Every country exhibits two kinds of economy, these are the formal and informal economy. However, the formal sector is the most important for every country. It's what determines the country’s position of development as well as growth. Formal economy is made up of all the sectors of the economy that can be taxed. The formal jobs which contribute towards the growth and development of the country and are taxed to make up this kind of the economy. They include companies, industries, big businesses and some medium-sized and small corporations. So long as they pay taxes, the business no matter how small forms part of the formal economy. Even people who deal with exports and imports can be classified as having a business that comprises formal economy. It is due to the fact that they pay levies, taxes, and tariffs for the products that they either export or import. In one way or the other, the government benefits from their trade or work. Any business which can be accounted for and from which the government benefits are part of the formal sector (Chen, 2006).
Despite the formal sector being so important, the informal economy is equally important. It comprises of business transactions that are not taxed. Such businesses are also not monitored by any state or government. As a result, there is no benefit which is attributed to the informal economy by the government. It can be classified as not in existence, although it exists. In the calculation of the countries’ wealth, the informal economy is not involved. Despite how helpful it might be or how much income it contributes to the country, it is not included in any statistical calculations of nation’s well-being. It is due to it not being monitored or under the watch of any state or government (Tokman, 2012). Businesses that fall under the informal economy include street vendors, rural shops, groceries located on the side of the street, open air market, shoe shine, bicycle repair shops, among others. Some part of the formal economy have an informal economy in them. For instance, there are those employees who work in large businesses, but they are not covered by Social protect. Such employees are informally employed. Casual laborers likewise shape part of the casual economy (Chen, 2012).
The informal sector plays quite a very important role in every country (Castells, and Portes. 2009). The informal sector provides jobs to residents of a country. Doing so helps to ensure that they have income which they use to take care of themselves and their families. They also use the income to improve their living standards and thus reducing the poverty levels in that country. Offering jobs to citizens also ensure that unemployment is reduced. The same case applies to underemployment. Unemployment and underemployment are major challenges that all governments, both in developed and developing nations face, which the informal sector helps to solve although not fully. However, it also plays a controversial role (Charmes, 1998). The jobs available to people do not pay so well. There is also no job security in the informal sector. One may have a job in the morning and by evening, they are back to being unemployed. Informal sector also brings about a rise in crime. People tend to rob from other so as to have an opportunity to sell it in the streets. They become unruly, and insecurity tends to increase.
Agriculture is another sector that makes up the informal economy. However, not all of it, but rather just a part it. The largest part is classified under formal economy, especially in the developed nations. Unlike the developed nations, most of the developing nations engage in agriculture in small scale. The government thus does not monitor the practice of small-scale agriculture in this nation as most of it is subsistence (International Labor Organization, 2002). Farmers mainly produce food for their consumption. They rarely have much to spare which they can trade with. In instances where they have surplus produce, they sell it to others, then get money to purchase what they do not have. They also make an informal arrangement of exchanging a product for another which they do not have. Such practices are unmonitored and untaxed, and they are subsequently part of the casual economy.
Migration, then again, alludes to the movement of individuals from one spot to the next. People can either move from one town to the other or from one city to the other. They can also move from one country to another or from one continent to another. Whenever people migrate, it is usually for the search of some better conditions. For instance, people may move from one town to the next in search of a better job. The better job provides them with higher income which helps them improve their standards of living. People may also move in search of a better life. Most people who migrate to America still believe in what most call the American dream. America is known to be a place where people can become better. It is due to the availability of many jobs as well as a developed economy thus better living standards. People thus migrate there in the view that their lives will be transformed and become like those of the Americans (Vanek, Chen, & Hussmanns, 2012).
There are several forms of migration. The most common type of migration is rural-urban migration. It occurs where people in the rural area move from their rural homes and settle down in the urban area. They mainly move in search of job opportunities. In the rural areas, people mainly work on their lands for money or do other informal jobs (Fields, 2010). However, these jobs do not pay much. Wages obtained are usually subsistent and thus cannot support large families. They are not also dependable for people who wish to better themselves. Accordingly, individuals move from the country ranges and settle in the urban territories. In the urban regions, there are a lot of openings for work accessible to the individuals who meet different capabilities. There is also improved living standards compared to rural areas which is why people migrate to the urban areas (Dimova & Gang, 2012).
The other form of migration is from one country to the other. People move in search of better jobs, better life, and better pay. They all say that they move in search of greener pastures. People migrating from one country to another may be due to the fact that they seek employment but remain citizens of their country. They may also seek to become citizens of the new country they move in to which occurs when their migration is permanent. In another instance, they acquire dual citizenship. Other than the peace movement and voluntary migration from one place and especially one country to the other, people may be forced to migrate from their country or place to another. It usually occurs when there are things like war, poverty, conflict, or persecution in the places they are from. As a result, they migrate to other places in search of peace among other things. It is what has contributed to the European migration crisis (Turton, 2002).
