<h3 style="text-align: justify;">Introduction</h3>
I attempt here to offer a more nuanced understanding of the informal sector and the basic preconditions for its integration into the formal economy, in order to improve economic growth while providing real protection for informal workers. The Egyptian government has long been interested in formalizing this sector and has taken several steps in this direction, but these have not achieved the desired results, focusing as they do primarily on worker registration as an end goal, which would expand the tax base and increase GDP. This discussion looks at some of the problems facing workers in the informal sector and examines provisions in the latest draft of the new labor law that address workers in this sector and governmental and non-governmental initiatives to formalize it.
In conclusion, I emphasize the need for representatives of irregular workers to participate in the formulation and implementation of decrees and laws concerning them. There is also a need to organize campaigns on a permanent basis among informal workers to inform them of the necessity and advantages of registering with the Ministry of Manpower. Moreover, the government should adopt alternative policies that do not again push millions of young people back into informal employment, thus promoting more sustainable development.
<h3>Understanding the Informal Sector</h3>
Those studying the informal economy use various terms and names to describe it&mdash;hidden economy, underground economy, the parallel economy, shadow economy, and more&mdash;and accordingly their definitions of informal economy activity vary as well. Some define it as &ldquo;unreported income, generated from all activities for which no taxes are paid&rdquo; (El-Gebali, 2021). In other words, it is all economic activity that would be taxable if reported to the tax authorities.
More recently, some have begun to approach the concept from the perspective of labor market conditions, focusing on informal labor relations in both formal and informal enterprises. This includes non-wage labor in informal enterprises and wage workers without formal contracts or social insurance in both formal and informal enterprises (El-Gebali, 2021).
The literature on the growth of the informal sector has helped to raise awareness and deepen our understanding of its effects at the global, national, and local levels. The International Labor Organization (ILO) confirms that more than 60% of the world&rsquo;s working population works in the informal economy, the vast majority of them in developing countries. The sector accounted for 32&ndash;33% of GDP from 1990 to 2018 (Financing and Development Magazine, 2020).
The size of the informal sector varies from country to country. In the Arab region, the highest percentage of informal work is in Yemen (91.4%), followed by Morocco (81.9%), Syria (71%), and Egypt (58.3%) (Angel-Uredinol &amp; Tanabe, 2012). Overall, informal labor in the Arab region (excluding the Gulf) makes up 67.2% of the total workforce, but only accounts for 35% of GDP because such workers do not have easy access to loans, credit, services, utilities, and technology. Productivity is low, as are wages&mdash;lower than their peers in the formal sector. There is also little prospect of moving from the informal to the formal sector (Angel-Uredinol &amp; Tanabe, 2012).
In Egypt, the economic census indicates that 2 million establishments operate in the informal sector, accounting for 53% of all businesses operating in Egypt in 2017/2018; 59.4% of them are engaged in wholesale and retail trade, followed by manufacturing at 14.1%. Most of these establishments are small and micro enterprises: some 81% of them have less than EGP100,000 in invested capital, while 18% have invested capital of EGP100,000&ndash;200,000 (El-Gebali, 2021). However, the economic census only covers economic activity and workers inside establishments. Data from CAPMAS, the official statistics agency, indicates that in 2020 there were 11.5 million people in the informal sector working outside establishments on farms, in the streets, and elsewhere.
The labor law (Law 12/2003) attempts to define different types of employment. Article 26 states that irregular labor includes seasonal agricultural workers, maritime workers, miners and quarry workers, and construction workers. This is not an exhaustive list, the article says, meaning that the government may add other categories as it deems necessary. The law also seeks to clarify the differences between temporary, seasonal, and casual employment.
<h3>Government Concern and Initiatives, But...</h3>
It is increasingly recognized that the high incidence and persistence of informal employment, particularly in emerging markets and developing economies, is an obstacle to sustainable development. Informal workers are also more likely to fall into poverty than their peers in the formal sector, either because they lack formal contracts and social protection or because they are often less educated.
Despite the growth of irregular employment&mdash;there are an estimated 8&ndash;13 million informal workers in Egypt, according to Minister of Social Solidarity Nivine al-Qabbage (El-Watan, 2022), about half the workforce&mdash;and despite numerous government efforts to address or mitigate it, Egypt has made no significant progress toward this goal. In this context, it is worthwhile to discuss some of these interventions, including the government initiative to establish a fund dedicated to the needs of irregular workers in the new draft labor law.
The government has already taken several steps to support informal workers, including attempts to make a count of the irregular workforce and record workers&rsquo; data. According to the Ministry of Manpower, this step &ldquo;aims to build a real database reflecting reality that covers sectors and categories of irregular workers within the formal and informal sectors over several phases. In the first phase, 2.5 million workers were targeted&rdquo; (Information and Decision Support Center, n.d.).
Law 152/2020 on small and medium enterprise development also grants a five-year exemption on stamp duties to employers in informal economic enterprises if they formalize their status, as well as a huge set of tax and non-tax incentives designed to foster the formalization of another segment of the informal sector.
In 2018, the state launched the Aman certificate to provide life insurance for temporary and seasonal workers. The certificate works as both a savings certificate and insurance policy. The buyer purchases a three-year certificate offering 16% interest, renewable three times, for a maximum duration of nine years. The insurance company collects part of the interest, offering certificate holders a minimum payout of EGP10,000 and a maximum sum of EGP250,000 in the event of natural death or an accident.
