Emerging Economies, mncs, and Transnational Unionism

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Informality and Transnational Labour Agency

Paper prepared for the Symposium “Emerging Economies, MNCs, and Transnational Unionism”, ILERA-Europe, Amsterdam,

Nikolaus Hammer, School of Management, University of Leicester, nh80@le.ac.uk

Anita Hammer, Leicester Business School, De Montfort University, ahammer@dmu.ac.uk

Glynne Williams, School of Management, University of Leicester, gw67@le.ac.uk

This is a draft; please do not quote.


This paper argues that transnational labour agency needs to be understood in the context of rising informal employment which, in turn, results from the increasing fragmentation of the firm as well as the employment relationship. A key feature in the restructuring of global value chains is that outsourcing often comes with an increase in informal sector firms as well as increases in different forms of informal wage labour, self-employment or unpaid labour. The International Labour Organisation (ILO 2012, 15) has recently put informal employment in the non-agricultural sector at 45% for the Middle East and North Africa, 51% in Latin America, 65% in East and South East Asia, 66% in sub-Saharan Africa, 82% in South Asia, and 36% in urban China. Dibben and Williams (2012) highlight the qualitative significant of informal employment in such economies and propose a distinct type of capitalism – informally dominant market economies.

Clearly, different capitalism afford labour different power resources and this paper argues that the relation between informal and formal employment is not only important in establishing a balance of power at the workplace (however remote or transient that might be) or at the level of societal institutions but also with regard to transnational labour agency. MNCs do provide a focal point in linking informality and transnational labour agency in a number of different respects. First, MNCs constitute key drivers (though not the only ones) of informality through their outsourcing practices, on the one hand, which restructure relations of production and competition in ways that often pushes suppliers into informality. On the other hand, MNCs or their subsidiaries segment their own workforce such that the informal tier of workers that is directly hired by them has grown over the last decades. Such practices directly speak to the power of MNCs as lead firms in global value chains (GVCs) as well as their ability to shape the rules within the functional division of labour. Second, the role of informal employment in/for MNCs’ practices and transnational labour agency is therefore also of central importance with regard to governance (see e.g. Gereffi and Mayer 2004 on social responses to governance deficits). What is critical here is that notions of social responsibility or even social dialogue within MNCs became increasingly prominent at a time when MNCs’ strategies led to an ever shrinking terrain such standards of responsibility or social dialogue would apply to. However, as Rubery and Grimshaw (2005) remind us, the equation ‘out of sight, out of mind’ does not entirely hold here: increasing informalisation and inequality is not only a management-labour issue about power and control; it has knock-on effects on relations of production and competition between capitals as it impacts on the parameters of worker-to-worker competition. The ‘paradox’ at the heart of our argument, then, is that while informal employment is central to global accumulation, it rarely figures in transnational labour agency.

This paper advances two arguments. First, we highlight the relevance of informal employment within the wider institutional framework of emerging economies as well as the inter-linkages of those labour market dynamics with the global economy. Far from being confined to activities within the indigenous economy, informal employment is central to MNCs’ management practices and directly shaped and reproduced by the latter in particular ways. This concerns, for example, MNCs’ recruitment and outsourcing practices as well as the way lead firms regulate and enforce core labour rights in their value and supply chains (e.g. through multi-stakeholder standards or International Framework Agreements).

Second, re-emphasising arguments about the different socio-economic foundations of informality as well as the fundamentally relational, interstitial, dynamics between formal and informal employment (Agarwala 2009; Harriss-White and Gooptu 2001), we argue that the specific relational dynamics shape constraints and opportunities for collective action, at the local, national as well as transnational levels. Interestingly, and central to our argument, while the ‘boundary’ between formal and informal employment is in fact so open that it can only be conceived as a variegated in/formal employment, modes of collective organisation and action, by contrast, are normally characterised by a clearer boundary.

