Glossary

Informal Economy

Informal economy, also known as informal sector, or hidden or shadow or underground economy, consists of economically productive activities that may be legal (in the sense that they comply with certain standards or regulations), but which are deliberately concealed from public authorities for the some reason:

1. To avoid the payment of income, value added or other taxes.
2. To avoid payment of social security contributions.
3. To avoid meeting certain legal standards such as minimum wages, maximum hours, safety or health standards, etc.
4. To avoid complying with certain administrative procedures, such as completing statistical questionnaires or other administrative forms.

 

The informal sector represents an important part of the economy and of the labour market in many countries, especially developing economies, and plays a major role in employment creation, production and income generation.

 

Source: Key Indicators of the labor Market, 5th Edition, Geneva, ILO, 2007, and OECD Glossary of Statistical Terms.