Chapter 7 The Close Relationship between Informality and Gender Gaps in Sub-Saharan Africa
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International Monetary Fund
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Keywords:
working man; household responsibility; family worker; care work; job instability; Gender inequality; Informal employment; Labor markets; Sub-Saharan Africa; Global; primary education
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Abstract

The Global Informal Workforce is a fresh look at the informal economy around the world and its impact on the macroeconomy. The book covers interactions between the informal economy, labor and product markets, gender equality, fiscal institutions and outcomes, social protection, and financial inclusion. Informality is a widespread and persistent phenomenon that affects how fast economies can grow, develop, and provide decent economic opportunities for their populations. The COVID-19 pandemic has helped to uncover the vulnerabilities of the informal workforce.

Introduction

Women are disproportionately overrepresented in the informal economy in more than 90 percent of countries in sub-Saharan Africa. Women’s average share of informal employment in the region’s nonagricultural sector is 83 percent, whereas for men the share is 72 percent. When the agricultural sector is included, these shares rise to 94 percent and 89 percent, respectively (International Labour Organization [ILO] 2018).1 Informal employment is often characterized by job instability, a lack of social protection, lower earnings, and higher gender gaps. UN Women (2016) finds that the gender wage gap in sub-Saharan Africa is 28 percent for the informal sector, far higher than the 6 percent gap for the formal sector. Although some of the wage gap can be explained by observable differences, such as job characteristics, number of hours worked, and skills required for the job, gender wage gaps can also reflect gender discrimination—a wage premium for male workers that cannot be explained after controlling for observable individual and job characteristics.

In this chapter, we investigate the factors that can explain the larger presence of women in the informal sector, including differences in education, social norms, and the legal framework. We adopt two approaches. First, using cross-country data, we show the association between women’s overrepresentation in the informal sector and gender differences in education, social norms, and legal barriers. Second, using microdata from Senegal, we use probit regression models to analyze possible factors behind disproportionate female employment in the informal sector.

We focus on Senegal because of its similarity to other sub-Saharan African countries and the high quality of its microdata. Employment in Senegal’s informal sector is 91 percent, versus the 92 percent regional average (ILO 2018). The country’s informal sector share of GDP (40 percent) is close to the sub-Saharan African average (38 percent) (IMF 2017e), as is its ratio of employment between women and men in the informal sector (ILO 2018).

As in other studies, this cross-country analysis indicates a high association between the disproportionate presence of women in the informal sector and gender gaps in education, limited access to reproductive health care, and higher rates of early marriage.2 Education is critical in explaining women’s participation in the informal sector: women tend to receive less education than men, and formal jobs often require more skills and education than informal jobs.

Using microdata from Senegal and a probit regression model to assess the determinants of working in the informal sector, our estimations find that women in urban areas are 8.5 percentage points more likely to work in the informal sector than men, all else held constant. For these women, each additional child increases her probability of being in the informal sector by 1.4 percent. In contrast, being married or having children reduces a man’s likelihood of working in the informal sector. For each additional child in the household, an employed man’s likelihood of being in the informal sector decreases by 0.6 percent. Furthermore, attaining primary and secondary education is usually more important for women than for men in leaving informal employment. Completing secondary education decreases an employed woman’s chances of being in the informal sector by 61 percent (in comparison with 54 percent for men).

Lower levels of education, traditional gender roles, and gender-biased laws may curtail women’s possibilities of working in the formal sector. Although informal jobs may offer certain appealing features, such as employment closer to home and greater flexibility, the informal sector can be a poverty trap for women. Female workers may remain in activities requiring fewer skills and providing lower earnings, which can lead to fewer incentives to invest in young girls’ education, creating perpetual gaps between men and women.

Several laws in sub-Saharan Africa still restrict women’s economic possibilities and competitiveness. In many countries in the region, women cannot get a job without their husband’s permission, make decisions for the household, travel outside the country the same way as men, administer marital property, perform the same jobs as men, or open a bank account. Furthermore, in more than half of the countries in sub-Saharan Africa, women’s access to finance is not protected by law, and in several, inheritance and property rights are not the same as men’s (World Bank 2018).

Governments have a range of policy options to tackle discrimination and women’s overrepresentation in the informal economy, such as investing in the physical and human capital needed for high-quality education, removing discriminatory barriers from the legal framework, providing family planning to women and families that desire it, and improving infrastructure.3 Our analysis concludes with policy recommendations to address these options for fighting gender inequality.

Gender gaps in the Informal Sector

The informal economy is large worldwide, particularly in emerging market and developing economies. According to the ILO (2018), 70 percent of employment in these economies is informal, contrasting with only 18 percent in advanced economies.

Informal work is an even larger share in sub-Saharan Africa, corresponding to 92 percent of total employment. IMF (2017b) estimates that the informal sector in sub-Saharan Africa accounted for 38 percent of GDP between 2010 and 2014 (Figure 7.1, panel 1). Country by country, however, sub-Saharan Africa demonstrates wide variation in the size of the informal economy (Figure 7.1, panel 2). For example, in Mauritius, the informal sector is small, hovering around 20 percent of GDP, comparable to Organisation for Economic Co-operation and Development countries. Yet in Nigeria, the informal economy accounts for more than 60 percent of GDP. In sub-Saharan Africa as a whole, informal jobs are concentrated in the agricultural sector, whereas most formal jobs are in the services sector (Figure 7.1, panel 3).