In 2015, it was estimated that about one million migrants and refugees came to Europe. The main reason behind such large migration is believed to be conflict, persecution, and poverty in their countries of origin. This is as indicated by information from The United Nations Refugee Agency, UNHCR and (IOM) International Organization for Migration joint public statement that was held on December 22, 2015. The main refugees were from Syria, Afghanistan and Iraq. They migrated to Europe, so as to escape the war that continues in their countries. A large number of immigrants and refugees have caused great problems in Europe. European countries are forced to incur a lot of costs to help the refugees. They are also left with no option but to provide accommodation and safety for them. The capital spent on the immigrants and refugees would have been used to bring about growth and development in the country. It explains why nationalist in these countries are forming anti-immigrants groups and opposing the migration of people into Europe.
Some form of relationship exists between the informal economy and migration. Let’s begin with the case of rural-urban migration. Whenever people migrate from the rural areas and come into the cities, they usually do not have the knowledge, skills, and qualifications to seek formal employment. They also lack the education needed so as to excel in the formal sector. However, they have to find the means to provide their daily needs as well as capital to send to their family members in the rural area. As a result, they find jobs in the informal sector, which they use as a stepping stone into formal employment. For instance, ladies could be employed as house helps while men could work as casual laborers in a construction site or in an industry (Bhowmik, 2014). They then save money for education or obtain the skills needed and advance into the formal sector. Some even choose to remain in the informal sector. They save money and begin their small businesses in the informal sector to provide for their livelihood. They may even expand their small jobs and seek employees. It explains how the informal sector keeps growing on a daily basis (Fields 2010).
According to a study that was carried out in Kathmandu Metropolitan City in Nepal, it shows that the relationship that exists between the migration sector and the informal sector is tremendous. The study revolved around the street merchants in the Kathmandu Metropolitan City in Nepal. As the study ended up, an expansion in the quantity of road merchant in the city expanded as a consequence of an expansion in rural urban relocation. The more the number of people migrated from their rural areas into the city, the more the number of street vendor who were seen around the city. The migrants from the rural areas did not have a higher qualification in education. They additionally did not have a large portion of the aptitudes that were required with a specific end goal to find them work in the formal division. Thus, they joined in the vocational opportunities in the casual area. The primary explanation behind rustic, urban movement in Nepal was because of the uprooting of individuals in their provincial ranges and also the contention in their places of cause (Timalsina 2010). Through street vending, these people gain the opportunity to earn an honest means of livelihood in the city. They improve their living standards and at the same time get capital to expand their businesses and even get the education and skills needed to earn jobs in the formal sector (Bromley, 2010).
People migrating to other countries as well as within their country in most cases do not have guaranteed jobs. They mainly move in search of employment opportunities. Upon arrival in the city or their country of choice, some are lucky while others are not so lucky. The fortunate ones can discover vocation in the formal sector quickly. They are mainly the most educated or just lucky ones. Others do not make it finding a job immediately. As a result, they settle for temporary jobs as they search for better jobs (Kanbur, 2009). Temporary jobs are part of an informal economy. They are categories of those activities people engage in for survival. Some also agree to settle for unpaid jobs mainly known as internships. It especially applies to graduates or people with experience. They volunteer to work in an organization without pay awaiting for an opportunity to open up in the organization at which point they would be employed (Dimova & Gang 2012).
A research was performed in Tajikistan to discover the relationship in the middle of relocation and the casual division. The findings of this research were related to what other studies found out. People in Tajikistan turned out to think differently with those from other places. According to the study, people in Tajikistan opt for employment in the formal sector. However, as is evident in every country, jobs in the formal sector are limited. As a result, some people have to find other means of livelihood failure to which they end up unemployed and living in poverty (International Labor Organization, 2010). Formal sector jobs also have their various demands. For instance, a certain level of education, skills, and experience is required. In Tajikistan, people who have the necessary requirement for jobs in the formal sector are very lucky as they find employment. However, those who do not have the requirements have to find an alternative. The most unexpected thing is that those who do not find formal employment in this area do not opt to migrate. It applies to those who also have the skills and experience but are unemployed. Other than migrating to another place in search of employment, they search for jobs in the casual sector as casual labourers. It explains the large informal sector present in the area. According to this study, the informal economy and migration are related as substitutes (Abdulloev, Gang, & Landon-Lane 2011). When people cannot migrate, they engage in the informal sector. However, when they don’t obtain employment in the informal sector, they migrate in search of better opportunities.
