Informal employment is a critical issue that challenges economies worldwide and affects millions of workers who lack social security protections. As of 2024, the number of informal workers continues to rise in both developed and developing countries. This increase exacerbates problems such as low wages, job insecurity, and economic inequality. In Turkey, the rate of informal employment is also high, making it a significant social issue that needs to be addressed.
The informal economy refers to all economic activities that take place outside the knowledge and control of the state. Such activities usually arise as a result of high tax rates, bureaucratic barriers, and economic imbalances. Especially in the face of high tax burdens and complex procedures, it is quite common for businesses and individuals to prefer working informally instead of participating in the formal economy. Moreover, factors like economic instability, rising inflation, and unemployment contribute to the shift towards the informal sector.
Global Rise in Informal Employment
What is informal employment? Informal employment refers to a situation where workers work without legal protection or social insurance, and where the workforce is not officially registered. As of 2023, the number of informal workers worldwide exceeds 2 billion, which means that 58% of the global workforce is engaged in the informal economy. Following the pandemic, as economies began to recover, informal employment further increased, with digital platforms and flexible work models contributing to this rise.
In developing countries, the rate of informal employment is high, while in developed economies, informal jobs are rapidly spreading due to the gig economy and independent working models. In regions such as the European Union and the United States, workers in digital platforms form a large informal workforce, deprived of social security benefits.
Global informal employment rates (according to the latest data from the ILO) are as follows:
- Niger – 98.5%
- Burundi – 98.3%
- Chad – 96.9%
- Benin – 96.3%
- Madagascar – 96.1%
- Mozambique – 95.7%
- Mali – 95.4%
- Uganda – 95.2%
- Burkina Faso – 95.2%
- Senegal – 95.1%
…
…
- Türkiye – 27.3%
Turkey ranks 99th globally in this list. However, it ranks second in Europe for the highest rates of informal employment.
Social and Economic Effects of Informal Employment
Informal employment not only leads to job insecurity but also increases economic and social inequality. Informal workers are deprived of social rights such as health insurance, unemployment insurance, and retirement benefits. This situation not only exposes them to the risk of poverty but also lowers their standard of living.
1. Low Wages and Poverty
A large portion of informal workers earn less than the minimum wage. This results in individuals working for low wages and often falling below the poverty line. According to an ILO report, informal workers often work long hours but receive low wages, making it harder for them to combat poverty.
2. Job Insecurity
Another significant negative impact of informal employment is job insecurity. Informal workers are not insured against workplace accidents, illnesses, or other adverse situations. This leaves them vulnerable both economically and health-wise.
3. Women and Youth: The Most Affected Groups
The groups most affected by informal employment are women and youth. In developing countries, women are often employed in the informal sector. Women working in agriculture, domestic services, and low-wage sectors are deprived of social security and work under conditions with no job security. Moreover, in Turkey, the labor force participation rate of women is lower compared to men, and women generally work in the informal sector.
Youth are also among the biggest victims of informal employment. Since young workers often have lower skills, they are typically forced to work in low-wage, insecure jobs. This situation hinders their career development and makes it difficult for them to achieve economic independence.
Informal Employment in Turkey: Situation and Solutions
Turkey has a high rate of informal employment. According to TUIK data, the informal employment rate in Turkey reached 32.9% in 2022. The majority of informal workers in Turkey are employed in the agriculture, construction, and service sectors. The reasons for the increase in informal employment in Turkey include economic crises, high unemployment rates, and the challenges young people face in the labor market.
Causes of Informal Employment in Turkey
- Youth Unemployment Rate: The youth unemployment rate in Turkey is quite high. Young people often work in low-skilled and low-wage jobs in the labor market.
- Women’s Labor Force Participation: In Turkey, women’s labor force participation rate is lower than that of men. Women generally work in the informal sector, where low wages and insecure conditions are prevalent.
- Economic Difficulties: Economic crises, inflation, and high living costs in Turkey have made informal employment more attractive. Due to economic hardships, people are turning to informal jobs.
