Vocational training must adjust to the informal sector

More people worldwide are working in the informal than in the formal sector. In this interview Dr Richard Walther, senior consultant with the French Development Agency (AFD), tells us what it means to work in the informal economy, why investment in the sector is necessary to overcome the poverty of the developing countries, and how vocational training systems should be reformed in order to meet the needs of the sector.

Mr. Walther, the terms "informal sector" or "informal economy" have meanwhile become keywords. But what does it mean for the life and work of a person employed in the informal sector?

This means, concretely, that people who work in the informal sector have an activity that gives them the opportunity to finance their daily lives – enough to buy what is needed in order not to live in total poverty and to gradually get out of poverty.

There are different standards of living in the informal sector. For people with the lowest income level it is just enough to survive; people with higher income levels can afford more than daily food and clothing: they also have access to social goods like a good school for the children, a TV at home, etc. But poverty is never very far away, for example in case of illness, the worker and his family can fall back into deep poverty.

You say that the informal sector is often unjustly portrayed very negatively. What makes the informal sector, in your opinion, a bearer of hope?

The informal sector is often seen as the sector that pays no taxes, as a sector that doesn’t respect social rights, that has no ability to bring new products and services to the market. But the reality is not black or white.

In the informal sector there are also many self-employed and entrepreneurs who pay their taxes. There are companies that agree to an employment contract with their employees. Studies show that increasing the skills of informal workers also favours their integration into formal legal and social systems.

The problem is not that the business owners want to avoid the tax and social security regulations, the problem is that the existing regulations have not been adjusted to fit the micro and small enterprises.

One of your recurring criticisms is that too little money is invested in programs for vocational training in the informal sector. What are the main arguments for the redistribution of financial resources that you could give lobbyists to transport?

Virtually nowhere is there public money for vocational training in the informal sector, even though most young people acquire their skills in informal jobs. Yet the informal sector in many countries produces up to 60 percent of gross domestic product.

Studies, which I myself have carried out, show that increased investment in the training of informal workers also increases the revenue and profit of entrepreneurs. These same studies also show that education and coaching can actually promote the innovation capacities of informal enterprises. This means that investment in the informal sector can be really profitable.

Investments in the informal sector are necessary to overcome the poverty of the developing countries.

A question for the educator in you: How should educational programs in the informal sector differ from formal education programs?

Education in the informal sector is learning-by-doing. This learning-by-doing model contains the weakness of not being able to impart sufficient knowledge and building skills to be able to give the learners the opportunity to find new technical and professional solutions.

But basically the learner in the informal sector is more efficient than the adolescent who has never learned something at work. A World Bank study from 2013 shows comprehensively that well-structured training on the job is the best preparation for the labour market.

For formal education it means that they must integrate real work experience; for the traditional type of training in the informal sector it means that they must integrate more general knowledge and skills. So there is a possibility to have vocational training which can serve the formal and the informal sector at the same time.

The discussion about the education programs for the informal sector is not new. What has changed in recent years? What are the new features?

In the past two or three years a new awareness has arisen in many political, economic and social actors, that one can no longer ignore the informal sector. The realisation that poverty in developing countries cannot be overcome without supporting the professional qualifications of the workers that are active in the informal sector is increasingly becoming the consensus.

In Africa or Asia one finds countries where informal activity provides up to 90 percent of existing jobs. How can one then develop educational programs that are only useful for formal employees? It is time to reform the vocational training system so that it works for all and not only for a small minority.

It is inexpedient at the economic level and unjust at the social level when all funds are spent only for the formal training of a very small number of adolescents and adults.