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More than 50% of informal workers do not believe in formalization

More than 50% of informal workers do not believe in formalization

Informality is an endemic evil that affects 7 out of 10 Peruvians – according to the INEI – and has dented growth ambitions, since more than half of businesses outside the formal sphere consider that regulation does not bring them benefits, according to the World Bank.

In detail, approximately 50% of informal workers believe that formalization does not represent better access to sales markets, inputs or infrastructure; although not everything is pessimism, since 75% perceive that they could have better finances.

“They do not formalize because they do not see the clear benefits, they only see costs, paying taxes, being supervised or setting the minimum wage. We should not punish informality because sometimes being harsh can lead them to darker areas of the economy,” said Norman Loayza, director of Global Indicators at the World Bank, during the conference ‘How to address informality in developing countries? ‘ of CIES.

Solutions

The Minister of Economy and Finance, Alex Contreras, promised that in 2024 informality “will be the main issue”, and to attack it, his first letter will be the simplification of the tax regime.

“At the end of this year we must send the proposal for the reform of the tax regimes. Simplification is giving incentives, basically. Rather than penalizing informality, we must give incentives for access to financing, provide better infrastructure, greater security and better institutions,” he said.

Furthermore, hours before the roar that emerged from the Constitutional Court after the release of Alberto Fujimori, Contreras said that the main factor of concern for formal companies is political instability, so it is everyone’s task to “promote a stable and peaceful environment.” consensus despite differences.”

GDP as a key piece

Loayza pointed out that informality produces between 40% and 50% of the Peruvian GDP – globally the rate is 30% – and employs two thirds of the country’s workers.

A fundamental point to mitigate it is the economic boom: for every percentage point of growth, one percentage point of informality is reduced; However, the rise in GDP must be sustained and this “takes a long time.”

Uruguay is the best example thanks to tough reforms (2% annually); Meanwhile, Peru with weak reforms is four steps below with just an average annual reduction of less than 1.5%.

Along these lines, Contreras recognized that, despite the important advances in Peruvian economic growth, the model did not allow for the reduction of informality.

316,000 entered the payroll

According to Sunafil, since January, 316,591 workers were incorporated into their employers’ electronic payroll: they left informality and became workers who have health insurance and pensions.

The regions with the largest number of formalized workers are metropolitan Lima, La Libertad and Piura in the economic sectors of agriculture, services (real estate and business) and real estate industries. In total, some 5,592 companies received assistance and half a million people were guided to recognize their labor rights.

Figures

79% of informal workers with complete basic education believe that formalization brings benefits.

7 out of 10 Peruvians work informally, according to INEI.

Source: Larepublica

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