08 Jul The Superintendence of Pensions Invites Benjamín Villena to Present His Paper "Unpacking the Persistence of Informality" to enrich the Entity's Informality Project
Posted at 15:48h
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- To enhance the research within the framework of a project on labor informality conducted by the Superintendence of Pensions, Benjamín Villena, main researcher of LM2C2 presented his paper "Unpacking the Persistence of Informality," where he analyzes this issue. Some points in Villena's work indicate that the causes of informality are undoubtedly important, but evidence shows that informality is often temporary, especially in Chile. This does not mean that society and policymakers should not be concerned about it: informality matters because it is usually linked to low wages and hazardous working conditions and has significant implications for well-being and inequality. Villena has argued that, given these background factors, it seems reasonable to generate public policies to reduce informality. However, informal employment is often more accessible to unemployed people, especially when they are more vulnerable. Therefore, besides considering whether someone is informal, it is necessary to know how long, on average, they will remain in this condition. If informal jobs are a temporary refuge from unemployment while they find better, possibly formal jobs, then the reduction of informality should be much more cautious. If, on the contrary, informality is a trap that is difficult to escape from, public policies should be aimed at preventing entry into informality. Based on rotating panel data from the National Employment Survey, Chile's average duration of informality is 16 weeks (with significant variation), which is substantially lower than observed in other economies, such as Argentina, Brazil, and Mexico. The most important reason for the low average duration is the relatively high transition from unemployment to informality, especially before October 2019. Transitions from inactivity to informality also play a role in explaining the estimated duration. Workers with higher education tend to persist longer in informality, as do women and younger workers, which could be due to the higher quality of employment in the first case and a more common use of informality as a refuge from unemployment in the case of women and younger workers.
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