2 billion workers of world population are in the informal sector – IMF
The informal economy is a globally widespread and pervasive phenomenon, the International Monetary Fund
(IMF) has noted.
The IMF added that 2 billion workers or 60 percent of the world population participate in the informal sector.
Although most prevalent in emerging and developing economies, it is also an important part of advanced
economies. Whereas workers and firms may choose to operate in the informal sector to avoid taxes or
regulations, 85 percent of all informal workers around the world are in precarious employment in small
production units, mostly due to lack of opportunities in the formal sector.
This has important macroeconomic consequences. First, informal firms tend to be small, with low productivity,
and do not contribute to the tax base.
Therefore, countries or regions with higher informality also grow below their potential. Moreover, they do not
collect sufficient taxes and cannot provide basic goods and services to the whole population, which reinforces
informality.
Second, informal workers are more likely to be poor and to earn lower wages compared to their peers in the
formal sector, both because they lack social protection and access to credit and because they tend to be less
educated.
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