25 Countries with the Highest Informal Employment in the World

Published on April 28, 2024 at 11:03 am by Zahaab Rehman in Business, Economy, Lists, News

In this article, we take a look at 25 countries with the highest informal employment in the world. If you would like to skip our detailed analysis of the informal economy, you can directly go to 5 Countries with the Highest Informal Employment in the World.

Defining Informal Economy

The informal economy refers to all economic activities that are not monitored by the government and, hence, are not taxed. These are either not covered by formal arrangements or insufficiently covered, as described by the International Labor Organization. According to ILO data from 2018, 60% of the world’s adult labor force operates in the informal sector, either full-time or part-time. This comprises around two billion individuals. The proportion is highest in Africa, where 85.8% of employment is informal. The ILO also states that people in rural areas are twice as likely to be informally employed as compared to urban citizens. The sector with the highest level of informal employment is agriculture, where it is estimated that more than 90% of individuals are informally employed.

Since the informal economy is not recorded, the ILO characterizes it as being high in underemployment, poverty, gender inequality, and precarious work. The quality of employment is low, with the employees not receiving any benefits or social protection. Usually, the informal economy is highly concentrated in developing countries or conflict-affected nations. Overall, 93% of total informal employment is in emerging and developing countries. Furthermore, the IMF states that, on average, the informal economy represents 35% of the total GDP in low and middle-income countries, as compared to 15% in advanced economies. Some common examples of informal jobs are market stands, gig and construction workers, domestic workers, and truck drivers.

Gender Gaps in Informal Employment

A 2023 study by Islam and Amin evaluated World Bank’s survey data on informal economies in order to discover the gender gaps in the sector. The study found that female-owned businesses showcased similar gaps in the informal and formal economies. Overall, female-owned informal businesses were 15.6% lower in mean labor productivity than male-owned businesses. One of the key reasons that the study located behind this productivity gap was that women tend to have lower levels of education, managerial experience, and access to resources.

A 2019 working paper by the IMF presented similar findings as well. The paper shared that in more than 90% of the countries in Sub-Saharan Africa, women had a higher share of employment in the informal economy. In the non-agricultural sector, the share of informal employment for women was 83%, whereas for men it was 72%. In the agricultural sector, these shares increased to 94% for women and 89% for men. The paper also reported that in Sub-Saharan Africa, the gender wage gap in the informal economy was 28%, much higher than in the formal economy, where it was 6%. This is why Sub-Saharan Africa has some of the worst countries for gender equality.

Vulnerabilities in the Informal Economy

Informal employment tends to have a negative impact on the overall economy as it is not taxed, but it also generates negative implications for the employees within the sector. The OECD states that workers in the informal economy are twice as likely to belong to poor households as compared to those in the formal economy. The OECD compared data across 29 countries and found that the share of the working poor in the informal economy was 42%, whereas in the formal economy, it was 20%.

Wages also tend to be disproportionately lower in the informal economy. Across 25 countries, the OECD found an hourly wage gap of 51% between the formal and informal economies. Some of the most significant wage gaps were witnessed in Africa, where Madagascar had an hourly wage gap of 52%. The OECD also reports that the informal economy is more likely to have inferior working conditions and expose workers to occupational hazards. These sub-par working conditions create a job satisfaction gap between formal and informal employment. In Tanzania, the gap was reported to be as high as 26.7%. Workers in the informal economy also struggle to negotiate for better working conditions because they’re underrepresented in unions and workers’ organizations.

Despite a higher risk of occupational hazards, informal workers find it much harder to access health insurance. Across 19 developing and emerging countries, the OECD found that the health insurance coverage rate for formal workers was 71%, whereas for informal workers, it ranged between 33 to 39%. Considering the burden of health-related expenses and the lack of social protection benefits, informal workers are more likely to struggle with poverty and inability to pay for basic needs. OECD evaluated data on health-related expenses in ten developing and emerging countries. The comparison found that in eight of ten countries, informal households had to bear a higher financial burden than formal households.