Figure 7.1.
Figure 7.1.
Figure 7.1.
Figure 7.1.

Informality around the World and in Sub-Saharan Africa

Most informal workers in the region are own-account workers, and this is true for both men and women. According to the ILO (2018), after own-account workers, male informal workers tend to be employees (32 percent), whereas female informal workers tend to be contributing family workers (24 percent), defined as those “who hold self-employment jobs in an establishment opera ted by a related person, with a too-limited degree of involve ment in its operation to be considered a partner.”4 This means that these women—although employed—are not fully independent and do not control the family business.

Even when agricultural activities are excluded, informality dominates in all sub-Saharan African countries, and on average, women work more often in the informal sector. In fact, informality is, on average, 10 percentage points higher for female workers in the non-agriculture sectors than for their male counterparts (ILO 2018; see Figure 7.1, panel 4).

In sub-Saharan Africa, these larger gender gaps in the informal sector are associated with greater gender inequality. Figure 7.2 shows this relationship between gender gaps in the informal sector and the World Economic Forum’s 2018 Global Gender Gap Index score. The index is a weighted average of four indicators: (1) educational empowerment, (2) legal empowerment, (3) financial access, and (4) health and survival perspectives. Higher levels of gender equality (that is, higher index values) are associated with lower rates of women in informal employment.

Figure 7.2.
Figure 7.2.

Informality and Gender Inequality in Sub-Saharan African Countries, 2018

Source: IMF staff estimates based on International Labour Organization and World Economic Forum statistics.Note: Each dot indicates a country. Informal employment in the agricultural sector is not included in the ratio.

Women tend to work more in the informal sector than men for several reasons. Factors such as difficult or unsafe commutes, poverty, and discrimination can all affect women’s labor market outcomes. Here, we examine three of the most prevalent factors: lower levels of education (often due to early marriage and pregnancy), social norms (a preference for flexible employment due to unpaid care work and household responsibilities), and legal barriers. We now investigate some possible factors behind women’s overrepresentation in the informal sector in sub-Saharan Africa in more detail.

Women Are Less Educated Than Men

Informal jobs are disproportionally held by low-skilled workers with no or little formal education. According to the ILO (2018), more than 90 percent of low-skilled workers are employed in the informal economy in sub-Saharan Africa. Among workers with no education, 95 percent are employed in the informal sector, and for workers with only primary education, 90 percent are in the informal sector. In stark contrast, only 27 percent of workers with tertiary education are in the informal economy (Figure 7.3).

Figure 7.3.
Figure 7.3.

Informal Employment as a Share of Total Employment, by Education

(Percent)

Sources: International Labour Organization 2018; and Enquête de Suivi de la Pauvreté au Sénégal: ESPS II, 2011 (Senegal household survey, 2011).

Women in sub-Saharan African countries are still, on average, less educated than men, despite improvements over the previous two decades. The gender gap in primary education completion rates has been eliminated in most countries; however, gender gaps persist in higher education. Figure 7.4 shows the ratio of average years of education between women and men for 22 sub-Saharan African countries. In years of schooling, women’s average is only 70 percent that of men’s. In countries such as Chad and Guinea, the ratio is around 30 percent.

Figure 7.4.
Figure 7.4.

Gender Gaps in Education in Sub-Saharan Africa

Source: World Bank statistics.Note: Data are from the latest available year for each country. Data labels use International Organization for Standardization country codes.

Incomplete education, in turn, leads to output (GDP) losses. Patrinos (2008) concludes that if a girl were to complete the level of education from which she dropped out (either primary or secondary), her lifetime earnings equivalent would increase up to 68 percent of annual gross domestic product, depending on the country and education level.5 GDP loss caused by incomplete secondary school education is estimated at 48 percent for Kenya, 32 percent for Tanzania, 35 percent for Uganda, and 24 percent for Senegal.

Although these losses are calculated in terms of these girls’ own generations, benefits from girls’ education go beyond their own life cycles: educating future mothers improves not only their individual employment opportunities but also their children’s health, cognitive skills, grades, educational attainment, and future employment opportunities. Women’s education generates a virtuous cycle of human capital formation and economic prosperity.

Secondary education, specifically, provides large returns for women. According to Psacharopoulos and Patrinos (2004), women’s return on secondary education (18.4 percent) is higher than their returns on primary education (12.8 percent) and postsecondary education (10.8 percent). Furthermore, the study shows that

Latin American and sub-Saharan African countries have the highest returns on education in the world.

Girls may drop out of secondary education because of the high opportunity costs of schooling at this stage of life. That is, girls may be required to work for a family business or in other jobs, help with household chores, and take care of younger children. Moreover, early marriage and early childbearing happens when girls would be in secondary education. Early marriage is one of the main reasons that girls drop out of school, preventing the full development of their human capital potential (World Bank 2012). This, in turn, often leads to work in low-paying jobs in the informal sector. For example, Herrera and Sahn (2015) estimate that in Madagascar, early childbearing increases the probability of dropping out of school by 42 percent and decreases the chances of completing secondary school by 44 percent.

Access to family planning and reproductive health care are also linked to female school enrollment. In fact, in countries where more family planning needs are met, more girls are in secondary school. There is a strong correlation between the secondary education enrollment ratio between girls and boys and access to reproductive health care in sub-Saharan Africa (Malta and others 2019).

