Local Solutions for a Global Economy

Promoting Informal Labor Rights

Program Information

Program Supporter The US Department of State

Implementing Partners
Instituto Nicaragüense de Estudios Humanísticos (INEH)
Asociación de Investigacion y Estudios Sociales (ASIES)
Poliarquía Consultores

GFI implemented PILAR (Promoting Informal Labor Rights), a two-year project funded by the US Department of State to improve government capacity to collect data on the informal sector while developing strategies that encourage formalization and provide capacity building to informal sector workers in Nicaragua and Guatemala. Using GFI’s multi-stakeholder approach, we have worked with a broad range of formal and informal worker organizations, government ministries, the private sector, and key civil society organizations.

Engaging Stakeholders to Assess the Problem

Beginning in 2008, GFI conducted national public opinion surveys and focus groups on obstacles and barriers to formalization as well as on ways to extend labor rights to the informal sector. In Guatemala, the survey revealed that a significant percentage of informal workers (67%) are agreeable to registering and paying taxes if the processes are clear and workers gain access to government services such as social security. In Nicaragua, 64% of workers surveyed stated that the lack of access to social security was the worst aspect of informality. From the data assessment, GFI developed discussion topics, which addressed the most pressing needs - while searching for consensus. These topics were discussed at national roundtables and also tied with the design of a schedule of trainings for informal workers.

The national roundtables in each country focused on strategies for formalization looking at cross-cutting issues such as labor rights, women and informality, and vulnerable groups. The strategies included incentives - for example, social security and better access to financial services and credit - to bring informal workers into the formal economy and improved government practices - such as streamlining bureaucratic practices and improving tax collection. Participants of the roundtables, as well as various individual meetings, included government leaders, labor union officials, civil society leaders, private sector representatives, and informal workers. PILAR worked to influence policy makers by building consensus among the private sector and civil society, finding government allies, and working with multi-lateral organizations, such as the ILO, to cement policy recommendations under internationally-recognized standards.

Focus on Workers

To complement GFI's top-down strategy, roundtables kept in direct connection with informal workers' needs by providing bottom-up trainings on a wide range of topics, including computer skills, budgeting, complying with government requirements, accounting and financial management of microenterprises, assertiveness trainings for domestic workers, and more. In this manner, PILAR took a new approach to formalization: GFI assisted self-employed street vendors in setting up their own association (FENTRAVIG), which today has over 2,000 members. We further worked together to start a cooperative, allowing them to import goods and reduce costs by ending dependence on middlemen. Working directly with government, we encouraged relationships with municipalities and helped promote policies, currently in effect, to benefit workers and enterprises. Finally, PILAR encouraged workers to be part of the political system and bring their needs to the table in an effective manner.

A tangible result of PILAR is the Roadmap to Formalization, a document that compiles the consensual recommendations of the many stakeholders. The Roadmap's specific proposals are different in each country, as it is based on the cultural, political, and economic realities of the diverse sectors of workers and microenterprises as well as on each country's laws. However, the core findings can be systematizes: First, decent work is the Roadmap's guiding principle. It was clear through the survey and national roundtables that improving competitiveness and extending labor rights is not mutually exclusive; in fact, formalization can serve as a tool to establish long-lasting business and attract sustainable investment. Second, one of the pillars of good governance is sound information; hence the roadmap focuses on improved labor statistics for the design of government programs. Taxation is also at the crux of formality. Informal workers and enterprises pay "taxes" in the form of bribes or other hidden costs, which through effective governance can be directly collected and used for improved government services. Finally, reducing administrative barriers is necessary to ease the entry of workers and enterprises, taking into consideration the high level of illiteracy and the importance of work hours for street workers. To start implementing integrative policy, the Roadmap recommends launching a simplified registration system called "monotributo."

This will allow workers to register with ease and pay a set fee, which gives them access to social security and other benefits of formalization. The roadmap was presented on October, 2010, at the National Palace in Guatemala City by GFI's President, Karen Tramontano to Mr. Edgar Rodriguez, Minister of Labor, who accepted it on behalf of the Guatemalan government. During the presentation, the Minister of Labor committed his government to work on the implementation of the recommendations, stressing the importance of the Roadmap as a tool for the design of effective public policies and requested the future assistance of GFI. In Nicaragua, Verónica Rojas, Vice Minister of Industry and Commerce (MIFIC), stressed the importance of the Roadmap's recommendations for reaching out to informal workers in a more effective manner and ensure the most successful application of the "One-Stop Window," for which GFI currently assists in it's outreach and dissemination strategy.

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