Unemployment and the Informal Economy: Lessons From a Study of Lithuania

This Brief examines the dynamics between the informal economy and unemployment rates, the causes of informality, its consequences, and potential reduction measures in Lithuania. It challenges traditional narratives and is targeted at academic and postgraduate researchers studying labor economics, public economics, human resource management, industrial relations, and economic sociology.

Format: Paperback / softback
Length: 111 pages
Publication date: 07 May 2022
Publisher: Springer Nature Switzerland AG

This comprehensive Brief delves into the intricate interplay between the informal economy and unemployment rates, shedding light on the underlying causes, consequences, and potential mitigation strategies at both theoretical and empirical levels. Through the lens of Lithuania, this book explores the notion that participation in the informal economy is predominantly driven by unemployed individuals in emerging economies. The Brief encompasses a systematic and comparative literature review, a quantitative survey specifically targeting participation in the Lithuanian informal economy, an expert evaluation involving representatives from municipalities responsible for employment-related issues, and a statistical analysis of the findings. By challenging prevailing narratives surrounding the informal economy, this Brief aims to serve as a valuable resource for academic and postgraduate researchers specializing in labor economics, public economics, human resource management, industrial relations, and economic sociology.

The informal economy is a complex and multifaceted phenomenon that has garnered significant attention in recent years. It refers to economic activities that are not officially recognized or regulated by government authorities, often taking place outside of formal employment structures. While the informal economy has been a part of human society for centuries, its significance has grown in recent decades due to various factors such as globalization, technological advancements, and economic inequality.

One of the primary drivers of the informal economy is unemployment. Many individuals who are unable to find formal employment in developed countries turn to the informal economy as a means of survival. These individuals may engage in informal work such as street vending, home-based businesses, or informal agriculture, often without the necessary legal protections or benefits. The informal economy provides a source of income for these individuals, but it also comes with significant risks and challenges.

One of the most significant consequences of the informal economy is its impact on economic growth and development. The informal economy is often characterized by low productivity, limited access to capital, and poor working conditions. This can lead to a lack of innovation, limited job creation, and reduced tax revenue for governments. Additionally, the informal economy can contribute to social and economic inequality, as it tends to exclude marginalized groups such as women, children, and immigrants from formal employment opportunities.

Another consequence of the informal economy is its impact on public health and safety. Many individuals who work in the informal economy are exposed to hazardous working conditions, such as exposure to toxic chemicals, long working hours, and inadequate safety equipment. This can lead to a range of health problems, including respiratory infections, musculoskeletal disorders, and injuries. Additionally, the informal economy can contribute to crime and violence, as individuals may turn to illegal activities to supplement their income.

To address the challenges posed by the informal economy, there are a range of potential reduction measures that can be implemented at both the theoretical and empirical levels. At the theoretical level, researchers can explore the factors that contribute to the growth of the informal economy and develop strategies to mitigate its negative consequences. This may involve developing policies that promote formal employment opportunities, improving access to education and training, and promoting social protection programs for marginalized groups.

At the empirical level, governments and organizations can implement policies and programs that target the informal economy. This may involve improving the legal and regulatory framework for informal work, providing training and support to individuals who want to transition from informal to formal employment, and promoting the development of small and medium-sized enterprises in the informal economy.

In conclusion, the informal economy is a complex and multifaceted phenomenon that has significant implications for economic growth, development, and social and economic inequality. While the informal economy provides a source of income for many individuals, it also comes with significant risks and challenges. To address these challenges, it is essential to implement a range of reduction measures that promote formal employment opportunities, improve access to education and training, and promote social protection programs for marginalized groups. By doing so, we can create a more equitable and sustainable economy for all.

Weight: 197g
Dimension: 235 x 155 (mm)
ISBN-13: 9783030966867
Edition number: 1st ed. 2022