Suggestions for Reducing Informal Employment
To reduce informal employment, Turkey needs to develop more comprehensive policies. These include:
- Social Security Reforms: It is important to bring informal workers under the umbrella of social security. Mechanisms such as insurance premium incentives and tax reductions should be developed.
- Education and Skill Development Programs: More workforce education and skill development programs should be implemented for young people. These programs will help young people secure quality jobs instead of working in the informal sector.
- Increasing Women’s Labor Force Participation: Women’s participation in the labor force should be encouraged, and special support should be provided to women working in the informal sector.
- Inspection Mechanisms and Legal Regulations: The government should strengthen inspection mechanisms to formalize the informal workforce. This will help create a fairer labor market.
Informal employment is a serious problem both globally and in Turkey. Informal workers, deprived of social security rights and working without job security, contribute to economic and social inequality. Turkey must develop more effective policies to reduce informal employment. Education, social security reforms, and strengthened inspection mechanisms can help reduce informal employment.
Informal Economy: The Hidden Burden
Although the informal economy may provide short-term relief for individuals, it is a serious issue that threatens the economic stability and social order of a country in the long term. This issue, which can be overcome through government determination and societal cooperation, often affects the public’s finances directly, but is frequently ignored.
Impact of the Informal Economy on Society
It is evident that the informal economy leads to significant losses in government tax revenues. These losses result in shortages in public services such as education, health, and infrastructure. This situation causes those who think “What harm does it do if only my tax is missing?” to contribute to a collective financial collapse. Moreover, the informal economy leads to unfair competition in the business world. Legally operating businesses enter into unfair competition with those operating in the informal economy, which can lead to sectoral collapses in the long run.
Damages of the Informal Economy to the Social Security System
Informal workers are deprived of benefits such as retirement, health insurance, and other social aids. This increases the vulnerability of the most vulnerable segments of society. The short-term benefits of the informal economy (such as job creation) are temporary, while the long-term damages to the social security system are permanent.
Informal Economy and Politics
The informal economy is also directly related to politics. Some politicians, particularly in regions with widespread corruption, may benefit from the informal economy. To fund election campaigns, it may be possible to turn to groups that generate illegal income or to benefit from informal sectors. Such situations can lead to the emergence of political dependency relationships, such as the “patronage system.”
Informal Economy in Turkey: Situation and Solutions
Turkey is one of the countries with a high level of informal economy. In the past, the informal economy accounted for 50% of GDP, but measures have reduced this to below 30%. However, this rate is still well above the European Union average. In Turkey, particularly small and medium-sized enterprises, agriculture, and service sectors are heavily involved in the informal economy. High unemployment rates and insufficient social policies play a major role in the spread of this issue.
Solution Suggestions
Reducing tax rates to reasonable levels and expanding the tax base can help prevent informality. Low taxes encourage individuals and businesses to voluntarily participate in the formal economy. Bureaucratic barriers must be removed to encourage businesses to work formally. Reducing paperwork can be the key to growing the economy. Increasing tax awareness, establishing a societal stance, and developing a strong public attitude against the informal economy is necessary. Effective inspections and deterrent penalties are critical to preventing informal activities.
Long-Term Strategy for Combating Informal Economy
While the informal economy may provide short-term relief for individuals, in the long run, it undermines a country’s economic stability. In an environment where tax justice is ensured, bureaucracy is reduced, and public awareness is strengthened, the informal economy can diminish to the point where it is no longer ignored. However, it should not be forgotten that this process requires a long-term effort.
References
- International Labour Organization (ILO), 2023. “Global Employment Trends 2023: Global Labor Market Outlook”.
- World Bank, 2023. “Informal Economy and Employment: New Approaches”.
- ILO, 2023. “Youth Employment and Informal Labor Markets: A Global Overview”.
- ILO, 2023. “Women in the Informal Economy: Implications for Labor Rights”.
- Turkish Statistical Institute (TUIK), 2022. “Informal Employment and Labor Market in Turkey”.