The next section considers debates on the relationship between informal employment, collective organisation and transnational collective action. We then turn to the specific relationship between formal-informal labour market dynamics and the way they impact on forms of collective organisation in three countries that exhibit very different histories and patterns of informality, India, Russia, and South Africa. A concluding section focuses on emerging issues from the theoretical and empirical material.

Informality and Transnational Unionism

The informal economy has assumed a central position in the way global value chains are restructured. The organisational fragmentation of global production and the fragmentation of the employment relation are at the base of the continuing increase in informal sector firms and employment. Academic debates from anthropology to labour studies have addressed the link between the workplace, mobilisation, collective action, the state, and transnational action in different ways. A key (dividing) theme running through virtually all disciplinary debates concerns questions around class and the centrality of workplace based strategies. The debate has seen two positions emerge that point to the importance of class-based organisation at the workplace, and mobilisation around welfare issues vis-à-vis the state, respectively. We look at this with regard to two themes: the links between formal and informal employment, as well as with regard to collective organisation and transnational action.

Following assumptions of modernisation theory as well as reflecting academic disciplinary boundaries, formal and informal employment have often been seen as separate worlds, building development around the industrial worker. Yet, not only has informal employment not declined over the last decades, modernisation in the form of economic liberalisation and globalisation has indeed drawn even greater numbers of workers into employment that is informal, often pays below the poverty level, and is highly insecure. Intensive fieldwork across a wide range of localities and sectors has, however, shown that such a dualist conception neither captures individual workers’ trajectories nor industrial dynamics adequately. Harriss-White (2010), for example, uses the term interstitial employment, trying to capture the insecure, discontinuous, and fluid nature of different forms of labour that span the range between a formal employment relationship and genuine self-employment.

The absence of regular work and an employment relationship, its interstitial nature, lies at the heart of conceptions that construct informal labour’s interests not only outside the workplace but also outside the working class. Thus, in the face of incomes below the poverty level, minimum social support is to alleviate informal labour’s destitution, and in the absence of an employer, it is the state such demands are targeted at (e.g. Indian government policy has taken up this strategy with targeted poverty alleviation programmes). This position, however, neglects the social basis of informal labour in favour of strategy: as many scholars have pointed out, it is the power balance at work and production relations that lies behind informality, and, both, the fluidity between formal and informal employment as well as the latter’s central role in capital accumulation testify to this. (Lerche 2010) Equally, examples abound in which informal workers express demands and organise on a class basis, that is, with regard to their very conditions of work and employment. (Agarwala 2012)

On a theoretical level, claims that emphasise the role of self-employment within the informal economy (Portes and Hoffman 2003) have been challenged by approaches that locate informal workers within the capitalist accumulation process and underline the multiple segmentations of the ‘classes of labour’ (Bernstein 2007). The fragmentation of the classes of labour is based on different co-existing forms of exploitation (Banaji 2010), spanning different forms of wage labour, self-employment, and unpaid labour. Each of these forms of exploitation exhibits different ways of organising the production process, different labour processes as well as forms of reproduction. Thus, such a perspective (see Barnes 2012 for an excellent debate) links informal labour into the capitalist accumulation process while at the same time emphasising differences in the nature of these links which have important consequences for the different classes’ economic survival strategies as well as opportunities and strategies of resistance. An important point, both, with regard to the labour and production processes as well as collective action is that the fragmentation of social relations occurs along multiple lines; thus, divisions along lines of gender, race, religion, or caste are crucial to the concrete processes of production (Harriss-White and Gooptu 2001).

In this respect, we aim to examine the position of informal workers in the accumulation process and to identify the main links and overlaps that exist between formal and informal employment. This has implications for the way workers can develop collective identities, and capacities in terms of representation and collective action. Bhattacharya (2007, 4) for example, makes a strong case for analysing the formal-informal linkages within the context of capitalist dynamics:

“… it is crucial … to analyse the critical dynamics between the two sectors in the light of overall capitalist accumulation. A significant part of the informal sector in the contemporary world is essentially an outgrowth of the formal economy in more than one way. The activities in the informal sector are directly linked to and often constitute an essential part of the processes of production, exchange and accumulation in the capitalist economy both at the national and, increasingly, at global levels.”

