Abstract: Informal sectors are one of the accelerating force for the economy of Bangladesh.

It
has a huge contribution to the economy of Bangladesh. More than half of World labor force is part
of informal sectors According to Bangladesh Bureau of Statistics around 85.1% employment is
distributed to informal sectors. Like agriculture, micro and small enterprises and other sectors with
are not under taxation and all these are not monitored or regulated by government. Though
informal sectors have an outright impact on labor force as well as on employment of our county,
it is deprived form lack of notice and advancement. As it has huge contribution to our economy,
we must put emphasize on analyzing informal sectors performance, labor force participation and
barriers to this. This paper tries to analyze the labor force participation and performance in informal
sectors, risks of labors and, barriers in expanding informal sectors performance, and some policy
suggestions and future directions of this sector.

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Introduction: The informal sector, informal economy, or gray economy is that the part of
economy that's neither taxed nor monitored by any variety of government. Sector which
encompasses all jobs with normal hours and regular wages, and are recognized as income sources
on which income taxes must be paid are known as formal sector .Not like the formal economy,
activities of the informal economy aren't enclosed during a country's gross national product (GNP)
or gross domestic product (GDP).The informal sector are often represented as a gray market in
labor.
The informal economy in South Asia is consist of at 80-90 percent of the labor force. the massive
scale of vulnerable employment presents a challenge to stable and proper development because
participant labor during this sector sometimes engages in activities that area unit unregulated,
unrecognized and “low productive” in nature.
Bangladesh Bureau of Statistics experimented Labor Force Survey with different approaches to
capture more extended participation of labor force through considering some informal activities
like irrigation, plowing, planting, and growing vegetables, poultry raising, livestock and food
processing. In Bangladesh 85% of the labor force is utilized within the informal economy
according to the 2016-17 Labor Force Survey. Those operating within the informal economy
embody wage laborers, freelance persons, unpaid family labor, piece-rate employees, and
alternative employed labor. The sixth 5 Year set up (SFYP) of Asian country (2011-2015)
acknowledges the vulnerability of employees within the informal economy and states “This entails
dynamic the structure of employment by retreating labor from low productivity agriculture and
informal jobs (also referred to as disguised unemployment) to higher productivity jobs within the
producing and formal services”. Most of the cases the low productivity of workers, lack of
education, health and safety hazards, exploitation of business man and contractors , lack of
information , proper monitoring of governments inhibits the proper development of informal
sectors.
In Asia there is a huge impact of modern manufacturing sectors to the GDP contribution while
informal sectors are not focused to that extent. So it is necessary to measure the informal sector
contributions to reduce poverty and enhance development for countries like Bangladesh. It’s quite
necessary to analyze the labor force participation considering their age, sex and working conditions
to eradicate poverty and establish a better, safe and sound working conditions for the workers.

Objectives of the study: Measuring the informal sector working conditions, labor force
participation and analyzing the behavior of labor market will help to improve the working
conditions for all. This paper consists recent labor force survey data and analyzes different age
group participations in informal sector as well as formal sector participation and contribution .So
the main objectives of this study includes,
 Participation of labor force in informal sector
 Analyzing working conditions of workers
 Contribution of informal sector to GDP
 Provide policy suggestions
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Methodology: To complete this paper, different data sources are used. Mainly data are collected
from /labor Force Survey 2016-17 which was conducted by Bangladesh Bureau of Statistics.
Besides different articles of ILO, ADB are used to analyze the policy suggestions.

Overview of employment in informal sector

Informal employment by sex and area
Informal employment is dominating the job sector according to the recent LFS by BBS. 85.1%
employment is distributed in informal sector while 14.9% employment is distributed in formal
sector. Most of the female are working in formal sector and its 91.8% . So a huge amount of female
participation is in informal sectors. On the other hand Male participation is quite low , where 82.1%
male are working in informal sector nd 17.9% are working in formal sectors.