Lastly, pension coverage is another vulnerability that informal households struggle with. For this purpose, the OECD evaluated data from 21 emerging and developing countries. It was found that, on average, the proportion of households with at least one member of age 65 or over receiving pension was 51% for informal households and 69% for formal households. However, the distribution for coverage varied greatly among informal households and was as low as 5% in countries such as Burkina Faso, Niger, Nicaragua, and Zambia. This is why several countries with high informal employment also have high rates of vulnerable employment.

SMEs and Corporate Partners

According to a 2021 report by the Center for Strategic and International Studies, most small and medium-sized enterprises in Africa belong to the informal economy, which means that many of their employees do not receive the same benefits that formal workers do. Since informal SMEs are not formally registered businesses, accessing finance is one of the biggest problems for the enterprises and their workers. The report estimates that approximately 28.3% of SMEs in Sub-Saharan Africa are fully credit-constrained. This is where companies such as Safaricom PLC (NAI:SCOM) and Vodacom Group Limited (JSE:VOD) can make a massive difference for informal employees.

In March 2007, Safaricom PLC (NAI:SCOM) launched M-PESA, a mobile banking platform that users can use to store and transfer money. Through the service, informal workers from small and medium-sized enterprises can save and transfer money at low costs. Safaricom PLC (NAI:SCOM) first launched the service in Kenya, but today, the app has more than 50 million users from around ten countries, including Tanzania, Mozambique, Lesotho, and Ethiopia.

In May 2023, M-PESA collaborated with KCB Bank Kenya to launch a service that allows businesses to access instant credit for operational needs. According to Safaricom PLC (NAI:SCOM), this service will enable 538,000 small and medium-sized businesses to access affordable credit. The M-PESA platform also has a partnership with Lynk, a platform that connects informal workers with job opportunities. When workers find jobs through the platforms, they can use M-PESA to receive payments.

Vodacom Group Limited (JSE:VOD) is a South African mobile communications company that has taken several initiatives to support and empower African SMEs. In 2019, Vodacom Group Limited (JSE:VOD) launched the Fast Forward Series, a series of online workshops and webinars equipping SME workers to connect with and learn from industry experts. The platform delivers masterclasses on topics such as business fundamentals and smart connections. The company also runs an incubator program in collaboration with the Department of Trade and Industry, which supports and upskills merchandising SMEs in their earlier phases.

While enterprises in the informal economy have to deal with a range of obstacles, efforts from formal private-sector companies can eliminate several of those issues, as showcased by these two examples. In this context, here are 25 countries with the highest informal employment in the world, where industries are still struggling with the drawbacks of the informal economy. You can also look at 25 Countries with the Lowest Unemployment Rates in the World.

25 Countries with the Highest Informal Employment in the World

Our Methodology

In order to compile this list of 25 countries with the highest informal employment in the world, we consulted the ILO dataset for the proportion of informal employment in total employment. Countries are listed in ascending order of aggregate informal employment across the entire labor market. Wherever tiebreaking was required, it was done on the basis of the latest reported year. Other information has been added from reports by the World Bank or ILO. Based on this methodology, here are 25 countries with the most informal employment in the world.

Note:

Due to data gaps, ILO data for certain countries is outdated. For all countries whose ILO data is for 2014 or earlier, we have consulted government and media reports to find updated statistics. If available, these have been listed in the respective paragraphs.
The proportion of informal employment reported by the ILO may differ from reports by national authorities due to varying operational definitions.

25 Countries with the Highest Informal Employment in the World

25. Cameroon

Proportion of Informal Employment in Total Employment (2014): 87.1%

Cameroon ranks 25th on our list of countries with the highest informal employment in the world. In 2014, 87.1% of the country’s total employment was in the informal sector.

24. Comoros

Proportion of Informal Employment in Total Employment (2021): 87.5%

According to a World Bank report, the informal sector in Comoros accounts for two-thirds of the total economic activity. In 2021, 87.5% of Comoros’ total employment was in the informal sector.

23. Zimbabwe

Proportion of Informal Employment in Total Employment (2022): 88.3%

Zimbabwe hosts one of the world’s largest informal economies, which is why it ranks 23rd on our list with an informal employment share of 88.3%.

