6. Policy for Jobs: Reducing Informality

This chapter argues that a major determinant of job quality is informality. Employment policies should, therefore, focus on enforcing the registration of both workers and enterprises to reduce informality and improve job quality. Such policies effectively extend social provisions that reduce workers’ vulnerability through social protection, minimum wages, and national legislation on improved conditions and rights. Mahmood provides among the first estimates of informality for a large sample of developing countries, based on which he draws two key policy implications. First, the demonstration of weaker job quality in informality gives a broad policy handle with which to improve jobs. Second, these new estimates allow a better decomposition of informality, showing large pockets of informality in the formal economy, requiring that policy on informality must be derived through an instrument to register not just enterprises, but also workers.