Gender gaps in education should also be analyzed under the urban-rural divide. Educational attainment in rural areas of sub-Saharan Africa is significantly lower than in urban areas. For example, according to the 2011 Senegal household survey,6 boys and girls between the ages of 10 and 14 years living in rural regions have approximately 1.5 years fewer education than those living in urban areas. The urban-rural divide only increases as we look at boys and girls ages 15 to 19 years, with students living in urban areas having completed approximately twice as many years of education as those living in rural areas.

Figures 7.5 and 7.6 show years of education in rural and urban Senegal by gender and age group, with the youngest age group being 10 to 14 years old and the oldest being 75 to 79 years old. Gender gaps in years of education are larger in urban than in rural areas (1.3 versus 0.7 years, on average). However, in percentage terms, women complete much less education than men in rural areas of Senegal; the difference in urban areas averages 31 percent (vertical axis), whereas in rural areas it increases to 57 percent.

Figure 7.5.
Figure 7.5.

Education, by Age and Gender: Rural Senegal

Source: Enquête de Suivi de la Pauvreté au Sénégal: ESPS II, 2011 (Senegal household survey, 2011).
Figure 7.6.
Figure 7.6.

Education, by Age and Gender: Urban Senegal

Source: Enquête de Suivi de la Pauvreté au Sénégal: ESPS II, 2011 (Senegal household survey, 2011).

Sub-Saharan African countries with wider gender disparities in education also have more women working in informality. Figure 7.7 plots the relation between gender gaps in informal employment and secondary education in 14 sub-Saharan African countries. The correlation of -0.53 shows a negative linear relationship between gender gaps in informal employment and gender gaps in secondary education.

Despite the gender gaps in education, women in Senegal who do work in the formal sector have similar years of education compared with men. According to the 2011 Senegal household survey, women working in the formal sector have on average 6.0 years of education, not much lower than men’s average of 6.5 years. In the informal sector, female workers have on average 1.3 years of education whereas male workers have 1.9 years.

Social Norms Curtail Women’s Competitiveness

Social norms, such as traditional gender roles, reduce women’s competitiveness in the formal labor market. Gender roles that impose significantly larger burdens on women prevent them from joining the labor force. Moreover, if women do enter the labor force, they often need to look for flexible opportunities to maintain the “double shift” of work inside and outside the home.

Unpaid care work and household responsibilities fall disproportionally on women and girls, starting from an early age (United Nations Children’s Fund 2016). For instance, in Senegal, women (both inside and outside the labor force) spend on average six times more time than men taking care of family and doing household chores.7 Even when women are employed, they still spend considerably more time completing household activities than men. According to Wodon and Blackden (2006), in Benin, working women spend 208 minutes a day on household chores, whereas men spend 67 minutes. In South Africa, these numbers are 228 minutes for women and 75 minutes for men, and in Mauritius, 277 minutes for women and 73 minutes for men. The substantially larger amount of time spent on domestic activities diminishes not only women’s productivity at work but also their competitiveness in the labor market.

Figure 7.7.
Figure 7.7.

Correlation of Informality and Education in Sub-Saharan African Countries

Source: IMF staff estimates based on International Labour Organization and United Nations statistics.Note: Each dot indicates a country. Informal employment in the agricultural sector is not included in the ratio.

Early marriage, early childbearing, and lack of family planning impose further constraints on women’s abilities to compete in the labor market. As noted, early marriage is one of the main reasons for school dropouts, impeding women from fully developing their human capital potential and thus increasing their probability of working in poorly remunerated jobs in the informal sector.

Girls marrying young is associated with higher levels of informal employment. Figure 7.8 uses data from 57 countries (24 in sub-Saharan Africa) and shows the relationship between early marriage and informal employment. Countries where girls marry before the age of 18 years is more common and tend to have higher rates of informal employment for women relative to men (the correlation between these two variables is 0.54).

Figure 7.8.
Figure 7.8.

Correlation of Girls’ Early Marriage and Informality, Worldwide (Percent)

Source: IMF staff estimates based on the International Labour Organization and United Nations statistics.Note: Each dot indicates a country. Informal employment in the agricultural sector is not included in the ratio. Early marriage is before the age of 18 years.

Women who have had children young face additional time constraints, impairing their human capital formation, which further reduces their competitiveness in the labor market. Herrera, Sahn, and Villa (2016) find that women who had their first child during adolescence work largely in low-quality informal jobs. Figure 7.9 shows that in sub-Saharan African countries, unattended family planning needs are associated with more women working in the informal sector relative to men. Given that women in sub-Saharan Africa carry most of the burden of unpaid care work, higher fertility rates and numbers of children pose further obstacles to the labor market.8 Figure 7.10 shows that high fertility rates are associated with low incomes.9

Figure 7.9.
Figure 7.9.

Gender Gaps in Informality, by Girls’ Early Marriage, Worldwide

(Percent)

Source: IMF staff estimates based on International Labour Organization and United Nations statistics.Note: Each dot indicates a country. Informal employment in the agricultural sector is not included in the ratio. Early marriage is before the age of 18 years.
Figure 7.10.
Figure 7.10.