Amongst the segments that are more directly inserted into global processes and dynamics of capital accumulation Bhattacharya (2007, 4-5) distinguishes between industries with artisanal origins that “evolved into factory forms with informal production and labour processes”; instances of formal firms directly employing informal labour, either recruiting themselves or through labour-only contractors (see also Hammer 2010; Barrientos 2013); and cases in which downsizing in the formal sector pushes workers into the informal sector. However, one also has to take note of the considerable informal service segment which is growing on the back of rising inequalities, that is, a service class for the needs of the old bourgeoisie and the middle classes.

While one of the implications of the ‘classes of labour’ argument makes informal workers a labour actor, it also underlines the fragmentation along various social relations. In the context of different forms of exploitation and the fragmentation into classes of labour, Bernstein (2007) speaks of a ‘struggle over class’ informal labour is involved in before – in an analytical sense – it is able to engage in a struggle between classes. Most obviously, informal workers’ organisations have been created platforms to pursue feminist as well as class issues. It is important to the wide and varied range of instances in which informal workers have not only organised but also built durable institutions: often cited examples are the Indian Self-Employed Women’s Association (SEWA) as well as HomeNet and StreetNet, transnational networks of home worker and street vendors’ organisations (Gallin and Horn 2005; Agarwala 2012).

A very interesting point coming out of analyses of informal workers’ organisations as well as alternative approaches to union organising lies in the similarities they show with regard to established practices and institutions of representation within formal unions. Rather than focusing on management-labour relations at the workplace from a narrow class perspective, organising strategies have in many cases reshaped their struggle over class by developing more inclusive coalitions. Furthermore, they have drawn the state into the terrain of the struggle, thereby re-politicising many of the issues at stake (Tattersall 2010).

In this respect, similar developments can be observed at the transnational level. Traditionally, approaches to international trade unionism were based on the notion of organised formal labour. This was the case regardless of whether they thought international trade union cooperation and multinational collective bargaining to be feasible (the basis of which Levinson saw in the expansion of MNCs), or not (e.g. perspectives that saw national interests, the structure of the international division of labour as insurmountable barriers) (Ramsay 1997).

A great deal of efforts of transnational unionism has focused on building networks and actions around the structures and activities of MNCs. There is a growing literature on different strategies and case studies which highlights two key strategies. First, there are forms of action that build on the institutional opportunities MNCs provide and use novel strategies to extend the geographical as well as substantive terrain of labour-management relations. However, this rarely goes beyond the organisational boundaries of the MNC. Importantly, it thereby cannot capture the problems that arise out of the fragmentation of the firm as well as the employment relationship. The second form can be seen in multi-stakeholder coalitions that often involve trade unions but also key civil society and grassroots actors, consumer organisations. This form is more attuned to the organisational complexity of global value chains as well as the diverse relationships workers/producers have with intermediaries and directive management at different levels of the chain. What Agarwala (2012) shows is how informal worker organisations such as SEWA have built membership organisations that focus on a range of work related issues but at the same time developed wider political strategies. Thus, from the position of a collective actor it has developed a critical engagement with the state, thereby made visible and legitimised the plight and interests of informal workers, and has leveraged additional selective power within the state through the route of transnational activism, transnational research and policy networks, as well as international social movements. (Agarwala 2012, 451-454) While neither of these poles of alternative strategies in themselves has proved sufficient, it would seem that networked approaches are better able to bridge the interests and strategic opportunities of formal and informal workers.

The key implications of the discussion above, the interlinkages between formal and informal employment are relevant at a number of different levels. First, workplaces and labour market trajectories are characterised by uneven and fluid dynamics in which workers move through a variety of jobs and employment relationships, of varying length as well as in different economic activities. Second, following arguments from segmentation theory, labour market dynamics cannot be seen as an issue of management labour relations. Rather, the competition between capitals, the production relations between capitals, as well as competition between workers feed off each other and thereby shape overall labour market dynamics. Thus, not only would these dimensions impact on the particular relation between formality and informality, they would also have consequences for the relative importance of different forms of exploitation as well as the fragmentation of capital as well as different classes of labour. This leads onto the level of the system of production and the third point: the intricate relation between formal and informal sector and employment is further underscored by those production relations. Bhattacharya (2007) and others (Hammer 2010), for example have been very clear about the ways informal sector firms as well as informal workers in MNCs are central to the business strategies of national as well as global lead firms.


