Employment: 9 out of 10 independent workers are informal

The pandemic increased labor informality in Peru, and five presidents later, solutions have not arrived. The numbers speak: the recovery of employment, after the paralysis of the bulk of economic activities in mid-2020, was driven 81% by informal workers during our bicentennial, according to the International Labor Organization.

The ILO recalls that, with the outbreak of the health emergency, informal work was more affected than its formal counterpart, because it was linked to sectors that had to stop unexpectedly and were not included in the essential items, as well as because of how easy it was to It turns out to fire a casual employee and because it is “more difficult to assume extended periods of inactivity.”

With its light and gray, the celebrated model managed to reduce the Peruvian labor informality rate to 72.7% until 2019; although, since then, it has rebounded and is now at 75.7%, according to the National Household Survey (ENAHO) of the INEI.

The good? Before going through hunger and hardship, Peruvians got to work even with the advance of COVID-19. The bad? The majority stay far from the legal framework: despite capitalizing, they do not pay taxes and do not provide legal benefits to their employees.

Casual by default

Of the 6.7 million independent workers (38% of the employed EAP by 2022), 90.8% are informal. In good faith: 9 out of 10 ventures are informal, according to research by Omar Ghurra, senior specialist in the Structural Policies Department of the BCRP.

Rudecindo Vega, former Minister of Labor and Employment Promotion, clarifies that in Peru the term “entrepreneur” is a euphemism to hide a painful reality: unemployment, derived, by necessity, to underemployed or informal.

In Vega’s opinion, apart from the bureaucratic obstacles that formalization implies, the main cause of illegality in nascent businesses is the financial system, but no one lifts a finger to put it on the table: credit rates for workers and microentrepreneurs If they weren’t so leonine, they would help.

Another tangible proof of the lack of judgment is the weak reach of Reactiva Perú or Impulso Myperú in small businesses. There are dozens of news stories that this newspaper aired, based on the unrest of entrepreneurs due to limited access to financing.

“If there were adequate interest rates for micro and small entrepreneurs, rest assured that they themselves would also pay a decent wage and provide decent jobs. Then, informality would be considerably reduced, but large financial companies are never touched as a cause of informality,” he noted for La República.

Few profits and key areas

Informal independents are more concentrated in the agricultural sector (33%), services (32%) and commerce (24%).

“During the pandemic there were many people who were left without a job and had to invent one or look for one. It’s not that he is a great entrepreneur or businessman. An itinerant is a worker without much support, just like farmers in rural areas. They are the great layer of informals,” explained Rudecindo Vega.

The BCRP report specifies that due to the low capacity of developing economies to generate quality jobs, independent work is a refuge for “subsistence activities”, a factor that generates an abysmal remuneration gap: a dependent earns, on average, S /774 more per month than an independent, both for formal and informal.

To be precise, an informal independent earns, on average, S/688 per month; while the informal dependent barely exceeds the Minimum Living Remuneration (RMV) (see graphs).

Why isn’t informality going back?

Elmer Cuba, author of the IPAE Proposal “A proposal for labor formalization,” alleges that among the causes of the high labor informality is the setting of the RMV, since “it has not made it possible for many workers to enter formality because, while Their salaries increased, they were affected by new regulations.”

For the Macroconsult partner, a single general and progressive Income Tax regime must govern with a rate of 30% so as not to affect the treasury, equating it with the marginal rate on labor income. For small wineries and establishments, continue with the Simplified Single Regime (RUS).

Peru, compared to Chile even in football, also enjoys a good macroeconomic reputation with the neoliberal model of three decades ago; However, in the southern neighbor, informality is below 30%.

Vega considers that the structure of the market leads to informality, and from the State, little or nothing has been done to reduce the problem, as he explained, created by financial and bureaucratic obstacles. He believes that there is a lack of will and one is only betting on spending money without reaching a clear direction.

The word

Rudecindo Vega, former Minister of Labor and Employment Promotion

“We have a structure that guides informality. Even within the State. There is talk of labor cost overruns, but no one about finance: if there were adequate interest rates, informality would be reduced.”