GDP Per Capita, by Fertility, Worldwide

Source: IMF staff estimates based on World Bank data.Note: Each dot indicates a country. Purchasing power parity dollars are dollars adjusted for purchasing power parity.

Given the strong effect of young marriage and childbearing, countries that better attend to family planning needs have more girls in secondary school. Figure 7.11 shows a strong correlation between the ratio of women and men with secondary education and access to family planning in sub-Saharan Africa. Countries in which more women’s family planning needs are satisfied through modern methods have more girls currently enrolled in secondary school.

Figure 7.11.
Figure 7.11.

Correlation of Reproductive Health Care and Secondary Education in Sub-Saharan African Countries

(Percent)

Source: IMF staff estimates based on International Labour Organization and United Nations statistics.Note: Each dot indicates a country.

The combination of low education, gender roles, early pregnancy, and early marriage can create a poverty trap for women and girls. Expectations play a large role in economic outcomes, and this is no different for women in poor employment conditions. Parents expecting lower returns from their daughters in the labor market have fewer incentives to keep their girls in school. Girls with less education and fewer professional opportunities may not prioritize improving their skills and will choose to stay out of the labor force or to seek flexible jobs that allow them to reconcile the demands of work inside and work outside the home. This cycle can leave women trapped in informal and lower-paying jobs.

Legal Frameworks Impose Barriers for Working Women

Legal barriers may impose additional constraints for women trying to pursue a career that includes working in the formal sector or being a successful entrepreneur. The World Bank’s Women, Business, and the Law data set provides information on legal rights and restrictions in 189 countries, covering 47 countries in sub-Saharan Africa. Our analysis draws on several indicators, of which we highlight four:10

  • 1. Women’s access to institutions. Sub-Saharan Africa ranks sixth out of six groups for women’s ability to access institutions.11 The “access to institutions” indicator measures women’s legal ability to make their own choices and to transform their choices into economic outcomes. If laws prevent women from interacting with public authorities or with the private sector in the same way as men, then their agency and Women’s access to institutions economic activities will be limited, pushing them out of formality. For this indicator, sub-Saharan African countries outperform only Middle Eastern and North African countries (World Bank 2018).

  • 2. Women’s access to property. Property rights for women are still compromised in many sub-Saharan African countries. In eight countries, only husbands can legally administer marital property. In nine, married women may not have equal ownership rights and female and male surviving spouses do not have equal inheritance rights.

  • 3. Women’s access to credit. In the vast majority of sub-Saharan African countries, discrimination on the basis of gender or marital status is not prohibited in access to finance.

  • 4. Women’s access to equality under the law. Women’s working opportunities and conditions are many times impaired by law. In 27 sub-Saharan African countries, women are legally barred from performing the same jobs as men. Workplace protection and parental benefits in the region are also weaker than the global average.12 Many sub-Saharan African countries do not have laws that prohibit or invalidate child or early marriage, criminalize domestic violence, or address sexual harassment. Yet some countries have improved over the previous decade. Since the first Women, Business, and the Law report in 2010, 31 out of the 47 sub-Saharan African countries have improved gender equality in their legal frameworks. Countries with considerable legal advancements include Democratic Republic of the Congo, Guinea, Mauritius, Rwanda, São Tomé and Príncipe, and Zambia.

Case Study: Senegal

We now further investigate the relationship between gender and informal employment in Senegal. In addition to presenting relevant stylized facts for the country, we use probit regression models to estimate the probability of Senegalese workers, particularly women, being employed in the informal sector. For this purpose, we use microdata from the 2011 Senegal household survey.

We define a formal worker as a paid worker who declares having a formal contract with the employer (11.9 percent), having affiliation through the employer to a social security system (7.7 percent), or both. In sum, 14.3 percent of all workers are formal workers under this classification.

The Context of Senegal

Senegal’s sectoral division is similar to that of other low-income sub-Saharan African countries. Employment is concentrated in the agricultural sector, accounting for almost half of total employment. The second-largest sector is industry, and the smallest is services. Senegal’s economic structure resembles that of a country beginning a structural transformation.13

Education

Gender gaps for both enrollment in and completion of primary education have closed, and even reversed, in Senegal (IMF 2018c). According to UNESCO (data accessed from the World Bank Data website), from 1999 to 2016, gross enrollment in primary education jumped from 59 percent to 88 percent for girls, whereas for boys, the rates improved from 71 percent to 78 percent. Primary education completion rates rose from 33 percent for girls and 43 percent for boys in 2000 to 64 percent and 54 percent in 2016. However, according to the United Nations Development Programme (data also accessed from the World Bank Data website), the average was only 2.8 years of education in 2015, lower than the average for the West African Economic and Monetary Union (3.0 years) and sub-Saharan Africa (5.1 years).

More progress is needed, because girls’ completion of secondary education and enrollment in tertiary education remain substantially lower than boys’. Senegal’s Demographic and Health Survey 2012–13 reported that, in 2012, the average completion rate in secondary education was only 13 percent for girls compared with 21 percent for boys. The women’s completion rate for tertiary education doubled from 4 percent in 2006 to 8 percent in 2016; however, the men’s rate is still much higher, having increased from 8 percent to 13 percent. Despite these gender gaps, the women who work in the formal sector in Senegal are on average almost as educated as the men.