But experts stress that the certificate should not be a substitute for a comprehensive social insurance system that covers informal workers. They see it largely as a commercial tool in the framework of the state&rsquo;s efforts to expand the base of citizens involved in the banking system (financial inclusion) (al-Safir, 2018).
<h3>The New Labor Law: The Latest Attempt</h3>
The draft labor law, approved by the Senate in 2022 but not by the House of Representatives, provided for the first time for the establishment of a fund for irregular workers endowed with public legal personhood and affiliated with the competent minister. Under the law, the prime minister will issue a decree forming the fund&rsquo;s board of directors (to be chaired by the competent minister) and defining its competencies, the prescribed fees, and the system for collecting fees from employers who hire irregular workers, set at 1&ndash;3% of the wages paid for work. The law also defines the categories of workers with entitlements in the fund, including temporary agricultural workers, small holders of agricultural land who own less than 1 feddan (about an acre), street workers and small self-employed workers such as street vendors, domestic workers, Quran readers, and lay church functionaries (Fakhri, 2023).
Some experts point out that thus far the results of government initiatives have been meager due to the lack of participation and transparency, as well as the economic and social policies pursued by the government.
Despite the many initiatives launched by the state, labor force data indicates that eight years after a 2015 ministerial decree called on irregular workers to register with the ministry, no more than 331,000 and 688,000 workers have done so, according to Reda al-Arabi, the executive director of the Department of Irregular Labor Accounts at the ministry in January (Middle East News Agency, 2023).
Experts say that the worker registration drive could have received a real boost if the formation of independent unions had been facilitated, allowing for a count of workers and better awareness of their rights. Although the 2017 law on trade union organization allows for the establishment of trade union committees, the lack of awareness of the law meant that very few workers joined them. The government&rsquo;s disregard for stakeholders also deepens the trust gap, giving the impression that the aim of the formalization process is solely to increase tax revenues.
Some experts and trade unionists have called for the inclusion of a specific mechanism for the registration of irregular workers by the Ministry of Manpower in the draft law and for an explicit provision for representation of irregular workers in the management of the fund. They have also called for the repeal of all statutes related to employment agencies, which were devised in Egypt as an alternative to the Ministry of Manpower and its offices, in order to guarantee protection for workers&rsquo; rights.
<h3>A Way Out of the Impasse</h3>
The ILO Employment Policy Convention of 1964 (no. 122) makes clear that the state has an obligation to provide decent work in order to stimulate economic growth and development, stating in Article 1 that &ldquo;there is freedom of choice of employment and the fullest possible opportunity for each worker to qualify for, and to use his skills and endowments in, a job for which he is well suited.&rdquo;
A policy that has been proposed around the world, especially in developing countries with fragile labor markets and a growing informal sector, is a universal basic income, whereby the government provides a regular sum to all citizens sufficient to cover their basic needs, without any conditions related to employment, income, marital status, or anything else.
Improving workers&rsquo; conditions and extending social protection to them remain necessary and important, but neoliberal policies themselves create the crisis, giving rise to a precarious working class made up of vulnerable wage and non-wage workers with little bargaining power (because of their poor technical qualifications or gender), the unemployed, and workers in the poor informal sector. Impoverishment is the only way to describe the long-term direction of these policies (Amin, 2004).&nbsp;
What is certain is that if we succeed in providing the necessary and urgent social protection to some segment of informal workers&mdash;an important and required effort&mdash;millions more such workers will continue to be created if we reduce the issue to its procedural and administrative dimensions, such as workers&rsquo; registration, while ignoring the social, cultural, and even political roots of the informal economy. In addition to legal and procedural improvements, it may also be necessary to adopt policies that prevent the reproduction of poverty, lest we find ourselves in a vicious cycle.
<hr>
References 1- Amin, S. (2004). The liberal virus, permanent war, and the Americanization of the world. Dar al-Farabi. [In Arabic] 2- Angel-Urdinola, D.F., &amp; Tanabe, K. (2012, January). Determinants of informal employment in the Middle East and North Africa region [SP Discussion Paper No. 1201]. World Bank.&nbsp; 3- Arab NGO Network for Development. (2016). Unstructured labor. 4- El-Gebali, A. F. (2021). The informal sector and the labor market. [In Arabic]
5- &laquo;معلومات الوزراء&raquo; : القطاع غير الرسمى يستحوذ على 53% من منشآت الأنشطة الاقتصادية - جريدة المال -18 أكتوبر -2 &nbsp;
6- "وزيرة التضامن: عدد العمالة غير المنتظمة في مصر من 8 لـ11 مليون" El-Watan Newspaper 23 March 2022&nbsp;
7- Fakhri, N. (2023). How does the new draft labor law care for irregular workers? A study responds. [In Arabic]
8- Information Decision and Support Center. (n.d.). Information reports: Irregular labor . [In Arabic]
9- "أمان" العمالة غير المنتظمة.. تأمين ما بعد الموت - عثمان الشرنوبي - جريدة السفير العربي - 22 مارس -2018&nbsp;
10- القوى العاملة لـ أ ش أ: نعتزم بناء قاعدة بيانات لـ 2.5 مليون من العمالة غير المنتظمة بالمرحلة الأولى- &nbsp;وكالة أنباء الشرق Middle East News Agency الأوسط: &nbsp;-8 يناير 2023&nbsp;

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