The Role of the Informal Sector in the National Economy
MOZAMBIQUE
Introduction
============
In an attempt to respond to the topic this essay will discuss the role
of the informal sector in the Mozambican economy. For a better
understanding of the topic some important definitions shall be given.
For the purpose of this essay, the concept of economy can be defined
as the science that deals with production and consumption of goods and
services, the circulation of wealth and the redistribution of income.
On the other hand, the concept of the informal sector was introduced
into international usage in 1972 by the International Labor
Organization (ILO) in its Kenya Mission Report. Though there is no
consensus on the definition of the informal sector, coupled with the
fact that in Mozambique the concept varies with the different periods
of history, the following are the common characteristics of this
sector as defined by ILO: (a) ease of entry; (b) reliance on
indigenous resources; (c) family ownership; (d) small scale
operations; (e) labor intensive and adaptive technology; (f) skills
acquired outside of formal sector; (g) unregulated and competitive
markets.
Since that time, different authors and the ILO itself introduced many
definitions. The ILO/ICFTU international symposium on the informal
sector in 1999 proposed that informal sector workforce can be
categorized into three broad groups: (a) owner-employers of micro
enterprises, a few paid workers, with or without apprentices; (b)
own-account workers, who own and operate one-person business, who work
alone or with the help of unpaid workers, generally family members and
apprentices; (c) dependent workers paid or unpaid, including wage
workers in micro enterprises, unpaid family workers, apprentices,
contract labor, home workers and paid domestic workers. (Santos in
Dhemba; 1999)
Mozambique Social Economic Situation
====================================
The signing of the peace agreement and the implementation of the
Structural Adjustment Program (SAP) in Mozambique caused an
impoverishment of the poor, especially in towns where the decline in
purchasing power is most felt as it is harder to find alternative
income to buy food. The liberalization of the market opened up the
possibilities to import goods, however, the purchasing power of
Mozambican citizens are still very low. There was a rise in the levels
of unemployment as a result of the mass retrenchment originated by the
implementation of the SAP policy. According to a World Bank study, and
many other studies, unemployment is a strong indicator of economic
crisis.
In spite of all the measures taken by the Government to bring about
economic and social development, this development was not percolating
down to the masses fast enough. Due to the pervasive effects of the
globalizing economy, population growth and urban migration, the active
labor force was growing at a much faster rate than the availability of
Wages are classified as being below “living wage”, and are not enough to support a family. Workers are paid less than 1% of the retail price of the product, for example, Honduran garment factory workers were paid US$0.24 for each US$50 Sean John sweatshirt (Sean John Setisa Report, 2003). We are often shocked at the wages in developing countries, but we must analyse the wage by the country standards in which it is being paid. In developing countries the main concern is food and shelter, so when the living standards are low, the money can go a lot further.
The Benefits of Sweatshop Sweatshops, when left to operate without government intervention, are the most efficient way out of poverty especially in developing countries. This argument may feel far fetched, but when examined in the context of those working at sweatshops and the locations sweatshops are most often constructed in, the reason why this is true is apparent. The benefits of sweatshops can be found by examining how they increase living conditions, examining the locations where sweatshops are constructed, and looking at how government regulations on factories don’t help anyone. Sweatshops increase the standards of living for the workers and their communities.
Per the textbook, p. 113 states “in the fringe economy, economic distress and low credit scores translate into high cost that are justified by the supposedly higher risk of serving poor or credit challenged population.” Moreover, on p. 118 “the poor pay more than the middle class for financial services…and the costs are aggravated by a dual financial system, one for the poor and one for middle and upper classes.”
The Economic Lives of the Poor, written by Abhijit V. Banerjee and Esther Duflo is an essay about the lives of the extremely poor. The Economic Lives of the Poor exhibits the patterns of how the poor live around the world and the troubles they confront on a daily basis. The article talks about various aspects of life of the poor, including, money, savings, assets, education, and infrastructure. The extremely poor are defined as the people of the world who make less than $1/day. To analyze this, Banerjee and Duflo conducted surveys in 13 different countries (Cote d’Ivoire, Guatemala, India, Indonesia, Mexico, Nicaragua, Pakistan, Papua New Guinea, Peru, South Africa, Tanzania, and Timor Leste). The article talks about how the poor people
In the 1990’s the economy struggled. Inflation caused prices for goods to skyrocket while the currency value plummeted. It took bundles of cash to make the simplest transactions. The country became restless under military rule and in 1991 opposing clans ousted President Barre, but then then failed to agree on a successor. Disorder and chaos ensued with clans and warlords fighting for power in local regions. The fighting hampered agriculture and soon caused food shortages. When warlords ...
As figure 2 demonstrates, despite 20 years of structural adjustment programmes (SAPS), poverty reduction strategies (PRS), and increased international trade, Africa, Latin America and many parts of Asia continue to remain entrenched in poverty and slow economic growth (Easterly, 2006). Due to public service cuts, privatization, and increased loans, many states suffered from rising indebtedness leading to development disasters. Professor of History George Schuyler (2004) notes that during the 1990s, privatization in Venezuela increased the cost of water and gasoline leading to a drop in the consumption of meat and milk by low-income families. As low wages and high inflation contributed to malnutrition, many unemployed citizens turned to criminal activates as a means to survive. Consequently, “by the mid-1990s, 85,000 Venezuelan children were involved in drug trafficking, prostitution and robbery” (Schuyler, 2004, p.
