Directory of Private Organizations for Development in El Salvador, San Salvador. tions, cooperation agencies and NGOs. UNESCO. 1998. “Participación de las mujeres en la economía,” (v) It is important for trade unions to address Enciclopedia Económica Popular, Volume II, San Salvador, the immediate needs of the informal sector, October. though they must go beyond that to strive for the creation of inclusive development models that will change working condi- Notes tions in the informal sector, the distribu- 1 tion of national income and hence living ILO. 1991. The dilemma of the informal sector, Report of the Director-General (Part I), International Labour Confer- conditions. ence, 78th Session, Geneva, p. 13. (vi) This means that trade unions must become 2 ILO. 15th International Conference of Labour Statisti- active in formulating proposals, in discus- cians, Report of the Conference, Geneva, 19-28 January 1993. sion and coordination with other social and 3 See Ministry of the Economy, op. cit. economic sectors and institutions engaged 4 See Kandel, Susan; Lazo Francisco, op. cit. in policy-making and development pro- 5 See United Nations Development Programme (UNDP), grammes at the regional and national lev- op. cit. els that include measures relating to infor- 6 ILO. The dilemma of the informal sector, op. cit., p. 45. mal sector workers. For this, trade unions 7 ILO. World Labour Report: Industrial relations, democ- must themselves be properly organized so racy and social stability, 1997-1998, p. 206. as to have an impact on centres where eco- 8 ICFTU/ORIT. 15th Continental Congress, 22- 24 April nomic and social policies are decided. 1997, Executive version, Santo Domingo, Dominican Republic

147 Annex Acronyms of Salvadorian Trade Union Organizations

CGS General Confederation of Trade Unions CTD Trade Union Centre of Democratic Workers CTS Trade Union Centre of Salvadorian Workers CUTS Single Central Organization of Salvadorian Workers FEASIES Federation of Independent Associations and Trade Unions of El Salvador FESINCONSTRANS Federation of Unions in the Construction and Similar Sectors, Transport and Other Sectors FESINTRABS Federation of Trade Unions of Workers in the Food and Beverages and Similar Sectors FESTES Federation of Workers’ Unions of El Salvador FESTICES Federation of Unions of Self-Employed Traders of El Salvador FESTRAES Federation of Workers’ Unions of El Salvador FLATICOM Labour Federation of Independent Trade Unions of the Transport, Trade and In-bond Processing Sectors FUSS Salvadorian Single Trade Union Federation OSILS Free Trade Union Organizations UPD Popular Democratic Union UNTS National Union of Salvadorian Workers

148