With the unprecedented rate of growth of the population in developing countries expected to continue and with the increasing failure of the rural and urban formal sectors to absorb additions to the labor force the informal sector in serving as a panacea for the following unemployment problem. Given the current low level of economic development in the developing countries, do you think that informal sector should in fact be promoted as a major source of employment and income for the urban labor force or considered as transitional phase to the formal sector. Comment your argument.

Question

With the unprecedented rate of growth of the population in developing countries expected to continue and with the increasing failure of the rural and urban formal sectors to absorb additions to the labor force the informal sector in serving as a panacea for the following unemployment problem. Given the current low level of economic development in the developing countries, do you think that informal sector should in fact be promoted as a major source of employment and income for the urban labor force or considered as transitional phase to the formal sector. Comment your argument.

Answer 1

The informal sector serves as a crucial source of employment and income for many individuals in developing countries, providing opportunities for those who may not be able to find work in the formal sector. It also plays a significant role in supporting the overall economy by providing goods and services that may not be readily available through formal channels.

However, the informal sector is often characterized by low wages, lack of job security, and limited access to benefits or protections. In many cases, workers in the informal sector are not afforded the same rights and protections as those in the formal sector, leading to exploitation and vulnerability.

While the informal sector may provide a necessary stopgap for addressing immediate unemployment concerns, it should not be seen as a long-term solution. It is important for governments and policymakers to work towards creating conditions that support the transition of workers from the informal sector to the formal sector, where they can access better wages, benefits, and protections.

Promoting the informal sector as a major source of employment may perpetuate a cycle of poverty and inequality, locking individuals into precarious working conditions with limited opportunities for advancement. It is crucial to address the underlying structural issues that contribute to the persistence of the informal sector, such as lack of access to education, skills training, and formal employment opportunities.

In conclusion, while the informal sector plays a valuable role in providing employment and income for many individuals in developing countries, it should not be promoted as the primary solution to the unemployment problem. Efforts should be made to support the transition of workers from the informal sector to the formal sector, where they can access better working conditions and opportunities for advancement.