Topic B: Labor Rights
Hey ILOers. For this post I took a brief look at the World Bank's report on Informal Enterprises in Kenya.

Interestingly, 95% of businesses in Kenya are informal, with around 50% manufacturing sector. Average age of business owners was 35 and 40% of the owners were female.

We find a few interesting notes from the figures in the paper.
- First off, access to capital was the primary hinderance to starting a business across all companies interviewed and the primary supply for capital in informal firms came from the owner's personal funds.
- Second, labor productivity is consistently higher in formal micro-firms than informal firms, however, this gap arose after 2007 and is attributed to the change in environment in formal firms.
-Education level of the manager correlated with higher productivity, with marginal benefits from secondary education and around a 20% increase when owners had vocational or university education. -There was no correlation seen among age of the firm and productivity.

These facts should help guide you in coming up with solutions and how you consider informal versus formal. Though this is a case study of Kenya, we can apply these ideas of what works to larger issues and these facts can guide us in trying to rebuild economies in post conflict areas/



World Bank Group. Informal Enterprises in Kenya. United Nations, Jan. 2016, documents.
worldbank.org/curated/en/262361468914023771/pdf/106986-WP-P151793-PUBLIC- Box.pdf.

Comments

  1. LennyFebruary 19, 2019 at 3:25 PM

    The research in Kenya is of particular interest to Morocco both because of geographical proximity and some similar settings. The Non-Governmental Organization, GiveDirectly, was first established in Kenya in 2012 in order to apply research in economic development into a real philanthropy. This NGO gives a very good model that can help to address informal businesses and the gendered differences in ownership by helping to fund the extreme poor. GiveDirectly does this by, first, using a very specific targeted approach. The organization takes arial photos of rural areas to determine who lacks a roof on their house (a pretty good indicator of poverty apparently) and then moves to those areas to offer funding services. It specifically targets previously informal forms of labor such as raising chickens or starting casual businesses. The project has reached enough success to be tried in other areas as well, such Uganda, Rwanda, and also the US post-natural disaster.

    Morocco has a bigger landmass than many people may think and has had significant development in urban areas in recent years, but has many labor related problems concerning informal labor and rural labor that can't be managed well, or invested in properly. We believe there can be more economic growth if the related issues are addressed by proper investment and further regulation. One problem specific to Morocco is that we see some territory as belonging to us that also loosely may be claimed by another unnamed party - because of the desert land this area is a part of, it is particularly hard to manage.

    Reference on GiveDirectly: https://en.wikipedia.org/wiki/GiveDirectly

    -- Morocco

    ReplyDelete
  2. Delegation of MalaysiaFebruary 28, 2019 at 5:56 PM

    The Delegation of Malaysia knows first hand how capital is the primary reason that informal industries struggle, specifically the increase in tax competition in developing economies. According to the World Bank in 2017, developing countries tend to struggle in increasing their productivity and overall GDP due to tax competition in which other nations lower the prices of their taxes, which makes the consumer wish to buy in those nations or the producer to outsource their work to these nations. Typically, this favors Western multinational corporations since smaller businesses go out of practice due to not making enough revenue.

    Due to a rise in international competition, Malaysia was forced to increase its taxes to Malaysian businesses in order to make enough revenue off of Western multinational corporations and stabilize our GDP. However, this tax harmed many small, informal businesses in Malaysia. The majority of informal businesses are family run, with the owners often putting in their own capital to make their businesses function. Due to the 6% Goods and Service Tax, large portions of profits were spent on paying off taxes when many of these businesses could not afford to pay taxes in the first place. As a result, we replaced the GST of 2016 with the Sales and Service Tax last summer which exempts small, informal businesses from having to pay the tax.

    In order to address this, we must be looking to alternate sources of funding to promote small businesses. Microloan NGOs such as Kiva and CARE work with small businesses in developing nations in order to help provide the capital needed to grow a business without putting the business in too much debt. Furthermore, we must explore how to promote stable human capital which would encompass the knowledge and skills of a labor force. Human capital and economic productivity have a direct correlation. Therefore, the Delegation of Malaysia proposes the Economics Development Panel which will help developing nations receive the capital they need to promote more sustainable labor practices. However in order to receive capital, part of the funding would have to go towards training unskilled laborers. This training will allow informal firms to grow as they will have proper technology and business techniques in order to sustain their industry.

    ReplyDelete

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