Social Norms

Women’s labor force participation increased from 34 percent in 2000 to 41 percent in 2016. Furthermore, according to the ILOSTAT, the ratio of unemployed young women to unemployed young men (from 15 to 24 years old) dropped from 1.7 to 1.1 between 2000 and 2017.

Women in Senegal rarely work part-time, even when employed in the informal sector. One benefit of the informal sector is the possibility of working flexible hours and days. This is especially valuable for women, who are almost always responsible for the bulk of unpaid care work. As a result, women could prefer a job that requires fewer hours or offers greater flexibility over a job that offers better security, compensation, or other benefits.

Using the household survey data, we calculate the share of men and women working full and part time in the formal and informal sectors. Table 7.1 confirms that Senegalese women are more likely than men to work part-time (20 percent versus 7 percent), although the majority of both women and men work full-time. On average, urban women work 43 hours per week in the formal sector and 48 hours per week in the informal sector. Thus, Senegalese women do not seem to benefit from the part-time flexibility more often given by the informal sector.

Table 7.1.

Part-Time Workers in Rural and Urban Senegal, by Formal and Informal Sector (Percent average)

article image
Source: Enquête de Suivi de la Pauvreté au Sénégal: ESPS II 2011 (Senegal Household Survey 2011).

Gender gaps vary across the distribution of income. Female Senegalese workers from the top income groups are more often informal workers than their male counterparts, but that statistic does not hold for lower-income groups. At the top 40 percent of the income distribution, female workers are on average 9 percentage points more often in the informal sector than male workers (82 percent versus 73 percent). In contrast, at the bottom 40 percent of the income distribution, the difference falls from 9 percent to 0. This could be partially explained by education gaps, which are larger among richer households: at the top 40 percent of the income distribution, the gap is 0.92 years of education, whereas at the bottom 30 percent, the gap is 0.60 years.

Legal Barriers

Gender discrimination in the Senegalese legal framework is worse than in sub-Saharan Africa as a whole. World Bank (2018) calculates that Senegal scores below the sub-Saharan African average in women’s legal rights (Figure 7.12), particularly for the indicators “using property” (related to asset ownership), “going to court,” “getting a job,” “building credit,” and “accessing institutions.” Legal restrictions still prevent women who are not pregnant or nursing from performing the same jobs as men. Moreover, sexual harassment is not recognized as a criminal offense, and the constitution does not formally recognize, nor does it prohibit, discrimination against women that may result from customary laws.

Figure 7.12.
Figure 7.12.

Legal Equality for Women in Sub-Saharan Africa and Senegal

Source: World Bank 2018.Note: Data are based on the World Bank’s Women, Business, and the Law score.

The Senegalese family code allows for early marriage, setting the minimum age for girls at 16 years. However, household survey data show that Senegalese women tend to marry earlier than men, and these women receive less education. Twenty-three percent of female adolescents ages 15 to 19 years are already married, whereas among males the same age, only 2 percent are married. Married female adolescents have on average one-third fewer years of education than unmarried ones (2.6 years versus 3.9 years), suggesting that early marriage might have substantial negative effects on educational outcomes.

Women own few assets, and their ownership is not protected by law. The Senegalese family code also gives husbands the power to make all decisions for the household. As a further complication, the system of inheritance described in the family code also gives advantages to men. This hampers women’s ability to own land or equipment, reducing their competitiveness in the labor market.

Senegal, however, scores above the sub-Saharan Africa average in areas such as “providing incentives to work” and “protecting women from violence.” Women working in the formal sector have a legal guarantee of an equivalent position after maternity leave, and the government provides parents in the workforce with child allowances. In addition, Senegal has made progress in passing legislation against domestic violence.

Empirical Analysis

We further examine factors that could determine whether a worker is formal or informal. Using the 2011 Senegal household survey, we construct probit models to quantify the probability of Senegalese workers between the ages of 15 and 64 years being formal or informal. We examine the marginal effects of seven variables on the probability of being an informal worker: gender, educational attainment, head of household status, marital status, number of children in the household, decile in the income distribution, and age group, controlling for urban or rural regions. We run probit models using the entire household sample as well as urban and rural areas separately, as is standard in the literature. For each of these three specifications, we run models including all workers, female workers only, and male workers only.14

Our results indicate that women are more likely to be in the informal sector than men. Being a female worker increases by 3.4 percentage points the probability of being employed in the informal sector, and this coefficient is significant at the 1 percent level. In urban areas, this discrepancy is even higher: all else constant, a working woman is 8.5 percentage points more likely to be in the informal sector than a working man (Annex Table 7.1.1).

Getting an education has the largest positive effect on the probability of being a formal worker, and it is usually more important for women. Primary, secondary, and tertiary education have the largest marginal effects on the probability of being in the informal sector, except for primary education in rural areas. Paid workers who completed primary education are 16.4 percent less likely to be in the informal sector. Urban female paid workers who completed primary education, in particular, are 31.2 percent less likely to be in the informal sector compared with a reduction of 22.5 percent for their male counterparts. However, for rural regions, a primary school diploma is less relevant in shifting a worker from the informal to the formal sector. Primary school completion decreases the probability of being informal by 7.2 percent for men and 4.6 percent for women.15

In other words, the likelihood of being in the informal sector decreases as educational attainment increases. Workers who have earned a secondary diploma are on average 55.5 percent less likely to be in the informal sector. Among urban residents, the decrease is 60.4 percent. The importance of secondary education is larger for women than for men: 61.0 percent versus 53.8 percent, respectively. In urban areas, these numbers rise to 66.4 for women and 57.1 for men. Individuals with tertiary education are 72.9 percentage points less likely to be working in the informal sector. For the urban sample, the tertiary education premium is higher for women (69.4 percent) than for men (68.6 percent).16

Chi-squared tests confirm that women generally have larger coefficients (in absolute terms) in primary and secondary education in both urban and rural areas, indicating that primary and secondary education are more important for women than for men in reducing their probability of working in the informal sector.

