The opposite of the formal economy, the informal economy is defined as “is economic activity that is neither taxed nor monitored by a government, and is not included in that government’s Gross National Product (GNP).” One example is that if you sell your old skateboard to your friend, its part of the informal economy, but if you buy a skateboard from a store, its part of the formal economy. Economic activity in the informal economy is often hard to track and not valued as highly as the formal sector.

In Canada we’re really used to transactions that happen within the formal economy, but for the majority of poor people around the world, working in the informal economy is the only way of earning a living. For girls, this often means domestic service, but it can also mean mining, construction, and factory work.

On the one hand, the informal economy provides much needed jobs when there are high unemployment rates in the formal sector. But, on the other hand, working in the informal sector often means lower wages, less job security, no benefits, and even unsafe working conditions. Because the informal sector works outside of government regulation and labour laws, informal workers have a hard time asserting their rights. It can often leave girls open to exploitation by employers because they have no way to demand better working standards. Estimates show that more than 60 percent of working women in developing countries work in the informal sector (2009 Girl Report).

Patience’s Story (Benin)

“I did household chores very early from 4am. After the chores I baked and sold cake all day in the market. I came back home at around 9pm each night. With another girls we used to make [approximately $36] each day for our employer. The employer promised to give us money to start our own business, but we were never paid” (2009 Girl Report).