Informal tourism economy in developing countries - a critical view.
Author: Izabela Soja
1 Commentries
Abstract: This paper aims to shed light on the impacts of the informal economy on tourism workers and how it is linked to global inequality in developing countries.
Keywords: informal economy, tourism employment, developing countries
Discussion:
Tourism is one of the biggest and most powerful industries in the world. It contributes greatly to the economy and creates various employment opportunities. By doing so, it has the power to become a real force for good by reducing poverty and regional inequality (Xu and Lv, 2022). However, there is a growing debate over the quality of employment in tourism. Not only many jobs in tourism are low paying and low-skilled, but in many countries, especially underdeveloped ones, various tourism economic activities are not officially regulated. This leads to the growing phenomenon of the informal economy, which can be particularly observed in developing countries. Critics are now debating whether the informal sector actually increases global inequality.
Informal economy was defined by Xu and Lv (2022) as the economic activity that falls outside government regulation and taxation. This simply means that those involved in informal economic activities do not pay taxes and are not registered with authorities. These activities are not necessarily illegal, but they are not organised in the same institutional forms characterised by formal employment contracts (Routh, 2022).
In tourism, many jobs can fall within this category. This includes, for example, street vendors selling food or souvenirs, tour guides, individual transport providers and many more (Cakmak and Cenezis, 2020). There are many reasons why people find employment in the informal sector. Sometimes, they simply do not have other choices because of their lack of skills and experience (The World Bank, 2021). Those people engaged in the informal tourism economy rely on their jobs to support their livelihoods. For many of them, the income from these activities is a survival strategy to feed themselves and their families. This is especially important for socially disadvantaged groups such as women, migrants, or ethnic minorities (Cakmak and Cenezis, 2020). On the other hand, in countries that suffer from widespread corruption or increased bureaucracy, it can be incredibly costly to establish formal employment opportunities (The World Bank, 2021). Consequently, people want to save money or avoid heavy regulations, which is why they turn to the informal sector (The World Bank, 2021). Therefore, the informal tourism economy can play a big part in the development of pro-poor tourism, which is a type of tourism that aims to bring net benefits to poor people.
Nevertheless, several issues exist in regard to the informal tourism economy. Firstly, unregistered activities make it impossible for governments to collect the taxes required to fund the provision of public goods, lead to inefficient use of limited resources, and undermine established institutions (Xu and Lv, 2022). Informal tourism employment is also highly vulnerable and insecure. Since there are no formal employment contracts, there is no stable income for workers. They are also not protected under any obligations, which means that a large number of people relying on the informal sector are socially disadvantageous and excluded from public policies’ benefits (Monterrubio, 2022). Moreover, as tourism depends to a large extent on external factors, such as for example economic shocks, it makes informal tourism employment even more vulnerable (Monterrubio, 2022). Indeed, The World Bank (2021) revealed that the Covid-19 pandemic has been particularly severe in the informal sector. Those workers are highly reliant on the number of tourists who come and go, so any major decline in tourist arrivals can significantly affect the livelihoods of workers who depend on them.
As discussed earlier, the informal tourism economy is mostly prevalent in emerging markets and developing economies (The World Bank, 2021). The discussion paper explored a few case studies with Hanoi, Vietnam as one of the examples. This place is popular with street vendors who are part of the informal economy. Many of them are forced to work as street vendors due to poor rice yields, scarcity of farmland, and lack of non-farm employment (Truong, 2018). However, for some of them, street vending is an attractive opportunity that offers them “liberation from poverty” (Truong, 2018). Nevertheless, those workers deal with the issues of unstable incomes (which depend on the number of tourists), as well as patrolling security staff (Truong, 2018). Consequently, those workers are often under a considerable amount of stress and pressure.
Similarly to Hanoi, the informal tourism economy is also prominent in Mexico, where it accounts for 56.7% of all jobs (Monterrubio, 2022). Examples of activities include trade in local food, which constitutes an attraction for tourists in certain destinations while also contributing to poverty reduction (Monterrubio, 2022). Employment in the informal sector is particularly important for women who need to support their households (Wilson, 2014). However, Monterrubio (2022) argued that informality leads to increased vulnerability and marginalisation of migrants in those places.
It is imperative to reflect on the impacts of the informal economy on such a vulnerable industry as tourism. While informal employment opportunities are often crucial for people to survive, they also present many challenges that need to be addressed by higher authorities in order to create just and fair workplaces in tourism services.
Important references:
Monterrubio, C. (2022) The informal tourism economy, COVID-19 and socioeconomic vulnerability in Mexico. Journal of Policy Research in Tourism, Leisure, and Events, 14(1) 20-34.
The World Bank (2021) As COVID-19 Wreaks Havoc on Service Workers, is the Informal Sector Increasing Global Inequality? [podcast]. 24 May. Available from https://www.worldbank.org/en/news/podcast/2021/05/24/as-covid-19-wreaks-havoc-on-service-workers-is-the-informal-sector-increasing-global-inequality-the-development-podcast [accessed 20 May 2023].