Men enjoy bonuses from being married and from fatherhood. In Senegal, married men have on average a 2.1 percent lower probability of being in the informal sector when compared with single men, and this rate rises to 10.2 percent when considering only urban areas. For each additional child in the household, the likelihood of a working man being in the informal sector decreases by 0.6 percent, whereas for women in urban areas, each additional child increases her probability of being in the informal sector by 1.4 percent.17 Given that women in Senegal have on average five children, the effect of having children on labor informality can be sizable.

Being the head of the household reduces the probability of being an informal worker, particularly for women. The probability of a Senegalese worker being an informal worker is 2.5 percent lower when he or she is head of the household, and 5.3 percent lower if he or she is head of the household in an urban area. When subsamples of women and men are separated, only the women show a significant coefficient (at the 5 percent level) for head of the household, increasing the probability of being a formal worker by 2.8 percent. A higher income increases the probability of being a formal worker for men more than for women. For each decile a working man’s household climbs in Senegal’s income distribution, the chance of him being in the informal sector decreases by 1.6 percent (3.1 percent in urban areas), whereas for a working woman, this reduction is smaller, at 0.6 percent (1.6 percent in urban areas). This divergence is in line with the larger gender gaps in informality at the top of the income distribution.

Conclusion and Policy Recommendations

Women are disproportionately overrepresented in the informal economy in sub-Saharan Africa, where they experience less stability, reduced social protection, lower productivity, lower earnings, and more discrimination. We offer evidence that countries with more informality among female workers, on average, have larger gender gaps in education, satisfy fewer family planning needs, and have higher incidences of early marriage. We further demonstrate how legal frameworks create constraints for women. That is, laws in sub-Saharan Africa reduce women’s economic possibilities and competitiveness by reducing their access to property, jobs, and credit.

The combination of low education, traditional gender roles, legal constraints, early pregnancy, and early marriage can trap women in the informal sector. Parents expecting lower returns from their daughters in the labor market have fewer incentives to keep them in school. Girls with less education and those who are tasked with the work associated with traditional gender roles have fewer chances of joining the formal labor market. Early pregnancy and early marriage further restrict their labor force opportunities. This cycle can leave women trapped in informal or less-attractive jobs.

Using microdata from Senegal, we confirm that women are more likely to be in the informal sector than men. We also find that primary and secondary education are usually more relevant to shifting women out of informality than men.

Furthermore, being married or having children implies a lower probability of being an informal worker for men—but the effect is opposite for women. Larger incomes also decrease the probability of being in the informal sector more for men than for women.

Governments have a role to play in diminishing these inequalities and ensuring men and women can compete equally in the labor market. Policymakers may choose to focus on the following findings:

  • Increasing girls’ educational attainment can substantially diminish the probability of women being employed in the informal sector. More high-quality years of education lead to higher salaries and thus better living standards for families. Governments should improve the access to, the quality of, and the effectiveness of their education systems. Costs can be much lower in countries where the physical infrastructure is in place, but for reasons such as social stigma, early marriage and childbearing, and discrimination, girls abandon school before completion of secondary education. Policymakers can provide parents with incentives to keep their daughters at school, for instance, by making targeted cash transfers to those who keep their girls home until they complete primary and secondary education.18 Prohibiting child marriage and disseminating information on women’s health also helps prevent girls from dropping out, especially in rural areas.

  • Changing the legal framework to enshrine gender equality is financially costless. Governments should expunge these legal differences not only because they violate the basic principle of equality between individuals before the law but also because, economically, they create distortions and wrong incentives. Sustainable growth cannot be achieved with half of the population lacking access to institutions, assets, credit, freedom of mobility, and freedom of choice. Enforcement of property rights—including inheritance rights—is particularly relevant, especially in countries where small agricultural plots are the most common site of economic activity, and thus where land ownership is highly valuable. Moreover, enforcing women’s legal rights by combating domestic violence, sexual harassment, and child marriage improves women’s living standards and breaks the cycle of gender inequality.

  • Meeting demands for family planning is imperative. Policymakers can run education campaigns and provide high-quality health care and information to young women interested in learning about reproductive health care. Disseminating knowledge and creating an atmosphere where women learn about and have access to family planning, sexual education, and modern contraceptives can pave the way to a healthier, more informed, and more prosperous generation of women.

  • Investing in infrastructure reduces time spent on home production and provides safe transportation options for women. Women’s disproportionately high participation in the informal labor sector is linked to the reduced number of available hours to dedicate to work outside their homes. Often, their choices are to find an informal job close to home or to not participate in the labor market. However, governments can invest in infrastructure for access to water and energy to reduce the time women spend in home production and to allow them to safely travel to and from workplaces and schools.19

  • Addressing social norms that economically disadvantage women is necessary. Policymakers should enforce equal rights and opportunities. Social norms have changed in urban areas of many sub-Saharan African countries, but gender inequalities still prevail in rural areas. In this context, policy recommendations include enforcing civil laws where customary laws reduce women’s freedom and power, combating domestic violence, and promoting and encouraging a more equal division of labor at home by developing education campaigns and introducing paternity leave.