Indian capitalism has been described as ‘compressed capitalism’ in which primitive accumulation, capitalist maturity, and petty commodity production coexist (D’Costa 2012), resulting in an institutionally and structurally weak variant of capitalism that competes both on low wages and technological advancement. Importantly, since the beginning of liberalisation measures in the early 1990s, state-capital-labour relations have been recast. On the one hand, the state has withdrawn from interventions on behalf of labour as well as structural reforms in agriculture (the basis of 60% of the population’s livelihoods, often in acute poverty), and instead pursued poverty alleviation programmes. On the other hand, large business groups based on family ownership have gained in importance, succeeded in gaining state assistance in land acquisition as well as regulatory exceptions (e.g. industrial zones, real estate development), and thereby are also able to shape the terms of inter-firm relations in relation to a large informal economy. The place of labour in the post-independence hegemonic bloc was evident in strong supportive employment protection, trade union and industrial relations legislation in a context of limited social security provisions. While the reforms since the 1990s have increased the power of capital with demand for labour flexibility and a weakening of union power by employers (Frenkel and Kuruvilla 2002; Shyam Sundar 2010), political patronage and the logic of electoral mass politics have prevented the state from making radical changes in the formal framework of employment security or full scale privatization. The political division of labour with regard to liberalisation, thus, sees soft reforms at the level of the central government (an amendment to the trade union law, disinvestment rather than privatization, the liberalization of labour inspection, and special concessions to firms in Special Economic Zones (SEZ)) at the same time as state governments introduced wide-ranging and pro-employer labour reforms in order to retain and attract investment. Bardhan (2002 cited in Shyam Sunadar 2010: 590) refers to this as ‘labour reforms by stealth.’

The labour market is segmented along the blurred boundaries of the formal and informal, rural and urban, agricultural and non-agricultural sectors, with further segmentation among the informal workers. It is affected by social or non-class institutions of gender and caste that, instead of being dissolved by capitalism, are being reconfigured in diverse ways (Harriss-White and Gooptu 2001). India’s National Commission for Enterprises in the Unorganised Sector (NCEUS, 2008:2) defines informal workers as ‘those working in the informal sector or households, excluding regular workers with social security benefits by the employers, and the workers in the formal sector without any employment and social security benefits provided by the employers’. According to the NCEUS definition there were 116.5 million informal workers in India in 2004-05 (83.9% of the non-agricultural workforce).

Informal employment sees a concentration of migrant, rural inhabitants driven to seek temporary urban employment in agricultural off-peak seasons. Women are predominantly in informal employment. Child labour, though illegal, continues to prevail in some sectors. Non-economic means of control operate through patronage, provision of accommodation and/or debt, sometimes physical violence. Persisting from the past, these are more monetised and without the earlier elements of protection or subsistence guarantee. This reproduces rural class positions and class relations in non-agricultural labour relations (Breman 1996). The absence of meaningful land reforms and a lack of investment in agriculture force this large segment of population into multiple deprivations. In addition, most of the growth in employment has been in the informal sector that is largely vulnerable and exploitative. Between 1999/2000 and 2004-05 employment in the formal sector grew by 3.02 annually, that in the informal sector by 5.17% (Bhattacharya 2007). The overall result of continued processes of flexibilisation, casualisation and/or forced labour-type labour relations is a hierarchy of classes of labour based on different types of employment and degrees of self-employment (Bernstein 2007; Lerche 2010).

