Informal Economy/ Informal Work: Challenges for Industrial Relations

 Industrial relations has predominantly focussed on the formal workplace and formal institutions of representation and neglected the informal economy/work. Informal work, instead of being a transitory phenomenon, has been a predominant form of work in the Global South and is increasingly prevalent in the Global North (Chang 2013; Kalleberg 2009). As work continues to reach beyond the formal workplace and into the informal economy – into the community, household and the realm of social reproduction – institutional forms of industrial relations face a challenge. While Organising and Social Movement literatures address this challenge, conceptual and methodological issues remain underexplored in industrial relations.


Initially conceptualised as the ‘informal sector’ (Hart 1973), since the 1990s the term ‘informal economy’ has focussed attention on a broad and heterogeneous type of employment and enterprises that are unregulated and unprotected (Portesand Castells 1989; Hussmans 2005; Agarwala 2009). The expanded definition of the informal economy sees it as segmented into a range of informal firms and employment relationships i.e. self-employed with assets and employees, survival self-employed (own account operators and unpaid family labour), wage labour, casual wage labour, domestic labour and industrial outworkers/homeworkers. As Breman (2013) puts it ‘there is not one but a variety of regimes of informal labour, not all vicious to the same extent. These also differ in coping behaviour and resilience, some segments being more successful than others’. In sum, informality has multiple levels of exploitation as well as of forms and avenues of resistance.


Accompanying this recognition of the permanence of the informal economy is also one that recognises its significance to capitalist development. The relationship between the formal and informal economy is seen as a continuum of economic relations of production, distribution and employment where firms and workers move along the continuum or can operate simultaneously in both (Chen 2007; Lerche 2010; Harriss-White 2010).There is a recognition of diverse socio-economic relations that can result from the interaction of the formal and informal economy.  Agarwala(2008) captures this in her relational understanding of the informal economy where informal workers are intertwined with the formal economy, society and the state through structures, networks and political institutions. Informality is now fused within formerly formal parts of the economy, through outsourcing and supply chains.


My research in a new industrialising region in North India shows how manufacturing firms, domestic as well as multinational, tap into and structure the informal economy. Over a span of ten years they have reduced their permanent workforce while employing three times the number of informal workers. These are segmented into contract, casual, company casual and apprentice workers and often fulfil the jobs of a full-time production worker inside the firm. In addition, firms draw upon informal workers through outsourcing and long supply chains both in the textile and the automotive sector. As in earlier industrial sociology, neighbourhood comes into the firm and the firm reaches into the neighbourhood. This blurs the boundaries between the spheres of production and reproduction when analysing control and contest. Trade unions are unable to respond to the needs of informal workers or formulate a strategy to counter the state-capital restructuring of work.


For industrial relations, the challenge is how to conceptualise these interlinkages between the formal-informal work/economy and how to organise disparate, dispersed and often mobile informal workplaces and workers. This requires a rethink of definitions and conceptualisation of labour, framing options, organisational forms and strategies, and types of struggles for labour in spheres of production as well as reproduction. ‘New’ questions, with long history, have arisen. Is labour a mere production input or ‘social’ labour? Is work only in the sphere of production or is it all the work that helps in capitalist accumulation? Do we need to conceptualise labour as an actor, or only as collective actor? Can, or indeed should, the informal be ‘formalised’? Why is informal economy/work so difficult to regulate? What role do inter-firm relations play in informality? Do we need to go beyond institutional forms of industrial relations? What are the methodological challenges in researching the informal economy/work?


One of the many ways forward is Bernstein’s (2007) ‘classes of labour’. The approach provides an analytical framework that is flexible enough to capture the diversity of employment in formal-informal economy. Another possibility is the integrated framework of social reproduction (Luxton 2006; Ferguson and McNally 2015) that captures social relations of capitalism more comprehensively. Such approaches are sensitive to varied economic survival strategies of different groups of informal workers and the diverse means of resistance.


A more differentiated understanding of work and labour, and links between oppression and exploitation and production and consumption may help in framing strategies to address the challenges informal economy/work poses to industrial relations and to the labour movement.

Anita Hammer is a member of CROWE at Leicester Business School, De Montfort University, UK. Her research focuses on the Global South and examines the development trajectories of new industrial regions, changing patterns of work and employment and the role of the informal economy



The challenges of host effects in regime-shopping multinationals.

Multinational companies, particularly those which have significant capacity to choose where their activities are located, pose substantial challenges to domestic systems of employment regulation. These are sometimes seen as contributing to international convergence , but it is generally acknowledged that globalisation has not – yet – resulted in cross-national uniformity in labour management, even between economies of comparable wealth and development.

Because of this, the literature on industrial relations and human resource management in multinational corporations (MNCs) frequently discusses ‘host country effects’. This type of research deals with two slightly different concepts.

Firstly, host effects often imply ‘constraints’ on foreign multinationals acting within the economy under investigation. These might impede or prevent the transfer into particular host countries of country-of-origin, or global ‘best practice’ inspired labour management policies. This literature looks at whether and how MNCs, conform with, seek to avoid, or seek somehow to negotiate, the nature of host country constraints.  It sometimes also analyses the pressures foreign multinationals place on historically-established national systems of industrial relations and labour market regulation.

Second, some researchers examine how MNCs may attempt to use institutionally embedded resources. These may include potential advantages derived from skills institutions, research and development infrastructures, or the presence of clusters of competent firms which may engage as suppliers to global firms. Such resources are often seen as the domain in which older, higher cost industrialised economies compete.