  • Mitigating discrimination in the formal labor market can help equalize opportunities. Governments can support gender equality through changes in the legal framework (that is, passing laws against gender discrimination and sexual harassment), as well as by provision of childcare subsidies or childcare facilities and parental leave. These policies can have positive spillovers to the informal sector. Fiscal policies such as tax breaks or subsidies for families with young children and generous parental leave (provided by the government, not the private sector) can encourage women to enter the labor force, especially the formal sector. Making sure the tax system, particularly income tax, does not penalize secondary wage earners is also important. Access to credit and assets is paramount in promoting equal opportunity of entrepre-neurship between men and women—and this is helpful for both formal and informal sectors. Spillovers from reduced gender discrimination in social norms and curtailed education gaps also positively affect all working women, along with girls who wish to one day participate in the labor force.

Implementation barriers should not prevent policymakers from working on gender equality measures. Some of our policy recommendations have vast empirical basis in the literature, such as “increasing education generates better salaries and living standards.” Although other channels and causal links between gender inequality and informality might be challenging to prove, governments should pursue equal opportunities for men and women and eliminate economic distortions related to gender inequality.

Annex 7.1.

Annex Table 7.1.1

Marginal Effects from Probit Regressions

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Source: Authors. Note: Standard errors appear in parentheses. We included “no education,” complete “primary education,” complete “secondary education,” and complete “tertiary education” in the regressions, omitting incomplete “primary education.”The dependent variable was informal worker (binary variable). ***p < 0.01; **p < 0.05; *p < 0.1.
Annex Table 7.1.2.

Marginal Effects of Probit Regressions (Including Z-Tests and All Control Variables)

article image
article image
article image
article image
article image
Source: Authors. Note: Standard errors appear in parentheses. We included “no education,” complete “primary education,” complete “secondary education,” and complete “tertiary education” in the regressions, omitting incomplete “primary education.”The dependent variable was informal worker (binary variable). ***p < 0.01; **p < 0.05; *p < 0.1.

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1

ILO (2018) distinguishes employment in the informal sector from informal employment. Employment in the informal sector (or in the informal economy) is a concept based on the characteristics of an enterprise or an employee’s place of work. Examples of the informal sector are unincorporated private economic units and economic units not registered to a relevant national institution or with no formal bookkeeping. Informal employment, in contrast, is job based and defined by the employment relationship and protections associated with the job. Examples of informal employment are own-account workers and employers in the informal sector and employees who are not subjected to national labor legislation, income taxation, or social protection or are not entitled to employment benefits. Here we use both terms interchangeably.

2

See Malta and others (2019) for a more complete literature review on women’s participation in the informal sector.

3

Fabrizio and others (2020), using an overlapping generation model calibrated to low-income developing countries, simulates the effect of reducing education gaps, improving infrastructure, and proving women with cash transfers on women’s labor force participation and output, as well as gender inequality.

5

The 68 percent is the estimation for secondary education in Burundi.

6

Enquête de Suivi de la Pauvreté au Sénégal: ESPS II, 2011, is the latest available comprehensive household survey in Senegal containing individual and household data on social and economic characteristics.

7

Our findings on women’s versus men’s hours of domestic labor are calculated using the 2011 Senegal household survey.

8

Bloom and others (2009) estimate a large negative effect of the fertility rate on labor force participation using cross-country panel data.

9

See the 2018 IMF Country Report on Nigeria for a discussion on how high fertility rates can lower economic growth (IMF 2018b).

10

See Malta and others (2019) for a more complete discussion on the various legal barriers that exist in the region.

11

The six groupings are high-income countries: Europe and Central Asia, Latin America and the Caribbean, East Asia and the Pacifc, sub-Saharan Africa, South Asia, and the Middle East and North Africa.

12

Ensuring that all boys and girls have access to high-quality pre-primary childhood education by 2030 is one of the Sustainable Development Goals. Countries considering options to increase access to childcare and thus female labor force participation include Austria (IMF 2017a), Egypt (IMF 2018a), and the former Yugoslav Republic of Macedonia (IMF 2019).

13

For a review of the literature on structural transformation, see Herrendorf, Rogerson, and Valentinyi (2014).

14

Annex Table 7.1.1 presents thecoefficients and standard errors of the marginal effects of the resulting nine probit models. Annex Table 7.1.2 presents these results, including the controls for urban and rural regions and the z-tests for all variables.

15

The discrepancy between informally employed urban and rural workers might result from the limited size of the formal sector in rural areas. In rural Senegal, only 6.7 percent of workers have a primary school diploma, whereas in urban areas, this percentage increases to 21.7.

16

Only 22 observations in the sample of 163,490 correspond to female workers with tertiary education; thus, the estimations suffer from small sample bias.

17

Correll, Benard, and Paik (2007), using a randomized control trial in the United States, find that mothers are perceived as less competent, are less likely to be promoted, and have lower wages than fathers. Bear and Glick (2016) examine how reframing mothers as “breadwinners” can reduce the motherhood penalty.

