Learning about informality

October 12, 2021

Smarter together!

The idea that development cannot be sustainable until we get smarter together is one of the assumptions behind the establishment of the UNDP Accelerator Labs network — a team that accelerates learning on "what works and what doesn’t when it comes to development" and where every Lab draws inspiration from each other’s insights, experiments, and mapped solutions. Today, this global network hosts 91 Labs covering more than 115 countries. The country teams have been working on a variety of complex societal challenges, with many focusing their work on informality and the informal economy.

Inspired by the work of some of the other Labs, the UNDP country office in North Macedonia believed that one way to further our understanding of the complex issue that is the informal sector is to bring a diverse group of people that have worked on the topic for a joint learning session in an environment where they can contribute their views, ideas, and experiences and try to mobilize a wide range of information using collaborative technology. Our goal was to embed some of the design principles of collective intelligence sessions and use them in facilitating learning between us and peers from the Accelerator Labs network.

Our interest in the informal economy

What we learned from our socio-economic assessment of COVID-19’s impact in North Macedonia in 2020 is that the informal economy in North Macedonia involves economic activities generating output equivalent to 17.4% of the country's GDP and that "every sixth woman works informally." Another recently published study echoes that the informal workers were hardest hit by the pandemic and the restrictive measures introduced to mitigate it, with most informal workers reporting income reductions that could potentially lead to severe poverty. With more than half of the informal workers in North Macedonia working in the agricultural sector, followed by the construction and the commerce sectors, it is evident that informality is a systemic and complex issue for our country, even before it was exacerbated by the pandemic. While we can acknowledge that there is a need to make informal activities part of the formal economy, we also must recognize that working solely on tax registration and punitive sanctions for noncompliance with the law will most likely be counterproductive. 

Both our Democratic Governance and our Inclusive Prosperity units within the UNDP country office have activities in this realm with different perspectives and entry points, which further motivated us to want to “dig deeper” and include our Accelerator Lab colleagues from other countries to hear their perspectives through a learning session dedicated to informality. 

The intro Mural board that we used for our learning session on Informality

The learning session we organized gathered more than 30 participants following three thematic areas, all designed in a way to encourage the sharing of ideas and to facilitate learning among our colleagues. The key issues we aimed to tackle were: 1) the reasons why our Accelerator Lab colleagues started working on this topic as well as the narratives that surrounded informality in the different contexts; 2) the key activities that the teams have undertaken in the different stages of the process (from the initiation to the implementation and monitoring stages); 3) the tools and innovative methods did the teams use in their work, what worked and what are some of the lessons learned. 

The two-hour learning session took place on the 27th of August 2021 with representatives from twelve Accelerator Labs. We hosted countries from three continents and we used an online tool, Mural, to capture the insights and exchanges from the different participants. 

The Mural board investigating the different country contexts used for our learning session on Informality (example Paraguay dashboard)

Lessons learned and the path forward

During the sessions, utilizing the experiences and insights from our Lab colleagues, we learned a lot about their countries, their work around informality, the tools, methods, and partnerships they developed to spearhead activities. In this text, we only have room to share a few insights. 

What we quickly confirmed in the session is that defining informality and the informal sector is a rather complex issue that comes with many cultural and contextual connotations. One of the core insights for our team, which we heard repeatedly during the session, was that to truly understand the challenge of informality we need to engage with the community and talk to the people in the sector. Actively listening to the informal workers will give us a better understanding of the context that the workers are facing (and the different types of workers in the community), the barriers for entry into the formal sector they might have, and how to best design activities in this realm. 

Moreover, we understood through these sessions that local knowledge on informality is needed so that we can comprehensively engage with the issue.  Often, the incentives of informal workers are perceived by institutions as ways to "hack the system", "avoid taxation", and subject to punitive measures, thus the conversation often revolves around taxes. On the other hand, another pattern showed that informal workers have been instrumental in developing entire ecosystems and communities, serving as creative outlets for people to explore and experiment with new ideas and processes, mobilizing youth, vulnerable communities, and many others helping to break the cycle of poverty. Actually, these are the two sides of the same coin, and we need to integrate both if we want our approaches for tackling the informal economy to work.

Finally, we learned about a range of tools that we can use for gathering data and mapping solutions. From traditional toolkits of gathering data from surveys and focus groups and publicly available data that our institutions are collecting to non-traditional toolkits including phone apps and social media, and online training and web platforms. 

Equipped with this knowledge and a spectrum of other learnings we are now going back to our colleagues in the global network and our country office in North Macedonia and accelerating existing efforts to work in the field of informality, but also starting new and exciting processes. There are many issues that require thorough reflections and are food for further thinking: How can we use these insights to best navigate exploration of the fluidity of the informal sector? What could be good entry points to engage with the informal workers directly, and offer bottom-up ideas on how to improve the status quo? What are the ways in which data and data-driven policies can help us design solutions for this complex environment? How do we constructively engage the government beyond corrective measures?


Accelerator Labs that participated in the learning session: 
Mauritius and Seychelles, Nigeria, Angola, Azerbaijan, Mauritania, Zimbabwe, Colombia, Paraguay, Ecuador, Kenya, Guatemala