Economic activities of persons and economic units that are – in law or in practice – not covered by formal arrangements because:
- they are operating outside the formal reach of the law; or
- they are not covered in practice, which means that, although they are operating within the formal reach of the law, the law is not applied or not enforced; or
- the law discourages compliance because it is considered inappropriate, burdensome, or imposes costs deemed excessive.
Comment
- Most workers and enterprises in the informal economy produce legal goods and services, albeit sometimes not in conformity with procedural legal requirements, for example where there is non-compliance with registration requirements or immigration formalities;
- these activities should be distinguished from criminal and illegal activities, such as production and smuggling of illegal drugs, as they are the subject of criminal law, and are not appropriate for regulation or protection under labour or commercial law;
- there also may be grey areas where the economic activity involves characteristics of both the formal and informal economy, for instance when formal workers are provided with undeclared remuneration, or when there are groups of workers in formal enterprises whose wages and working conditions are typical of those existing in informality;
- this term is close not synonymous with: grey economy / parallel economy / underground economy.
Source
Based on ILO, 2002.