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How tech can light up shadow economy
Digital platforms can provide a space for informal workers to participate in discussions about labour policies and regulations that directly affect them, ensuring their voices are heard in decision-making.
With an increase of informal labour across the globe, e-government has the potential to formalise businesses and improve working conditions of staff.
This is because digital inclusion can empower citizens through access to information, better management, and revenue growth. It enhances transparency and accountability in public administration thereafter reducing corruption and red tape inefficiencies.
A recent study by the International Labour Organisation (ILO), in collaboration with the UNDP Accelerator Labs, revealed that e-government initiatives can help formalise institutions.
These initiatives can encourage informal firms to transition into the formal economy by simplifying registration and providing clear information on compliance needs. Since increased transparency is vital in creating a fairer environment for all workers, this shift would improve labour conditions and provide staff with better access to benefits.
The study explored transformative potential of new technology in reducing informal labour. And that the complex and multidimensional relationship between technological advancements and the informal economy can significantly enhance productivity and drive economic growth, potentially leading to more formal jobs.
By leveraging digital technologies, these initiatives can streamline public services, making them more reach to workers who often face barriers in accessing essential resources such as social protection, healthcare, and legal support.
The authors conducted an empirical investigation using data from multiple countries to substantiate their findings. They analysed indicators such as informal employment rates, vulnerable employment, and the share of the shadow economy in GDP alongside measures of access to digital technology.
The results suggest that while technology can reduce informality, its impact depends heavily on the type and specific context of the labour market.
One of the study's key aspects is how technological advancements are reshaping the nature of work. By giving rise to new forms of production, this evolution can both encourage informal work and support efforts to formalise the labour market.
These digital efforts, which aim to improve service delivery and governance, can generally help reduce informality by making government services more accessible and efficient. Understanding whether technological progress will lead to informality is essential, as the outcome could vary depending on several factors.
The paper also highlights key technological trends influencing labour markets and informality in recent decades.
Rapid advancement of digital technologies, such as the widespread adoption of mobile phones and the increase in internet accessibility (from less than 20 percent of the global population in 2009 to around 60 percent in 2019), has opened new opportunities for communication and economic activities, particularly for informal workers.
This data can then be used to inform targeted policies to address these workers' specific vulnerabilities. It also underscores the significant role that e-government initiatives can play in improving the working conditions of informal workers.
Another important aspect of e-government is its ability to empower informal workers by fostering greater citizen engagement in policymaking processes. Digital platforms can provide a space for informal workers to participate in discussions about labour policies and regulations that directly affect them, ensuring their voices are heard in decision-making.
While these technological advancements present opportunities, they also risk widening the gap between large and small firms, exacerbating existing inequalities. The ongoing digital transformation has been accelerated by the Covid-19 pandemic, which reshaped labour markets by introducing new forms of work and has also changed how labour is organised.
The study underscores the transformative potential of technology in addressing the challenges of informal labour, revealing a nuanced and multidirectional relationship.
Even though technological advancements can drive economic growth and create formal jobs, the benefits are not evenly distributed, with unequal access potentially exacerbating existing inequalities.
E-government initiatives are a vital tool offering mechanisms to improve service delivery, enhance transparency, and facilitate formalisation of informal work. Policymakers must prioritise digital inclusion, investing in infrastructure and digital literacy to bridge tech gap and empower all workers to participate fully in the digital age.
It calls for policy interventions that ensure equitable access to technology and support the transition of informal workers into the formal economy.
By simplifying processes related to registration, compliance, and access to social protection, E-government can help workers transition from informal to formal employment, ultimately improving their labour conditions and access to benefits.
In light of these findings, the authors offer several critical recommendations for policymakers on promoting inclusive access to technology by ensuring that all workers, especially those in informal sectors, can benefit from digital advancements.
This includes investing in essential infrastructure, such as internet connectivity, and implementing digital literacy programs to bridge the digital divide. And that governments can enhance E-government services tailored to the needs of informal workers.
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