Ray Way Alberto Navarro

 The economic activity that is not taxed, monitored, or regulated by the government.  Informal sector jobs are generally low-wage and low-productivity work.  These jobs include:  Food VendorsStreet Show Entertainers  Garbage CollectorsPsychics  Taxi DriversFruit and Vegetable  BarbersVendors  Recycling

 Urbanization: Large numbers of rural residents moving to the cities in search of work.  The urban population of Peru in 1960 was 46.8%, by 2005 the figure had reached 74.6%.  The formal sector does not provide enough jobs to absorb the inflow of rural-urban migration.  The cost of doing business legally is too high

 The time it takes for registering and engaging in production is too long.  In “The Other Path,” by Economist Hernando de Soto, he documented that it took 100 administrative steps and a full year to register a small garment company in Peru.  The lack of judicial and legal efficiency increases the size of the informal sector.

 Excessive Regulations  Filling Excessive Unnecessary Paperwork  Obtaining Unnecessary Licenses  Having multiple people or committees approve a decision  Makes a process longer and tedious

 Fictitious Clothing Co.  10x’s bribes were solicited  289 days  $1,231 expenses  32 Min. monthly wages  Difficult for people with modest means to open a small buss.

 They don’t pay taxes.  They don’t follow legal, health, and safety procedures.  Although it provides primary or secondary income, Informal work does not contribute to human capital; which is necessary for better wages and a modern economy.

 75%-80% of those employed in the informal sector earn less than the poverty level.  Can’t request:  Municipal Services  Utilities  Obtain Titles to Property  Apply for Credit  No Legal Recourse to Agreed Contracts

 When subcontracted they have no rights to:  Job Security  Vacation Days  Minimum Wage  Sick Days  Personal Days  Benefits

 Provides many services cheaply and efficiently.  Many low-income housing is produced in the informal sector.  Save money and time  Can be sub-contracted by companies to work for them.  Women are disproportionately represented in the informal sector.

 Food Services  Domestic Washing and Cleaning  Tourism  Petty Trading  Dressmaking  Companionship  Lower Entry Barriers  Flexible Hours for Childcare  Family Survival  67% of Informal Sector are Women  Lack of formal Education  Credit  Technical training

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 The informal sector, while not legal and unaccountable to tax collection and government health, safety, social security, and laws, it provides a secondary economy in developing countries in Latin America that helps to reduce unemployment, increase income, and provide goods & services that other wise would cost more legally.