22. India

Proportion of Informal Employment in Total Employment (2023): 88.8%

Even though India is one of the world’s fastest-developing countries in 2024, it still possesses a disproportionately high rate of informal employment. In 2023, 88.8% of the country’s total employment was in the informal sector.

21. Cambodia

Proportion of Informal Employment in Total Employment (2019): 89.4%

Cambodia’s informal employment has slightly decreased from 2012, when the proportion of informal employment was 93%. However, 89.4% of the country’s total employment is still in the informal sector.

20. Liberia

Proportion of Informal Employment in Total Employment (2017): 89.6%

Liberia ranks 20th on our list of countries with the highest informal employment in the world. In 2017, the informal sector had a share of 89.6% in the total employment.

19. Togo

Proportion of Informal Employment in Total Employment (2017): 90.1%

In Togo, 60% of the population is under the age of 25. Since the formal economy is not able to provide enough job opportunities for the youth, a considerable portion of people have to resort to informal options for employment.

18. Senegal

Proportion of Informal Employment in Total Employment (2019): 90.2%

The ILO reports that the rate of informal employment in Senegal is around 90%. However, according to the National Agency of Statistics and Demography, this can be as high as 96.4%.

17. Angola

Proportion of Informal Employment in Total Employment (2021): 90.3%

Angola ranks 17th on our list of countries with the highest informal employment in the world. In 2021, 90.3% of the country’s total employment was in the informal sector.

16. Lao PDR

Proportion of Informal Employment in Total Employment (2022): 90.5%

Lao PDR is one of the few Asian countries on this list. In 2022, informal employment had a share of 90.5% in total employment, which is why the country ranks 16th on our list of countries with the highest rates of informal employment.

15. Côte d’Ivoire

Proportion of Informal Employment in Total Employment (2019): 91.7%

Côte d’Ivoire is one of the world’s largest cocoa producers, an industry with several informal enterprises. In 2019, 91.7% of the country’s total employment was informal.

14. Sierra Leone

Proportion of Informal Employment in Total Employment (2018): 93.1%

Nearly nine in ten young workers in Sierra Leone are employed in the informal economy, which is why it is one of the countries with the highest rates of informal employment in the world.

13. Tanzania

Proportion of Informal Employment in Total Employment (2020): 93.3%

Tanzania ranks 13th on our list of countries with the highest informal employment in the world. In 2020, informal employment had a share of 93.3% in the total employment.

12. Nigeria

Proportion of Informal Employment in Total Employment (2022): 93.9%

Within Nigeria, 95% of the women work in the informal sector, as compared to 90% of the men. In total, the rate of informal employment in the country is 93.9%.

11. Mali

Proportion of Informal Employment in Total Employment (2020): 94%

Mali is one of the countries where the informal economy was severely affected by the COVID-19 pandemic. The UN reports that 34% of informal workers lost their jobs, whereas 76% reported a decrease in earnings.

10. Sudan

Proportion of Informal Employment in Total Employment (2022): 94.4%

Sudan ranks 10th on our list of countries with the highest rates of informal employment. In 2022, 94.4% of the country’s total employment was in the informal sector.

9. Mauritania

Proportion of Informal Employment in Total Employment (2017): 94.5%

Most of the firms in Mauritania are small in size and concentrated in the trade and services sector. In 2017, the country had an informal employment rate of 94.5%.

8. Guinea-Bissau

Proportion of Informal Employment in Total Employment (2018): 94.8%

The informal sector contributes to nearly a third of the GDP in Guinea-Bissau. It is one of the countries with the world’s highest rates of informal employment, ranking eighth on our list.

7. Madagascar

Proportion of Informal Employment in Total Employment (2015): 95.2%

The informal sector is the primary driver of employment in Madagascar, which is why the country had a 95.2% rate of informal employment in 2015.

6. Uganda

Proportion of Informal Employment in Total Employment (2021): 95.2%

Uganda ranks sixth on our list of countries with the highest rates of informal employment globally. In 2021, 95.2% of the country’s total employment was in the informal sector.

Click to continue reading and see the 5 Countries with the Highest Informal Employment in the World.