Summary

This study is a product of the collaborative research programme of the International Institute for Labour Studies at the International Labour Organization (ILO) and the Secretariat of the World Trade Organization (WTO). Following up on the joint review of the literature on Trade and Employment, published in 2007, it focuses on the linkages between globalization and informal employment in developing countries. World trade has expanded significantly in recent years, making a major contribution to global growth. Economic growth has not led to a corresponding improvement in working conditions and living standards for many workers. In developing countries, job creation has largely taken place in the informal economy, where around 60 per cent of workers are employed. Most of the workers in the informal economy have limited job security, low incomes and no social protection, with limited opportunities to benefit from globalization. This study focuses on the relationship between trade and the growth of the informal economy in developing countries. Based on existing academic literature, complemented with new empirical research by the ILO and the WTO, the study discusses how trade reform affects different aspects of the informal economy. It also examines how high rates of informal employment diminish the scope for developing countries to translate trade openness into sustainable long-term growth. The report analyzes how well-designed trade and decent-work friendly policies can complement each other so as to promote sustainable development and growing prosperity in developing countries.