Material and ideological conditions are integral components of a market society, which interacted and changed the ways we view market society today. I will discuss the shift from traditional societies to a market society to explain what Polanyi refers to as “the great transformation”. I will then talk about the changes that have occurred in the workplace, the impact on these workers, and the worldview of those in a market society.
Globalization has had a significant impact on the lives of women in the developing nations, which we will further examine in the two countries – Bangladesh and Kenya. In this paper, Globalization is defined as “a complex economic, political, cultural, and geographic process in which the mobility of capital, organizations, ideas, discourses, and people has taken a global or transnational form (Valentine Moghadam 1999). Globalization has more negative effects on women in third world countries such as Kenya and Bangladesh. Corporations hire people in the third world countries, due to the cheap labor force. Corporations like to hire more women than men in the cheap labor force, because women “work in labor intensive industries at lower wages than men would accept and in conditions that unions would not permit “ (Moghadam 1999). There has been a shift from the agrarian sector to commercial and industrial sectors which pays more. Women also experience social and economic injustice while at work. Females generally hold a secondary status compared to males, both in the household and the work environment. Although the women labor force in the industrial and commercial sectors get paid higher wages then women who work on farms, the wages are not enough to keep them from depending on the financial support of males in their family. This in turn makes the female gender much more depended and prone to exploitation in many ways. The inability of female workers to generate enough capital to support themselves as well as their families, suggests that until wages increase along with better working conditions, the economies of Kenya and Bangladesh will continue to exist in poverty. At the same time, women are given opportunities to work and become ...
Formal and Informal sector intersect when the subject relates opportunity costs enforcing the cost-benefit approach. Legalist perspective suggests that formalization is the mechanism to protect business and property rights, creating capital, raise productivity and attract investments. De Soto (2000) argues that the real estate value is worth of USD 9.3 trillion in the Third World countries that exceeds any kind of donation and loans from the developed world. We witness the unique “entrepreneurial ingenuity” that the poor created in the developing world. Although, it is a dead capital which cannot be used for economic development, unless treated properly. De Soto claims that the higher formalization, the more potential exists to accumulate wealth and decrease the poverty rate. The concept that he considers crucial generating capital flow is the “surplus value” created by the formalization and property rights. Assets’ economic potential must be fixed in order to initiate additional production. Assets must be integrated into one formal representational system; that is how the West succeeded in capitalist realm. In 1849, California, the Congress gradually integrated the informal property created by immigrants and miners . Thus, benefits from the company perspective of operating formally are as follows: limited liability not risking the whole property of the business/owner; enforceable commercial contracts, enabling business entities insure rights and obligations to be met; access to finance and market information, legalised and registered entities benefit from the trust of financial institutions; access to government incentives, including procurement tenders and export promotion policies; access to public infrastructure and services; ...
Powell, B and Skarbek, D. (2004). Sweatshops and Third World Living Standards. The Independent Institute. 53 (1), 6, 10.
Simply put the informal economy refers to those economic activities that are neither taxed nor monitored by a government and are therefore not included in that government's Gross National Product (GNP) However in literature this phenomenon is discussed using different concepts such as informal, unofficial, irregular, parallel second underground, underground, grey markets, subterranean, hidden, invisible, unrecorded, shadow, ghosting and moonlighting. Illegal or criminal activities such as drug dealing or prostitution have been excluded from this definition, as have exchanges of unpaid work. My paper is therefore prepared with this omission in mind.
Thus, expanding individual pay by making formal occupations or supporting casual substances is portrayed as the center and speediest strategies for the counter destitution exertion as 75% of the poor are accepted to claim work or casual elements as a methods for
Ardnt, Channing, Paul Chinowsky, Kenneth Strzepek, and James Thurlow. "Climate Change, Growth and Infrastructure Investment: The Case of Mozambique. ." Review of Development Economics (n.d.): n. pag. Print.
Ghana is a country located on the west coast of Africa; Africa is a resource rich continent that supplies much of the world with diamonds, oils, petroleum and more through trade. The country of Ghana has undergone revision in their labor forces in the past twenty years, Ghana has moved more from the traditional labor sector like agriculture to more modern sectors. One of the more modern sectors of Ghana today is the industrial sector which is relatively small and is mainly operated by the Ghanaian government. The industrial sector was expanded by the government and president to employ the unemployed and promote investment in the private sector. After the 1990’s Ghana has seen consistent economic growth but their economic growth from the last eight years has increased tremendously. In the most recent of years ( after 2004) the growth rate of Ghana started to accelerate and it increased to over six percent between a five year span from 2005-2010, with the average being above seven percent in 2000 and 2009. The increase in sectors has taken Ghana from a poverty rate of more than half 51.7% to 28.5% by the year 2005. Before Ghana’s independence on March 6, 1957 most of the country’s gdp was contributed to agriculture and the industry sector was less of a contributor. Recently, between the years of 2001-2010 the roles of whom or what contributes to the gdp has switched. Most of the contribution to the gdp is that of the service sector. Even though, the service sector has risen to the top of the economy, agriculture is slowly but surely is rising back to the top of Ghana’s highest gdp contributor by the way of nontraditional exports like automobiles and cocoa. The service sector of Ghana provides many residents w...