Labour reforms at the state level have allowed more labour flexibility, control over work processes, union containment or avoidance, reduced regular workers (through voluntary retirement schemes), and led to an increase in contract labour and subcontracting at the workplace. A significant outcome of these labour market reforms have been an increase of temporary, casual and contract workers in the total workforce in the organized, manfucturing industry (Deshpande et al 2004). Thus, informality is not about the growth of residual employment. On the contrary, there is a growing informalisation of the formal sector, particularly the manufacturing sector such that manufacturing now represents the largest segment of the informal sector (27%). Employment growth in the formal sector was entirely due to growth of informal employment, i.e. formal employment in that sector declined by 0.32% while informal employment grew by 8.05%.

“Of the total net incremental jobs created (both formal and informal work) in the formal sector in this period, about 45% have been informal jobs in manufacturing, followed by 19.5% as informal jobs in construction and 15.5% as informal jobs in education.” (Bhattacharya 2007, 9).

Overall, informal labour has grown in size supported by labour reforms thatenable employers to replace formal with informal workers, to whom they are not required to extend social security or minimum wages (Breman 2002). This weakens labour and its collective institutions. Informal employment almost forms a part of the state-capital strategy as ‘the primary source of future work for all Indians’ (NCL 2002) and is particularly pronounced in the creation and development of new industrial areas or New Industrial Zones (NIZs) – often including Export Promotion Zones (EPZ) and Special Economic Zones (SEZ) – built to attract investment. Units in EPZs and SEZs are often declared ‘public utility services’ in order to exempt them from labour laws, to relax labour inspections, or to make strikes difficult. This aids the increased use of informal workers and containment or avoidance of unions in the firms located here (Hammer 2010).

Informal workers’ organisations can be independent unions or cooperatives or civil society groups. Some examples include the National Federation of Construction Labour (an independent industry-level union formed in 1991 in Bangalore), the Self Employed Women’s Association that calls itself a movement, a cooperative and a union (that organizes beedi workers, waste pickers, construction workers), and the National Fish Workers Forum. The National Centre for Labour, formed in the year 1995, is an apex body of independent labour organisations working in the informal sector with a membership of about a million workers from 10 states (NCL website; Unni and Rani 2003).

They organise and mobilize through social movements, in neighbourhoods, and through discussion groups and reading circles. Some NGOs provide on-site child care and health services to workers (e.g. in construction), teach them about their welfare rights and get the workers’ registered with the Welfare Boards (E.g. NIRMAAN in Mumbai; SEWA in Gujarat and Delhi).

The defining feature of such organisations is the shift in their demand from workplace rights to citizenship rights and from employers to the state in the absence of a fixed workplace and clear employer-employee relationship. Instead of minimum wages, the demand is for reproductive and/or human/citizenship rights of education, health and welfare (basic needs). Moreover, workers ensure that production is not disrupted so that they do not lose their low incomes or jobs. Forms of action include demonstrations, petitions and hunger strikes all directed at politicians. Such organizations and their members argue that the welfare-oriented struggle is stronger and more appealing than the militant and violent movement of the past (Agarwala 2006; 2008; 2012).

The relationship between trade unions and informal workers organisations has often been fraught. Historically, trade unions have neglected to organise informal workers because of their cooption in the post independence state-labour-capital compromise. The political unionism model that developed during the late colonial period, in conjunction with the freedom struggle, created common ground between political leaders and unions. Political interests often overruled labour interests and generated splits and inter-union rivalry. The mutual rivalry prevented the labour movement to form a united front and led trade unions to neglect the representation of informal labour. They became detached from the mass of informal underprivileged labour that was excluded from formal wage negotiations and any form of institutional mechanisms (Breman in Parry et al. 1999: 31). This furthered latter’s self-organisation and the emergence of new forms of informal workers organizations.

More recently, increasingly conflictual political party-trade union links as well as declining trade union membership have, however, contributed to a more inclusive stance on the part of unions who have started to organise informal workers. This occurs in a context of new collective bargaining regulations such as the decentralization of collective bargaining to the enterprise level in the private sector, the integration of long term settlements and performance pay into public sector bargaining, as well as increased managerialism – all trends that tend to weaken trade unions (Shyam Sundar 2010).