Figure 1: Formal and Informal sector employment (Male and Female) Source: BBS (LFS 2016-
17)
In Figure 2, the employment distribution between informal and formal sector is analyzed on the
basis of area comparison. Both in urban and rural area female participation is high than male and
its clear that informal sector consists a large amount of female employment.

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Figure 2: Percentage of informal distribution by sex and area Source: BBS(LFS 2016-17

Table 1: Informal employment aged 15 or older by age group sex and area, Source: BBS
Informal employment varies widely by broad age group and rural and urban areas. In urban
areas, informal employment was 77.3 per cent, and it was 88.0 per cent in rural areas, where
the largest number of informally employed persons engaged. The percentage distribution of
informal employment portrays a scenario, where both in rural and urban areas, the proportion
of informal and formal employment in rural areas for females (93.3 per cent) is higher than in
urban areas (87.4 per cent). Table 1 shows that, both in rural and urban areas, females and
youths aged 15-29 are more likely to be in the informal employment than male counterpart.

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Informal employment in economic sectors and occupation
The distribution of the informal employment across the broad economic sectors is shown in Figure 3. The
percentage of informally employed persons in total employment was very high in all sectors; in particular,
it was 95.4 % in Agriculture sector, followed by Industry sector 89.9 % and service sector 71.8 %.

Figure 3: Percentage distribution of Informal employment by broad economic sector

Informal employment varies widely by economic sectors. It indicates that 95.4 per cent of the
total employment of the agriculture sector engaged in the informal employment, followed by
89.9 per cent of industry sector and 71.8 per cent of the service sector engaged in the informal
employment. Table 2 below also shows that there were wide variations in the rate of informal
employment by area in all the sectors.

Table 2: Employed population aged 15 or older, by formal/informal employment, sector and are

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Formal employment by education attainment
As table 3 indicates that for formal employment education plays a vital role. With tertiary level of
education 48% male and49.4%female are working in formal sectors. Education is a part of formal
sector employment.

Table 3: Formal employment aged 15 or older, by education level, sex and area

Figure 4: Proportion of formal employment by education attainment

So from above analysis we can say there is appositive correlation between education and formal
sector employment. Highly educated persons have more participations in formal sectors jobs.

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Trends of informal employment rate

Figure 5: Trends of informal sector employment by quarter

Figure 5 analyzes the trends of informal sector employment for every quarter where employment
in formal sector is still high above 80% in spite of heavy investments in manufacturing sectors.

Figure 6: Proportion of informal employment by quarter and sex

Figure 6 shows over the years participation of female is still high in informal sectors. Which is around 90%.
In case of accelerating economic growth it’s a significant achievement that women are participating in
economic activities.

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Disparity in informal and formal sectors
Bangladesh is moving toward to enhance the performance of modern industrial sectors, though
many economic sectors are still traditional in terms of production, management and in nature. The
labor market in Bangladesh is mainly based on agricultural sectors. The nature of employment ,
productivity of labor , age ,education, sex , geography are major reasons of the disparity in earing
in different economic sectors where workers are exploited.

Table 4: Employment by Industry, Nature of Employment, Sex, and Urban/Rural (thousands)

Source: Computations using 2010 LFS and ISS

Table 4 shows a wide discrepancy in ta agriculture, construction, trade, manufacturing, storage

and communication, and other services between formal and informal employment. These
industries are associated with informal employments because there is no rules for them to maintain
a minimum wage, signing contract paper and appointment letters to the works, less government
monitoring. Since there industries are mostly founded in rural areas, where works are bound to
work at a subsistence wage. The provision of these formal and informal activities are changing
due to economic activities.

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Figure 7 : Monthly income by type of worker(in taka ) , nature of employment , Source : ADB (2010)

Monthly income by economic sector is presented in figure 7 where formal sectors employee
earns a highly significant amount than informal sector employee.

Figure 8: Proportion of wage workers who receives benefits by nature of employment and types of
benefits

Figure 8 shows the disparity among informal and formal sector wage benefits, while formal sector
works enjoy a high benefit than informal sector workers. Informal sectors workers working in
construction and transportation, manufacturing sectors earn a very little benefits than other se4ctor
workers. They don’t get any benefits and their wages are uncertain.

