Informality in South Asia: A Review

Labour markets in South Asia have been characterized as dualistic, with a relatively small, well-protected formal sector and a large unprotected informal sector. Indeed, the formal workforce is very small in all countries in the region representing a privileged labour force. However, labour markets in South Asia are much more complex than simple dualism suggests. To begin with, the public sector, public enterprises, and many large private firms are down-sizing employment or out-sourcing production, leading to new entrants into informal self-employment (as retrenched workers seek alternative employment) and the informalization of once-formal jobs. Second, the informal economy is very heterogeneous consisting of selfemployed and wage workers as well as intermediate categories such as industrial outworkers and unpaid contributing family members. Third, the informal economy is often linked to the formal economy through employment and commercial relationships. What follows is a brief overview of employment in South Asia.