In terms of transnational links, informal workers’ organisations have been more successful than traditional trade unions in forming international networks such as WIEGO, and links with Global Union Federations and the ILO and use that to bear pressure on the state (Agarwala 2006; 2008). Trade unions have displayed suspicion of international unions embedded as they are in the nationalist discourse and a trajectory of cooption by the state (Agarwala 2012; Hammer 2010).


Key features of the post-communist economy in Russia have evolved out of the stringencies of shock therapy. Variously, this has been described as merchant capitalism (Burawoy and Krotov 1992) or a bureaucratic authoritarian (re-) industrialising regime (King 2007). Unleashing the forces of the market meant that companies were faced with the loss of established markets and supply chains, foreign competition, and higher input prices and interest rates. This contributed to the hollowing out of the manufacturing sector, and a financial system that channels profits out of Russia while acquiring capital from abroad in order to fund credit demand at home, thereby pushing up the value of the Ruble. This context of weak capital and a weak state has combined in the formation of strong and pervasive patron-client relationships, evident in the development of integrated business groups (IBGs; see Galukhina and Pappe 2006). Weak labour, both at workplace level as well as a collective actor at national level, was associated in this regime as a subordinate actor in a shallow form of corporatism.

At the workplace level, attention has been paid to the dependent position of workers and the neo-paternalist relationships between employers and workers. Key features of this power balance are a two-tier wage structure (in which the flexible element constituted up to 45% of the official wages between 1996-98; Kapelyushnikov et al 2001); management trying to retain labour even in times of the recession in the 1990s (while GDP declined by 40%, employment only saw a 15% decline over that period); and high turnover as a result of voluntary quits (Gimpelson and Kapeliushnikov 2011). These dynamics, according to Gimpelson and Kapeliushnikov (2011, 24), characterise the Russian labour market model: “adjustments on the price margin (through wage) or the intensive margin (through working hours) … dominate adjustments on the extensive margin (through the number of workers).” To this form of flexibility one must add the considerable number of informal workers, unregistered migrants, mainly from the CIS states, without residence or work permits; figures for migrant workers to Russia range from just under 8 million (official registration) to much lower estimates 3-4 million (of which half work unregistered and informally) by the Russian Academy of Science (see HRW 2009). With regard to the Russian labour market Gimpelson and Kapeliushnikov have, often with various colleagues, built up an impressive body of research that aims to explain the specificity of employment dynamics in the light of a series of labour market institutions; in this respect, they employ a neo-Keynesian perspective. The argument below, trying to discuss informality within a broader comparative capitalist perspective, integrates institutions and accumulation strategies in a wider sense.

The significant informal sector and informal employment underline and complement workplace power and the respective labour market dynamics. First, the flexibility afforded to employers through the trade off between employment on the one hand, the extension of working time and shadow wage payments on the other, offers numerous in-built lines of intersection between the formal and informal segments. Second, since 2000, the informal sector seemed to grow pro-cyclically, thereby suggesting that its main function is not one of a residual refuge in times of crisis. Thus, as GDP grew in the 2000s, real wages grew, employment in the informal sector rose. Estimates of informality range from 19.9 million people or 30% of the working population as an upper limit (counting the number of those not employed in the corporate sector), to 18% as a lower limit (people with primary jobs in the informal economy); beyond the differences, however, both approaches, point to the significant growth of informal employment between 1999-2009 (by 16% and 5% respectively) (Gimpelson and Zudina 2012, 32-3). Third, informality also seems to be integrated into the particular accumulation strategy with respect to its sectoral distribution. Gimpelson and Zudina (2012) show the concentration of informal sector activity in the commerce, construction and service sectors.

