Off the Books in Salvador

Abstract

Informal economic activity has been increasing in Brazil in the midst of neoliberal reforms, skyrocketing unemployment, and business strategies designed to cut labor costs. Today half of the Brazilian economically active population works informally, as do 40 percent of private-sector employees, now the largest group of informal workers. In both Salvador and Brazil there are more informal salaried workers than there are informal self-employed entrepreneurs, contrary to what most theories of informality would predict. The state is not adequately enforcing its labor legislation, and employers increasingly contract their employees informally. Outsourcing (subcontracting to smaller firms) also contributes to informality, since micro-enterprises are less likely to formalize their employees’ status. Theories of informality need to recognize that there is no such thing as a separate “informal sector” of the economy and that informality increasingly extends to employees of formal firms.