🏭 Economic Development Pattern
As countries develop, employment shifts from primary to secondary to tertiary sectors. This is called the Clark-Fisher model. Poor countries have most workers in farming, whilst rich countries have most in services.
Economic Sector Impacts » Economic Development and Informal Work
What you'll learn this session
Study time: 30 minutes
- Understand the three economic sectors and how they change as countries develop
- Learn about the informal economy and why it exists
- Explore the advantages and disadvantages of informal work
- Examine case studies of informal economies in different countries
- Analyse the relationship between economic development and employment patterns
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Unlock This CourseIntroduction to Economic Sectors and Development
As countries develop economically, the types of jobs people do change dramatically. Understanding these changes helps us see how development affects people's lives and the economy as a whole. The informal economy plays a huge role in many developing countries, providing jobs for millions but often without proper protection or benefits.
Key Definitions:
- Primary Sector: Jobs that extract raw materials from the environment (farming, mining, fishing).
- Secondary Sector: Jobs that manufacture goods from raw materials (factories, construction).
- Tertiary Sector: Jobs that provide services (shops, banks, hospitals, schools).
- Informal Economy: Economic activities that aren't officially recorded or regulated by the government.
- Formal Economy: Official economic activities that are registered, taxed and regulated.
The Three Economic Sectors
Every job in the world fits into one of three economic sectors. The balance between these sectors tells us a lot about how developed a country is economically.
How Sectors Change with Development
The proportion of workers in each sector changes as countries develop. This pattern is so common that geographers have created models to explain it.
🌾 Primary Sector
Dominates in least developed countries. Over 70% of workers in countries like Chad and Niger work in agriculture. These jobs often provide low incomes and are vulnerable to weather and climate change.
🏭 Secondary Sector
Grows rapidly during industrialisation. Countries like China and India have seen massive growth in manufacturing. These jobs typically pay better than primary sector work and help countries export goods.
🏢 Tertiary Sector
Dominates in developed countries. Over 80% of workers in the UK work in services. These include everything from teachers to bankers to shop assistants. Many require higher education and skills.
Case Study Focus: Employment in Different Countries
Chad (Low Income): 80% primary, 15% tertiary, 5% secondary. Most people are subsistence farmers with very low incomes.
China (Middle Income): 25% primary, 29% secondary, 46% tertiary. Rapid industrialisation has created millions of factory jobs.
United Kingdom (High Income): 1% primary, 19% secondary, 80% tertiary. Most jobs are in services like finance, education and healthcare.
Understanding the Informal Economy
The informal economy is huge in many developing countries. It includes all the economic activities that happen outside official government records - from street vendors to unlicensed taxi drivers to people working in unregistered businesses.
Why Does Informal Work Exist?
Informal work exists for several reasons and it's particularly common in developing countries where formal job opportunities are limited.
💼 Push Factors
People are pushed into informal work by lack of formal jobs, poverty and the need to survive. When there aren't enough official jobs, people create their own work opportunities.
💰 Pull Factors
Some people choose informal work because it offers flexibility, no taxes and the chance to be their own boss. It can also provide quick income without needing qualifications.
Characteristics of Informal Work
Informal work has distinctive features that make it different from formal employment. Understanding these helps explain why it's so common in developing countries.
💳 Low Barriers to Entry
Most informal jobs need little education, training, or capital to start. A person can become a street vendor with just a few pounds to buy goods to sell.
👥 Small Scale Operations
Informal businesses are usually very small, often just one person or a family. They serve local markets and use simple technology.
📈 Unregulated
These activities aren't registered with the government, don't pay taxes and aren't protected by labour laws. This means no official records exist.
Advantages and Disadvantages of Informal Work
Informal work has both positive and negative impacts on individuals and the economy. It's important to understand both sides to see why it's such a complex issue.
Benefits of Informal Work
Despite its problems, informal work provides important benefits, especially in countries where formal job opportunities are scarce.
👍 For Individuals
Provides income when no other jobs exist, offers flexibility in working hours, allows people to use existing skills and gives independence from employers.
🌎 For Society
Reduces unemployment, provides cheap goods and services, creates entrepreneurship opportunities and helps people survive during economic difficulties.
Problems with Informal Work
However, informal work also creates significant challenges for both workers and the wider economy.
👎 For Workers
Low and unstable incomes, no job security, no benefits like healthcare or pensions, dangerous working conditions and long working hours.
🏢 For Government
No tax revenue, difficulty planning the economy, problems providing services and challenges measuring economic activity accurately.
Case Study Focus: Street Vendors in Mumbai, India
Mumbai has over 250,000 street vendors selling everything from food to clothes. They provide cheap goods for millions of people and create their own jobs when formal work is scarce. However, they face constant harassment from authorities, have no legal protection and earn very little money. Many work 12-hour days just to survive. The government is trying to formalise some vendors by giving them licenses, but this is a slow process.
Regional Variations in Informal Work
The size and nature of informal economies vary greatly between different regions and countries, reflecting different levels of development and government policies.
🌍 Sub-Saharan Africa
Has the world's largest informal economy - up to 70% of jobs. Includes farming, street trading and small manufacturing. Often the only option for survival.
🌏 Latin America
About 50% of jobs are informal. Common in cities where rural migrants can't find formal work. Includes domestic work, construction and street vending.
🌐 Developed Countries
Much smaller informal sectors (10-20%). Includes cash-in-hand work, online selling and some service jobs. Often chosen for flexibility rather than necessity.
The Future of Informal Work
As countries develop economically, the informal sector typically shrinks as more formal jobs become available. However, this process can take many decades and requires good government policies.
Strategies for Formalisation
Governments can help move workers from informal to formal employment through various approaches.
📚 Education and Training
Providing skills training helps people qualify for formal jobs. Improving basic education also helps future generations access better employment opportunities.
📊 Economic Growth
Creating more formal jobs through economic development reduces the need for informal work. This requires investment in infrastructure and business development.
Case Study Focus: Brazil's Formalisation Programme
Brazil created the "Simples Nacional" programme to help small businesses become formal. It simplified tax procedures and reduced costs for registration. Over 10 million small businesses have joined the programme, creating millions of formal jobs. Workers now have access to healthcare, pensions and legal protection. However, many informal workers still can't afford to formalise their businesses due to ongoing costs.