China among the countries that have experienced a lot of internal migration. People move from their rural areas in China to the urban areas. It is what has led to the congestion and traffic chaos in most Chinese towns. As people move to China town, according to the study, they engage in two types of activities. They either look for a job in the formal segment or the casual division. Be that as it may, because of the rising number of transients, employments in the formal area are exceptionally hard to discover. A large portion of them in this manner land in the casual division. As the study found, the development of occupations in the casual division is a direct result of the extension in migration. The vagrants either utilize themselves or look for an occupation in the casual segment. It clarifies the expansion in the quantity of sellers in the city and occupations in the casual part. The concentrate likewise discovered that individuals who work in the casual division acquire more than the individuals who don't. It explains why more people are willing to migrate and take part in the informal sector in the Chinese city to earn their livelihood (Meng 2011).
According to a study carried out in the rural areas of Nepal, there is a lot of internal migration in the place where people mainly move from their rural homes in the urban areas. The main reasons behind the internal migration are increasing unemployment, difficult rural life, household level increased population pressure, and conflicts in the rural areas over things like land and other resources. People want to get away from all this, and thus, they relocate, looking for greener pastures for their well being and that of their relatives. Upon arrival in the city, the only place they can land employment is in the informal sector. It is due to their lack of skills, education, and experience required for jobs in the formal sector. The main job that was studied was street vending in the Kathmandu Metropolitan City in Nepal. (Timalsina 2010) Most of the migrants became street vendors proving to the urban community most of the good which they obtained expensively at a cheaper cost. They also brought the goods closer to the urban population. As a result, they eased the life of the urban people other than making it chaotic or difficult. The street vending jobs also provided employment to the migrant population. They obtained income and their living standards improved. They even got money to land their kids in a government school.
As is evident with this study, informal economy can help solve the problem of migration, especially in Europe (Timalsina 2010). So many people have migrated to Europe in search for peace as their countries are at war. Such people include those from Afghanistan, Syria, and Iraq. All they require from their countries of refuge is an opportunity. Such people obtain help from organizations such as the United Nations Refugee Agency, Red Cross, World Bank, UNHCR, land International Organization for Migration (IOM) (Timalsina 2010). Other than them being provided with all they require, these organizations in conjunction with the European governments can provide jobs for the people in the informal sector. They can encourage them to be part of the casual sector so as to earn their income and livelihood. They should not just allow them to stay in their camps doing nothing awaiting the help they receive. Encouraging them to work helps them feel welcomed in the places they seek refuge. It also encourages them to do something so as to earn their livelihood and thus depend less on the government in those areas. As a result, the government reduced the burden of catering for the immigrants. It also increases the chances of employment, thus reducing the unemployment rate. Poverty in those countries is also reduced (Chen, Vanek and Carr. 2004).
According to a study that was conducted out in Colombia, an increase in migration brought about an increase, amounting to labour supply in the urban areas (Flórez 2011). In most cases, there is usually a shortage amounting to the labour needed, especially in the urban areas. People who migrate from their rural areas or countries are a source of labour for industry organizations in the places where they migrate to. Some have very high qualification while others do not. As despite the fact that high migration, such as the European migration crisis that is currently ongoing bring about many disadvantages, there are also various advantages. The European Union can use the relationship that exists between the informal economy and migration to bring about stability in the countries where migrants settle. For those people with very high qualification, they can be hired in the formal sector. As for those with lower qualifications, the government can provide opportunities in the informal sector (Horn, 2011). For instance, there are so many constructions and infrastructure improvement projects that countries undertake. They should take advantage of the high number of migrants as a source of cheap labour. Though the labour they provide, the countries can improve their infrastructure as well as finish some other projects that aid in boosting their economy (Hart, 2013).
In conclusion, the informal economy is that part of the economy, which is unmonitored by either the state or the government. As a result, any production or trading activities carried out in this sector of the economy are not included in the calculations of the gross domestic product, or any other measures of the economic wellbeing of people in a country. It is despite the fact that the informal economy contributes a lot towards the well being of people and the country in general. Migration, on the other hand, refers to the movement of people from one geographical location to the other. It may be from a rural area to an urban area, from an urban area to another urban area, or from one country or state to the other. There is a great relationship that exists between the informal economy and migration. As discussed all throughout the paper, the main relationship that exists is that migration is what leads to the informal sector or an increase in the activities in the informal economy. Another relationship is that both are substitute. At the point when individuals need livelihood in the formal area, they either relocate to somewhere else looking for work in the formal segment or remain and participate in the casual economy. European countries are currently facing a migration crisis. Over the last year, it is estimated that one million migrants migrated to Europe, which is such a large number of migrants. Every day new migrants continue to increase in Europe, thus necessitating a solution. The relationship between the informal sector and migration can be used to solve the crisis. European countries can encourage the migrants to take part in the informal economy. They can also create job opportunities for them in this sector so that they can get income to cater for their needs and those of their families other than depending on help from the government and other organizations.
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