Using the more conservative estimates, the most significant feature is that the number of people hired by individuals and individual entrepreneurs has increased from 2.5 million in 1999 to 7.5 million in 2008. At the same time, home production has fallen and, from 2001 onwards, remained around 2 million. Also, those employed informally in formal enterprises seem to only make up 1.5% of all informally employed people. One can speculate that the mainstream two-tier wage structure allows sufficient flexibility for employers, so that there is no need to resort to the informalisation of its own employees. As is evident in the first category, however, this is different when it comes to subcontracting (at 60% this constituted the largest segment within the informal sector in 2008) (Gimpelson and Zudina 2012, 33-4).

Thus, informality is at the margins of the export sector, as well as the hollowed out manufacturing sector, but is concentrated in those areas that are auxiliary to growth and are most affected by business cycle fluctuations. Employment in the informal sector being concentrated in woods, personal/housing/communal services, construction/transport suggests that they are not core to accumulation. Rather they are derived functions: as incomes driven by the natural-resource and patron-client rents driven economy spread through the economy, they come with demands for services that, at the same time, are performed in very hierarchical asymmetric power relations at the workplace.

The weakness of organised labour expressed through a shallow corporatism and detailed and strict sector level collective bargaining agreements is mirrored at the workplace level through a neo-paternalism that is limited in exit rather than voice . Representation of formal and informal workers, as well as the formal and informal aspects of work and employment, are separate. Workers find some advice in diaspora networks, their respective embassies, NGOs. There are some efforts at collective organisation of migrant informal workers, which, again, tend to be organised around ethnic diaspora networks and institutions such as community organisations. In 2008, following strike action by migrant construction workers a union for migrant workers was founded (NEWSRU 2008).

There seem to be two main logics according to which informal dynamics form part of Russian capitalism. First, there are the numerous elements that provide flexibility in labour management and contain wage costs. This implies strong segmentations between firms as well as within firms, underlined by high wage inequalities. Those in-built lines of intersection between the formal and informal segments is, second, complemented through further flexibility where workers’ main employment is informal. A significant segment in this latter part is constituted through labour migrants, thereby based on a specific conjunction of gender, ethnic, religion and class relations.

South Africa

For a country with high and rising unemployment, the informal economy in South Africa is relatively small. Unemployment in South Africa is 25% (or 37% including those not actively seeking employment: Statistics South Africa, 2013), Yet whereas informal (non-agricultural) employment in sub-Saharan Africa accounts for over half of total employment (ILO, 2013), in South Africa it is around 30% (Wills, 2009). It should be noted, though, that this is a highly contested figure, with different definitions of informality yielding different results (Yu, 2012). Not only is this a politically charged debate, but definitions themselves also rely on assumptions about the appropriate level of regulation and protection that workers should expect.

Allowing for problems of consistent definition and measurement, this relatively small number is a puzzle. From the perspective of those advocating the liberalisation of the South African labour market, the failure of the informal economy to absorb underutilised labour results from supply-side factors, such as the possibility of subsisting on benefits. Alternatively, the cause lies in barriers to entry, which may include investment and skill requirements, as well as restrictive recruitment methods based on social networks (Kingdon and Knight, 2004).

However, definition is fundamental here. The dominant political position has been to see the informal ‘sector’ as a ‘second’, or parallel economy, which impedes progress and is a drag on growth.

…the development of the Marginalised Economy requires the infusion of capital and other resources by the democratic state to ensure the integration of this economy within the developed sector. (Mbeki, 2003)

This seemingly optimistic stance has been questioned, first from a recognition that the move away from the “traditional employment relationship” may not be easily reversible (Smit and Fourie, 2010) and, second, since the binary model of formal and informal sectors does not capture the full extent of the non-regulated, precarious workforce (Valodia and Devey, 2012). Since 2008, the South African Labour Force Survey has used an extended definition of informality, following the ILO (2002), based on the nature of employment, rather than of the employing enterprise. As well as workers in the informal ‘sector’ (for example working for unregistered micro-enterprises), the category thus includes workers who are notionally employees of formally constituted businesses, but who have no contract of employment and are therefore excluded both from their rights in employment law (Statistics South Africa, 2008: 5). This latter group is particularly significant in South Africa, where only a minority of informal workers are self-employed. This contrasts with other developing countries (Wills, 2009).