18

See, for example, IMF staff reports on Guatemala (2016a), Jordan (2017c), Morocco (2017d), Nigeria (2016b), and Pakistan (2016c), which discuss targeted cash transfers to increase female enrollment.

19

See, for example, Mexico City’s and Bolivia’s efforts to create safe transportation options (Kolovich 2018) along with IMF staff reports such as Chile (2015), India (2017b), and Jordan (2017c).

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Contributor Notes

The authors thank Claudia Berg, Anna Fruttero, Roland Kangni Kpodar, Michel Lazare, Monique Newiak, and Tito Nicias Teixeira da Silva Filho for their comments. This chapter is based on the authors’ IMF Working Paper 19/112, “Informality and Gender Gaps Going Hand in Hand.” This chapter is part of a research project on macroeconomic policy in low-income countries supported by the UK Department for International Development. The research results and conclusions expressed herein are those of the authors and do not necessarily reflect the views of the Department for International Development, the IMF, its executive board, or its management.

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Cover The Global Informal Workforce
The Global Informal Workforce
Priorities for Inclusive Growth
Author:
International Monetary Fund
ISBN:
9781513575919
Publication Date:
23 Jul 2021
Publisher:
International Monetary Fund
DOI:
https://doi.org/10.5089/9781513575919.071
Pages:
412
  • <sup><xref ref-type="fig" rid="Rch007fig01">Figure 7.1.</xref></sup> <sup><xref ref-type="fig" rid="Rch007fig01">Figure 7.1.</xref></sup> <sup><xref ref-type="fig" rid="Rch007fig01">Figure 7.1.</xref></sup>
    View in gallery
    Figure 7.1.

    Informality around the World and in Sub-Saharan Africa

  • <sup><xref ref-type="fig" rid="Rch007fig02">Figure 7.2.</xref></sup>
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    Figure 7.2.

    Informality and Gender Inequality in Sub-Saharan African Countries, 2018

  • <sup><xref ref-type="fig" rid="Rch007fig03">Figure 7.3.</xref></sup>
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    Figure 7.3.

    Informal Employment as a Share of Total Employment, by Education

    (Percent)

  • <sup><xref ref-type="fig" rid="Rch007fig04">Figure 7.4.</xref></sup>
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    Figure 7.4.

    Gender Gaps in Education in Sub-Saharan Africa

  • <sup><xref ref-type="fig" rid="Rch007fig05">Figure 7.5.</xref></sup>
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    Figure 7.5.

    Education, by Age and Gender: Rural Senegal

  • <sup><xref ref-type="fig" rid="Rch007fig06">Figure 7.6.</xref></sup>
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    Figure 7.6.

    Education, by Age and Gender: Urban Senegal

  • <sup><xref ref-type="fig" rid="Rch007fig07">Figure 7.7.</xref></sup>
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    Figure 7.7.

    Correlation of Informality and Education in Sub-Saharan African Countries

  • <sup><xref ref-type="fig" rid="Rch007fig08">Figure 7.8.</xref></sup>
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    Figure 7.8.

    Correlation of Girls’ Early Marriage and Informality, Worldwide (Percent)

  • <sup><xref ref-type="fig" rid="Rch007fig09">Figure 7.9.</xref></sup>
    View in gallery
    Figure 7.9.

    Gender Gaps in Informality, by Girls’ Early Marriage, Worldwide

    (Percent)

  • <sup><xref ref-type="fig" rid="Rch007fig10">Figure 7.10.</xref></sup>
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    Figure 7.10.

    GDP Per Capita, by Fertility, Worldwide

  • <sup><xref ref-type="fig" rid="Rch007fig11">Figure 7.11.</xref></sup>
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    Figure 7.11.

    Correlation of Reproductive Health Care and Secondary Education in Sub-Saharan African Countries

    (Percent)

  • <sup><xref ref-type="fig" rid="Rch007fig12">Figure 7.12.</xref></sup>
    View in gallery
    Figure 7.12.

    Legal Equality for Women in Sub-Saharan Africa and Senegal

Figure 7.1.

Informality around the World and in Sub-Saharan Africa
Figure 7.1.

Informality around the World and in Sub-Saharan Africa
Figure 7.1.

Informality around the World and in Sub-Saharan Africa
Figure 7.2.

Informality and Gender Inequality in Sub-Saharan African Countries, 2018
Figure 7.3.

Informal Employment as a Share of Total Employment, by Education

(Percent)
Figure 7.4.

Gender Gaps in Education in Sub-Saharan Africa
Figure 7.5.

Education, by Age and Gender: Rural Senegal
Figure 7.6.

Education, by Age and Gender: Urban Senegal
Figure 7.7.

Correlation of Informality and Education in Sub-Saharan African Countries
Figure 7.8.

Correlation of Girls’ Early Marriage and Informality, Worldwide (Percent)
Figure 7.9.

Gender Gaps in Informality, by Girls’ Early Marriage, Worldwide

(Percent)
Figure 7.10.

GDP Per Capita, by Fertility, Worldwide
Figure 7.11.

Correlation of Reproductive Health Care and Secondary Education in Sub-Saharan African Countries

(Percent)
Figure 7.12.

Legal Equality for Women in Sub-Saharan Africa and Senegal