Trying to make any realistic assessment of host constraints and resources requires an understanding of the contemporary context of international business. Clearly, neo-liberal globalisation has strengthened the hand of MNCs in relation to host business and employment systems. There are of course many factors at play here, but it is worth briefly highlighting the following:

  • the additional locational flexibility of FDI brought into play by single market legislation, as well as broader international trade agreements;
  • in Europe in particular, the possibilities for ‘brownfield’ investment which emerged in processes of privatisation (see for example the internationalisation of ownership of the European steel sector);
  • the multiple ways in which technology, often allied to product market liberalisation, has enabled markets to be serviced remotely (in Anglophone countries at least, the Indian call centre was one of the core public images of corporate globalisation in the last decade);
  • the ways in which corporate financialisation, and the related ideology of the lean enterprise, have made MNCs increasingly unwilling or unable to tolerate redundancy of capacity, leading in many cases to intense competition between different geographical sites of the same MNC for investment (the auto industry is the emblematic case in point here);
  • the broad transition at state level from protecting domestic industries to securing positions in international contests for mobile investment.

All these factors both enable and encourage increasing proportions of productive capital to engage in ‘regime shopping’ between the institutionally-derived constraints and resources of different national and local economies.

Regime shopping was a phrase popularised in the industrial relations literature by Wolfgang Streeck. It has been used mainly to draw attention to the ways in which some MNCs have sought to avoid labour-friendly elements of host country regulation, the consequent risks of social dumping if investment decisions are made on this basis, and thus the risks of a race to the bottom as erstwhile social democracies compete for productive investment with regimes that offer fewer protections for labour. All of this is still relevant. But regime shopping is now more endemic, and goes beyond host country industrial relations (recent controversies around the dubious tax strategies of many MNCs reinforce this point).

To extend the ‘shopping’ analogy, those firms whose investment is mobile are quasi-customers of the business and employment systems of different economies, balancing host resources and constraints within a context in which geographies are constrained to conceive of each other as rivals for investment. But not all mobile MNCs ‘shop’ in the same way. Broadly speaking, there is a continuum between, on the one hand, firms that attempt to select the most appropriate locations à la carte and then attempt to act pretty much in isolation from institutional actors in the host economy, and, on the other, firms where subsidiary managers choose to engage with host institutions in order to construct a more desirable environment for themselves through continuing relationships.

If we take the need for national and local economies to compete for mobile investment as a given, the important question is that of ‘capture’: while most can see the potential for ‘overspill’ effects from foreign direct investment boosting local productivity and creating gains for the locality/region beyond the direct employment effects of FDI, these are not automatic and require governance. Equally, there are clear dangers, that given the asymmetric power relations between foreign investors and sub-national governance actors, that local institutions will, in attempting to maximise FDI, be ‘captured’ by MNCs.

Our international research in this area , funded in the UK by the ESRC , showed a number of different approaches to the local governance of FDI. We examined two national economies with strong sub-national levels of government – Spain and Canada – in both these cases there was a marked internal contrast between a relatively coordinated approach, with attempts at institution-building (Asturias and Quebec, respectively) and a much more free-market approach (Madrid and Ontario). Ireland, something of an outlier due to its dependence on the foreign-owned export sector, has maintained a largely national, coordinated network approach to FDI. Finally, the UK, and particularly England, has moved from a Blairite experiment in nationally-driven attempts to use Regional Development Agencies to correct market failures, to a much more squarely neo-liberal approach.

It is difficult to quantify which of these approaches is the most successful. This is particularly the case if we see the goal as optimising the local benefits to FDI, which is not necessarily the same thing as maximising the amount of FDI. However, one might tentatively conclude that those governance systems that have benefitted from a degree of political consensus that the process of FDI attraction and retention require substantive governance (Asturias, Ireland, and Quebec) seem to have more chance of potentially creating positive outcomes than those where this is not the case. In particular, the institutional destruction in England, justified by the requirement for deficit-reduction, has occasioned substantial losses of institutional memory at sub-national levels, and has left a situation where even directors of some large foreign MNCs lamented institutional loss. Given current pressures at all levels of the state to cut costs, it is important not to lose sight of the need for what will remain high-cost host economies to create resources. This cannot happen in an institutional vacuum; despite talk of a “Northern Powerhouse”, the government’s recent lack of action to defend the steel sector shows little sign of any real interest in industrial policy at national or regional levels.

Finally, social actors and policy makers have to be aware that any analysis of FDI, local embeddedness and potential contributions to local economies needs to take a very granular approach. That is, it needs to ask, on a unit by unit basis, why the firm is in a particular location, whether it is doing something there that is unique and/or is local resource dependent, whether there are sister plants elsewhere in the world, and what the real degree of potential mobility of the production/service provision of particular units is. This knowledge, which trade unions often have privileged access to, is a necessary pre-condition to policymakers making sensible choices in this area


Phil Almond is Professor of Comparative Employment Relations at DMU. His research interests are in the theoretical and practical challenges of the governance of work and employment in contemporary global capitalism, with specific expertise on the social relations of multinationals.

A more detailed account of the above research can be found here. Alongside the project’s researchers, he gratefully acknowledges the support of the ESRC, a Spanish Research, Development and Innovation grant, and of CRIMT.