As in many other developing countries, the construction industry is a barometer of economic growth or stagnation. And, as elsewhere, the industry is a source of employment for relatively unskilled labour, with much of this being insecure casual or informal work. Informal employment constitutes a broad spectrum, with the extreme forms being, by definition, difficult to quantify. Debate has focused on the role of labour brokers (‘temporary employment services’). These account for only about 4% of non-permanent employment in South Africa (Wills, 2009: 41), but in the construction industry, over half of the construction workforce was classified as informal (in 2008). Following a decline in the wake of the 2010 World Cup projects, the construction workforce grew between 2012 and 2013. Perhaps surprisingly, though, informal employment in the industry fell over the same period, continuing a trend that seems to suggest a progressive formalisation of employment (Heintz and Posel, 2008). Nevertheless, labour broking is, according to one commercial analysis, the fastest growing ‘sector’ in the country (Adcorp 2013)

Formalisation is certainly the aim of COSATU and its main affiliate in the construction industry, the National Union of Mineworkers (NUM). A longstanding campaign to outlaw labour brokers resulted in a proposed amendment to the 1995 Labour Relations Act, “intended to promote the organisation of non-standard employees”. At the time of writing, the bill gives equal employment rights to workers hired through brokers after three months of employment (Department of Labour, 2012; ENCA, 2013).

Although the amendment will make indirect employment less attractive to construction companies, it seems likely to have less impact on the more extreme forms of informality within the industry. Reputable labour contractors distinguish themselves from the ‘bakkie brigade’, who recruit unregistered and anonymous workers on day rate (interviews, 2009). Without active monitoring, employment rights mean little in such cases, and labour-only subcontracting provides ‘plausible deniability’ for clients.

Yet the NUM has prioritised this statutory solution to the problem, arguably at the expense of practical attempts to organise vulnerable workers. Writing about India, Agarwala shows how informal workers have organised around demands, not to their ‘employers’, but to government; in the absence of a focus for collective bargaining, workers have claimed their rights as citizens. Yet this is a dilemma for unions. As the current legislation demonstrates, the NUM and COSATU retain an extremely influential position and have used this to secure political solutions to problems that are, essentially, problems of union organisation. Buhlungu (2010) has called this the ‘paradox of victory’; proximity to power and involvement in the process of liberalisation has preserved influence at the top, while eroding unions’ ablity to function effectively in the workplace or in the community. The NUM recognises this weakness and has effectively defined temporary (and even more so informal) workers as beyond the scope of workplace organising (interviews, 2009).

So, although the term ‘informal’ refers to a range of forms of employment, often fully integrated into the functioning of client companies, union approaches have tended to be dualistic, treating workers as either potential members or as unorganisable.


The blurred boundaries between formal and informal employment, on the one hand, the central role of the informal economy for globalised production processes, on the other, require a consideration of informal labour in transnational labour strategies. This seems to hold even more if we recognise the extent to which gains by trade unions within MNCs’ industrial relations frameworks or in the context of private social standards initiatives in the context of increases in outsourcing and subcontracting. Thus, given the continuing de- or informalisation of formal employment, Gallin’s (2001) dictum, that the survival of formal trade union organisation depends on the organisation of the informal, becomes a condition.

At the same time, it is crucial to understand the positions different segments or classes of labour occupy in global production processes, the way non-class relations play a role in their collective identities and organisation, as well as the respective constraints and opportunities for action follow from these aspects.

“the recognition of the heterogeneity of the sector not merely as a descriptive category but as a process that has organic links (or its absence) with the formal sector and the capital accumulation process is necessary before a set of policies is formulated. In this process it is crucial to understand the specific institutional settings, embeddings and networks that operate, as any policy framing oblivious of such specificities will defeat the very purpose.” (Bhattacharya 2007, 20)

Templates do exist, both for collective organisation as well as transnational action, first and foremost from the side of informal worker movements themselves, but also within the more recent organising literature as well as the labour movement’s historical practices (see e.g. Hyman 2005).


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