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Contribution of informal sector to GDP
Informal sectors are playing an important role in the economy of developing countries like
Bangladesh. Large amount of women are part of informal sectors employment. Micro firms and
institution are one of the accelerating force of our economy. As our economy is based on
agriculture and other manufacturing sectors table 5 shows contribution of informal sectors to the
GDP on Bangladesh which is based on 2010 price level.

Table 5: GDP share of formal and informal sector (TK Billion) Source: ADB
In agriculture 14|% contribution to GDP is from agricultural sector while informal sector has a
larger share in real estate, community and private sectors and trade.

Policies of promoting and protecting informal sectors labors of Bangladesh

In recent years Bangladesh is moving toward a great infrastructural development with modern
production technology. Government has less focus on promoting and protecting the works of
informal sector. Living conditions and other basic needs are not ensured for informal sector
workers. They are out of concern from our policy makers. Accelerating economic growth and
development without these large amount of working groups will not be possible in future.
Economic imbalance will be created because of the disparities between formal and informal sector
workers
Here this papers tries to acknowledge some key sights in which the government must take some
incentives to provide and ensure a better environment for in formal sector workers.
 Education: Education is a basic need for all .Due to low wage and low income informal
sectors labors are not getting any chance to educate their children. Promoting education
and other opportunities like free education, free transportation in rural and urban areas for
children will improve their conditions.

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  Health Issues: Most of informal sector workers are not aware of their health condition.
Recent research on tobacco industry in Rangpur district in Bangladesh has showed how
the workers are affected by different diseases. Creating a better working environment is
necessary for the workers as well as government medical budget allocation should be
increase to provide better health opportunities to the mass people.

 Safety Issues: Many workers are working in construction, transport and manufacturing
industry. Their working condition are not up to mark. Working in poor conditions they lost
their lives. Without proper safety measurements they are working in hard times. So it’s
necessary to monitor the working conditions.

 Wage determination: Informal sector labors are work in a subsistence wage level. They
don’t get any benefits or get less opportunity for recreation and other social activities.
Employers sometimes don’t pay subsistence wage, monitoring this with proper laws will
be effective.

 Credit opportunities: Credit opportunities are constrained and narrow for micro firms in
Bangladesh. Due to lack of capital and credit, firms can’t move forward to create better
employment opportunities for workers. Credit accessibility must be ensured for all the
small business enterprises.

 Labor Productivity: Labor productivity is very low in informal sectors due to low skills,
lack of information about the work and working conditions. Proper skill development
strategies, ensuring access to information may lead them to have a better productivity.

 Internal Migration: Internal migration also effects the labor force participation. In recent
years we have seen a lot of people are migrating because of natural disasters. They are
willing to provide labor at any wage in creating a pressure on the economy. So proper
monitoring migration system is required to create balance in labor force.

Conclusion: Formal and informal sectors both are necessary for a developing country like
Bangladesh. We can’t move forward to accelerate our development without leaving behind.
Informal labors are necessary for the development of the country. As they have a great contribution
to our GDP we must look for the betterment of these sector workers providing them the basic
necessities and opportunities.

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References:
Bangladesh Bureau of Statistics (BBS), 2018 “Labor Force Survey 2016-17”, BBS: Bangladesh
Bureau of Statistics with technical support from the World Bank
Asian Development Bank (ADB).2010. “The Informal Sector and Informal Employment in
Bangladesh”. Country Report 2010.
Mohammad Mastak Al Amin, 2010, “Factors behind internal migration and migrant aspects”,
Lund University, Sweden
ATM Nurul Amin. 1987.”The Role of the Informal Sector in Economic Development: Some
Evidence from Dhaka, Bangladesh” International Labor Review .Vol: 126, No: 5September-
October, 1987
Kabir Uddin Ahmad, 2010, “Measuring Informal Employment in Bangladesh”, paper presented
at Regional Workshop on MAP on Decent work in ASIA,in Bangkok , Thailand , 28-30June
2010

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