The Informal Economy Mainly in Egypt

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These features differ from businesses and employees in the formal sector, which have regular hours of operation, a regular location and other structured benefits.

The most important types of work in the informal economy are home-based workers and street vendors. Home-based workers are more numerous while street vendors are more visible to us. But in fact they make up to 30% in the developed countries.

Many workers engage in the Informal economy by choice for either economic or non-economic reasons. Many consider the free-tax and the free licensing requirements as benefits to the informal sector.

No doubt that jobs in the formal economy might bring more security and regularity, or even pay better that the informal sector but workers think from another view which could be more independence, the chance to select their own hours, the opportunity to work outside and near friends, the ability to choose their customers and their product as well.

Informal Activities in both Goods and Services

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Introduction to Egypt Economic status and characteristics.

The volume of the informal sector is 65% - 70%

The volume of the informal economy activities has notably increased after the 25 January Revolution as a result of the absence of entities that monitor economic activities and increased insecurity

The formal employment decreased by 5% in the industrial sector, 8% in the construction sector, and by 15% in the services sector in 2013. Meanwhile, the informal employment has increased by 40% in 2012 and by 45% in 2013 compared to a 30% rate in 1998.

According to a study that was made last year, the informal sector has lost the government EGP 300bn in potential taxes.

The informal sector also weakens the formal one as the informal provides products at lower prices due to not paying taxes and custom fees.

The Difference between formal sector and informal sector in Egypt.

[pic 5]The portion of informal economy in Egypt is estimated between 40 % to 60% of the total economy and the remaining ratio is divided between public and private formal sectors.

The government has information about the formal economy but it has a few data about informal economy that makes confusion and a very bad impact to the decision makers and also affects the GDP. People work in the formal sector work with a defined regulations like contracts between them and their employers, defined working hours, insurance and developing programs while people work in the informal economy don’t have these facilities.

Taxes and fees that are considered as the main source of the national income load the formal economy. The informal economy has no commitment to the government and it has a load on the infrastructure and the country resources.

The government in the formal sector inspects economic activities, but there is almost no inspection in the informal economy so many of the goods and services offered by the informal sector are low quality products and people suffer from their poor quality.

Sometimes the formal sector economy suffers because of the bad affection of the informal economy like the big difference between the foreign currencies, which are formed due to the black market. Also the difference between the official and market price of many goods and services.

In Egypt the formal sector always select the educated and the developed employees, but the informal sector doesn’t care about the education level.

Other concepts which can be characterized as informal sector can include the black market (shadow economy, underground economy), Associated idioms include "under the table", "off the books" and "working for cash".

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People have to find work for themselves, The Formal Sector is controlled by this is called the Informal Sector of employment. Government and large companies.

Specific characteristics of the formal economy and informal economy:

The formal economy:

- Has an organized system of employment with clear written rules of recruitment, agreement and job responsibilities.

- Has a standardized relationship between the employer and the employee is maintained through a formal contract.

- The employee is expected to work for fixed hours and receives fixed salaries in addition to incentives and perks. He works under a decent work environment and is entitled to benefits such as leave, savings, loans etc. He has an organized association or union where his official grievances are addressed. Besides, he is covered under social protection benefits such as life insurance, health insurance, pension, gratuity etc.

People working in civil service, public sector units, government service, defence, multi-national/national/private companies, schools, colleges, research institutes, management organizations, banks etc.…all belong to the Formal Sector.

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The informal economy:

(1) Does not have any written rules or agreements.

(2) It exists merely on verbal understanding.

(3) It does not have fixed wages or fixed hours of work and mostly relies on daily earnings.

(4) In most cases, the work atmosphere is congested and unhygienic.

(5) The workers in this type of economy usually fail to come together and address their problems through an association or a group. They have poor awareness levels regarding social protection schemes, are unable to make savings and do not see the necessity of insuring themselves

People working as small farmers, street vendors, hawkers, small traders, micro-entrepreneurs, home-based workers, cobblers, rag-pickers, porters, laborers, artisans, etc…all belong to the Informal Sector

Although the informal sector makes up a significant portion of the economies in developing countries it is often stigmatized as troublesome and unmanageable. However the informal sector provides critical economy opportunities for the poor and has been expanding rapidly since the 1960s. As such, integrating the informal economy