INFORMALITY AND THE POTENTIAL FOR SOUTH-SOUTH COOPERATION BETWEEN BRICS Santosh Mehrotra University of1 Bath, UK Copyright © International Labour Organization 2021 Publications of the International Labour Office enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction or translation, application should be made to ILO Publications (Rights and Licensing), International Labour Office, CH-1211 Geneva 22, Switzerland, or by email: [email protected]. The International Labour Office welcomes such applications. Libraries, institutions and other users registered with a reproduction rights organization may make copies in accordance with the licences issued to them for this purpose. Visit www.ifrro.org to find the reproduction rights organization in your country. 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Information on ILO publications and digital products can be found at: www.ilo.org/publns. 2 Table of Content Preface......................................................................................................................................5 Acknowledgements ...............................................................................................................6 List of tables ............................................................................................................................7 Executive Summary ...............................................................................................................9 Informality and the Potential for South-South Cooperation between BRICS ..........14 The relationship of GDP growth with informality. .........................................................17 Economic structure of the BRICS countries and informality. ............................................. 20 Further on theories explaining informality and its extent. ................................................... 23 The demographic dividend and growth in the BRICS: Implications for informality. ....... 26 Profiles of Informality in the BRICS: By Type of Employment, Age, Location and Education ...............................................................................................................................29 South Africa .................................................................................................................................. 36 Russia ............................................................................................................................................. 38 Brazil ............................................................................................................................................... 39 India ................................................................................................................................................ 40 China ............................................................................................................................................... 41 Gender dimensions of informality in the BRICS countries. ........................................44 South Africa ................................................................................................................................... 49 Russia. ............................................................................................................................................ 50 Brazil. .............................................................................................................................................. 50 India ................................................................................................................................................ 51 China ............................................................................................................................................... 51 ILO Recommendation 204 and its dimensions: implications for informality in BRICS countries. ..................................................................................................................53 Social security in the BRICS ..............................................................................................62 3 The impact of COVID-19 pandemic on the informal economy. ...................................82 South Africa. .................................................................................................................................. 83 Russia. ............................................................................................................................................ 84 Brazil. .............................................................................................................................................. 86 India. ............................................................................................................................................... 87 China ............................................................................................................................................... 88 Summary and Recommendations for BRICS: Potential for learning from and among the BRICS experience. ...........................................................................................90 Bibliography. .........................................................................................................................97 4 Preface Informality and the potential for south-south cooperation between BRICS The BRICS are a driving force in the global economy, and the global labour market, representing almost 44 per cent of the word’s labour force. Overall, the BRICS countries (that is Brazil, Russia, India, China and South Africa) have seen a significant move away from vulnerable employment towards wage employment of 6.6 percentage points, well in excess of the world average excluding BRICS of 1.6 percentage point (BRICS brief series 2016). Informal employment is most prevalent in India, in variety of sectors more so in form of street vendors, home –based and sub-contracted workers in the supply chain, as well as other forms of self-employment. In China, informal employment is concentrated among rural migrants and workers retrenched by the erstwhile state and collective enterprises, largely in construction, small workshops, domestic work and self- employment. In Brazil, it is based largely in low –skilled intensive sectors such as agriculture, construction, hotels and restaurant, domestic work and wholesale and retail trade. It is seen that salaried workers are higher in Russia, followed by China. India has only 18 percent of salaried workers among the BRICS countries. On the other hand, the share of self-employed workers is the highest in India followed by Brazil and South Africa. At the other end of the spectrum, the informal economy is seeing an influx of high –skilled qualified youths, mostly women, engaged as workers in the rapidly growing platform economy, but without proper labour contracts and social protection coverage. Inadequate capacity and coverage of state labour inspections apart from the emerging model of production as a result of globalization are also known to have contributed to gradual informalisation of the formal economy in the BRICS countries. This publication aims to promote South-South cooperation between the BRICS countries on the transition to formality from informality. Through country-specific coordinated actions and capacity building to implement the ILO Recommendation No. 204, transition to the formal economy is a major policy goal identified by BRICS countries in successive BRICS summits. It, therefore, makes a series of recommendations for BRICS governments for the Delhi Summit (2021) and beyond. 5 Acknowledgements The publication was authored by Santosh Mehrotra and it benefited from valuable inputs from: Anita Amorim, Claire Harasty, Dagmar Walter, Sudipta Bhadra, Snehal Vasantlal Soneji, Sher Verick, Kwassy Adjamah , Mikhail Pouchkin, Duncan Chando, Yadong Wang, Karina Levina, Andrea Bolzon, Annamarie Kiaga, Gonzalo Xavier Estupiñan and Ashwani Aggarwal. Statistical assistance of Aditi Agarwal is gratefully acknowledged. 6 List of tables Table 1: BRICS GDP Level and per Capita GDP in PPP Table 2: BRICS economic structure (As % of GDP) Table 3: BRICS Employment Structure (% of total employment) Table 4: BRICS: Share and composition of informal employment, total (%) Table 5: BRICS: Informal employment depending on employment status (%) Table 6: BRICS: Distribution of informal employment by level of education (%) Table 7: BRICS: