Informality, Job Quality, and Welfare in Sri Lanka
World Bank
Abstract
Informal employment remains a salient \n and persistent feature of the Sri Lanka labor market, with \n around 70 percent of the work force informally employed. \n There are generally three reasons to be concerned about high \n informality: poverty, productivity and public finance. This \n report focuses on the poverty and vulnerability aspect of \n informal employment, by showing that informal jobs are more \n precarious in nature than formal jobs and are associated \n with inferior working conditions and lower earnings. The \n three key messages of the report are as follows. First, The \n quality of informal jobs is much lower than that of formal \n jobs. Informal workers have more precarious employment \n arrangements and inferior working conditions. Their low \n earnings levels elevate the risk of poverty. Second, \n Stringent labor laws, along with the high cost of compliance \n and complexity of labor regulations, have encouraged \n informality. But formalization does not necessarily ease \n other constraints such as access to credit, reducing the \n incentive to formalize. Third, Reducing informality should \n not be in itself a policy goal. Reforms should focus on \n regulatory reforms that aim to reduce the cost and increase \n the benefits of formality, as well as on measures that \n enhance productivity.