Self-employed People in the Informal Economy - Cheats or Contributors? Evidence, Implications and Policy Recommendations

This report focuses on people working in the informal, cash or grey economy. The report aims to:

• Raise awareness of the informal economy among mainstream organizations, government policy-makers and regulators;
• Shift the attitude towards people working in the informal economy from one of "cheats and tax dodgers" to people who use cash transactions to:
  • Try to make ends meet;
  • Advance into financial independence from the State, etc.
• Provide pointers to policy recommendations as well as suggestions for action research.

The report:

• Explains the work of Street(UK), a microfinance organization assisting self-employed people and owners of small businesses by providing loans, advice and support;
• Presents a case study to explain the obstacles that people in the informal economy face;
• Summarizes the results of additional interviews with Street(UK) clients.

The report concludes that:

• The problems that people in the informal economy face are complex and have no single cause or solution;
• The informal economy serves many positive functions;
• It is important to provide sufficient opportunities to support people out of dependency;
• Mechanisms to help people out of welfare should be smaller and more frequent;
• Programs for this sector should be motivational.

The report recommends steps in the areas of:

• Education;
• Business advice and support;
• Tax and benefit rules;
• Role of the voluntary and community sector;
• Debt management and incentives to save;
• Cross-governmental working groups.