Informality is an important reality in many contexts, in the economy, in the labour market and in education. The informal sector is portrayed often and unjustly very negatively. Many see it as a sector that pays no taxes, as a sector that does not respect social rights, that has no ability to bring new products and services to the market. However, the reality is not black or white, but blurred, and the informal economy is an important job and income generator. In the informal sector there are also many self-employed and entrepreneurs who pay their taxes or at least some of them, and there are companies that agree to an employment contract with their employees. That is why we prefer to speak about shades of informality.
Growth has not and may not be sufficient to eradicate informal employment. Informal economy is and will most likely remain realities, and it creates individual and national incomes. At the same time, the formal and informal economy are important training providers in terms of informal learning. In many contexts and most dominantly in Sub-Saharan Africa, most people work but are not employed, and many people learn but not formally. Many people are self-employed and have mixed and changing employment realities. Informal employment is often heterogeneous and people may move between different employment status.
Therefore, VSD needs to approach the informal economy and more specifically train for self-employment, aiming for increasing productivity and income on individual and on national level too. Studies show that increasing the skills of informal workers also favors their integration into formal legal and social systems. Comparable low investments can lead to high and tangible benefits for many. However, approaches have to be adapted to the local context, culture and history, and skills investments do not automatically lead to skills utilization and jobs. Project interventions in this field should therefore apply a broader approach and combine VSD instruments with private sector and financial sector development instruments.
This working paper theoretical, and policy debates on the informal economy. It gives a brief historical overview of the informal sector concept and related debates and then turns to recent rethinking of the concept, detailing the expanded statistical concept of informal employment and holistic conceptual models of the composition and causes of informality.
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Chapter I argues for learning from traditional training systems and identifies aspects of the "crisis of vocational training" that influence the effectiveness of self-employment training programmes.
Chapter II comprises case studies which examine the working practices of three successful vocational training for self-employment programmes
Chapter III offers a brief overview of pertinent best practice in small enterprise development, and explores a number of the design issues which influence the success of vocational training for self-employment programmes.
Chapter IV is a response to Professor King's call for practical solutions to pressing problems. This concluding chapter opens with a summary of the basic characteristics of successful vocational training for self-employment programmes.
Background paper prepared for the Education for All Global Monitoring Report 2012.