Truong, V.D. (2018) Tourism, poverty alleviation, and the informal economy: the street vendors of Hanoi, Vietnam. Tourism Recreation Research, 43(1) 52-67.
Keywords: informal economy, tourism employment, developing countries
Discussion:
Tourism is one of the biggest and most powerful industries in the world. It contributes greatly to the economy and creates various employment opportunities. By doing so, it has the power to become a real force for good by reducing poverty and regional inequality (Xu and Lv, 2022). However, there is a growing debate over the quality of employment in tourism. Not only many jobs in tourism are low paying and low-skilled, but in many countries, especially underdeveloped ones, various tourism economic activities are not officially regulated. This leads to the growing phenomenon of the informal economy, which can be particularly observed in developing countries. Critics are now debating whether the informal sector actually increases global inequality.
Informal economy was defined by Xu and Lv (2022) as the economic activity that falls outside government regulation and taxation. This simply means that those involved in informal economic activities do not pay taxes and are not registered with authorities. These activities are not necessarily illegal, but they are not organised in the same institutional forms characterised by formal employment contracts (Routh, 2022).
In tourism, many jobs can fall within this category. This includes, for example, street vendors selling food or souvenirs, tour guides, individual transport providers and many more (Cakmak and Cenezis, 2020). There are many reasons why people find employment in the informal sector. Sometimes, they simply do not have other choices because of their lack of skills and experience (The World Bank, 2021). Those people engaged in the informal tourism economy rely on their jobs to support their livelihoods. For many of them, the income from these activities is a survival strategy to feed themselves and their families. This is especially important for socially disadvantaged groups such as women, migrants, or ethnic minorities (Cakmak and Cenezis, 2020). On the other hand, in countries that suffer from widespread corruption or increased bureaucracy, it can be incredibly costly to establish formal employment opportunities (The World Bank, 2021). Consequently, people want to save money or avoid heavy regulations, which is why they turn to the informal sector (The World Bank, 2021). Therefore, the informal tourism economy can play a big part in the development of pro-poor tourism, which is a type of tourism that aims to bring net benefits to poor people.
Nevertheless, several issues exist in regard to the informal tourism economy. Firstly, unregistered activities make it impossible for governments to collect the taxes required to fund the provision of public goods, lead to inefficient use of limited resources, and undermine established institutions (Xu and Lv, 2022). Informal tourism employment is also highly vulnerable and insecure. Since there are no formal employment contracts, there is no stable income for workers. They are also not protected under any obligations, which means that a large number of people relying on the informal sector are socially disadvantageous and excluded from public policies’ benefits (Monterrubio, 2022). Moreover, as tourism depends to a large extent on external factors, such as for example economic shocks, it makes informal tourism employment even more vulnerable (Monterrubio, 2022). Indeed, The World Bank (2021) revealed that the Covid-19 pandemic has been particularly severe in the informal sector. Those workers are highly reliant on the number of tourists who come and go, so any major decline in tourist arrivals can significantly affect the livelihoods of workers who depend on them.
As discussed earlier, the informal tourism economy is mostly prevalent in emerging markets and developing economies (The World Bank, 2021). The discussion paper explored a few case studies with Hanoi, Vietnam as one of the examples. This place is popular with street vendors who are part of the informal economy. Many of them are forced to work as street vendors due to poor rice yields, scarcity of farmland, and lack of non-farm employment (Truong, 2018). However, for some of them, street vending is an attractive opportunity that offers them “liberation from poverty” (Truong, 2018). Nevertheless, those workers deal with the issues of unstable incomes (which depend on the number of tourists), as well as patrolling security staff (Truong, 2018). Consequently, those workers are often under a considerable amount of stress and pressure.
Similarly to Hanoi, the informal tourism economy is also prominent in Mexico, where it accounts for 56.7% of all jobs (Monterrubio, 2022). Examples of activities include trade in local food, which constitutes an attraction for tourists in certain destinations while also contributing to poverty reduction (Monterrubio, 2022). Employment in the informal sector is particularly important for women who need to support their households (Wilson, 2014). However, Monterrubio (2022) argued that informality leads to increased vulnerability and marginalisation of migrants in those places.
It is imperative to reflect on the impacts of the informal economy on such a vulnerable industry as tourism. While informal employment opportunities are often crucial for people to survive, they also present many challenges that need to be addressed by higher authorities in order to create just and fair workplaces in tourism services.
Important references:
Monterrubio, C. (2022) The informal tourism economy, COVID-19 and socioeconomic vulnerability in Mexico. Journal of Policy Research in Tourism, Leisure, and Events, 14(1) 20-34.
The World Bank (2021) As COVID-19 Wreaks Havoc on Service Workers, is the Informal Sector Increasing Global Inequality? [podcast]. 24 May. Available from https://www.worldbank.org/en/news/podcast/2021/05/24/as-covid-19-wreaks-havoc-on-service-workers-is-the-informal-sector-increasing-global-inequality-the-development-podcast [accessed 20 May 2023].
Truong, V.D. (2018) Tourism, poverty alleviation, and the informal economy: the street vendors of Hanoi, Vietnam. Tourism Recreation Research, 43(1) 52-67.