“Uzbekistan has come a long way towards reducing informal employment over the past five years. However, the policy in this area can be further improved if informality in the labour market is finally clearly defined and the protection of all informal workers is put at the centre,” notes Binazir Yusupova – a participant of the CABAR.asia School of Analytics, in an article for CABAR.asia.
Until 2017, informal employment in Uzbekistan remained an “elephant in the room”: both the state and the people knew about the existence of this problem, but due to the lack of political will, the state policy in this area was not formed [1]. As a result, the definition of informal employment has not been formulated and enshrined in legal acts. Moreover, neither statistical data on informal employment was collected , nor any systemic measures to reduce it were taken.
With Shavkat Mirziyoyev’s succession, the country has seen an activation of state policy in reducing informal employment. Nevertheless, the definition of informal employment remains ambiguous which raises questions regarding both the quality of the collected statistical data and the validity of the measures taken to legalize labor. In addition, the development of employment policy rarely relies on relevant data and does not consider the diversity and opinions of informal workers. In other words, the policy to reduce informal employment is not based on evidence (evidence-based policy) and does not focus on the person and his/her rights (person centric). This article is intended to reveal the problems in the policy on informal employment, as well as to propose areas for improvement.
Why informal employment matters?
In Uzbekistan, about half of the working-age population is employed in the informal sector. These data vary from 35 to 50% depending on the source and methodology of data collected. According to the Ministry of Employment and Labor Relations, in January-July 2022, the share of people employed in the informal sector of the economy was 41%. In other words, about 6 million people of working age population in Uzbekistan do not have access to social protection and labor regulation mechanisms such as paid sick leave, maternity, paternity and childcare leave, unemployment benefits and pensions.
The informally employed are not a homogeneous group – they are women and men of different ages, with different levels of education, who, for various reasons, work informally. Therefore, these 6 million workers should not be taken for tax evaders. Informal employment is not a choice, rather its absence.
As research shows, informal employment is highly correlated with poverty and inequality. A higher percentage of informal workers than formal workers come from poor households; a higher share of all workers in poor households than in non-poor households are employed informally; and more often women than men work informally in the most vulnerable positions and earn, on average, less than men [2]. Despite these difficulties, informal workers contribute to poverty reduction and economic growth. Therefore, policies to reduce informal employment must be designed in a way not to harm the already vulnerable segments of the population.
Employment in the informal sector vs informal employment
The reason behind informal employment estimates varying from 35 to 50% stems from the lack of consistent operationalisation of the concept. For example, on the website of the Ministry of Employment and Labor Relations [3], the concept of “employment in the unofficial sector” is featured, while on the website of the State Committee on Statistics (Goskomstat)[4] in the section of sustainable development goals, one can find the term “informal employment”, and the glossary of the State Statistics Committee operates with the term “employed in the informal sector” and defines them as persons not registered with the tax authorities. These concepts seem convey similar meanings but there is a significant difference underlying them, and this difference determines the vector of public policy in the field of employment and labor.
According to the ILO and the International Conference of Labor Statisticians (ICLS), there are two approaches to understanding labor market informality which in turn determine the focus of public policy. The first approach is based on the concept of “employment in the informal sector” whereas the second focuses on the concept of “informal employment”. The first concept refers to employment in enterprises that do not have legal status, while the second concept also includes workers inside legally registered enterprises, but employed without official contract.
In other words, informal employment is a more inclusive and complex concept, including employment both in the “informal sector” and informal employment outside the “informal sector”, where the worker and his/her working conditions become the focus, not the legal status of the enterprise (see Figure 1).
For example, Madina works in an officially registered large construction company. She is not part of the informal sector. However, Madina’s employer did not conclude an employment contract with her, arguing that she is a woman of childbearing age, and in the event of her pregnancy and the birth of a child, he will have to pay maternity benefits. They only have a verbal agreement. According to the principles of the 17th ICLS, Madina is informally employed, as her labor and social rights are not protected.
Figure 1: Employment in the informal sector versus informal employment
As shown in the above example and depicted in Figure 1, the concept of employment in the informal sector and the concept of informal employment are not the same. An analysis of the available data (official websites of state bodies, regulations, and other documents), and personal conversations with representatives of the Ministry of Labor allow the author to conclude that the policy in the country is rather built around the concept of “employment in the informal sector”, thus excluding a whole layer of people like Madina. In other words, the policy is being built around the characteristics of enterprises, not the protection of the employees by labor law. Focusing only on the informal sector, the state targets small businessese, small-scale trade and self-employment, without paying due attention to violations against the workers within formally registered enterprises.
Until recently official speeches on informality in the labor market were prevailed by the concepts of shadow economy and illegality. However, currently the discourse has shifted towards reducing informal employment and ensuring decent work. Perhaps such discursive change also reflects the expansion of cooperation between the ILO and Uzbekistan, which since 2020 has transcended child and forced labor.
A new milestone in this cooperation was the approval of the presidential decree “On measures to reduce the share of informal employment and create a balance of labor resources based on modern approaches” dated August 30, 2022, No. PP-366. But even in this document, which, at first glance, marks a change in focus from the enterprise to the workers and their protection, the concept of informal employment is not defined. Thus, it remains unclear how the state is planning to reduce something it could not even define.
Moreover, according to the document, data on employment in the informal sector will be used to assess the effectiveness of policy in reducing the share of informal employment in 2023-2026 (see Appendix 4, paragraph 5). In other words, a decrease in employment in the informal sector (the grey triangle area inside the circle in Figure 1) will be presented as a decrease in informal employment (the three-color area inside the circle). As can be seen in Figure 1, the share of employment in the informal sector will be always lower than that of informal employment, thus giving rise to the illusion that the informality in the labour market is being reduced. Perhaps for this reason government agencies are hesitant to define and collect data on informal employment, instead collecting data on the informal sector only?
From an analytical concept to a statistical one: the problem of data quality
According to the National Strategy for the Development of Statistics of Uzbekistan in 2020-2025, the main bodies responsible for collecting data on labor resources are the State Committee of the Republic of Uzbekistan on Statistics and the Ministry of Labor and Labour relations, which also rely on data from the State Tax Committee [5]and other government agencies. Every quarter the Institute for Labor Market Research under the Ministry of Labor conducts “Survey of Labor Force” where a sample of 5,000 households in 14 regions of Uzbekistan are interrogated. Based on these data estimates of employment in the informal sector are compiled. Unfortunately, most of the data collected are not available to the public, including independent researchers.
After submitting formal request to the Ministry of Labor, only data disaggregated by agricultural and non-agricultural sectors (see Figures 2 and 3) and gender (see Figure 4) were obtained. As it turns out, the data that is being collected since 2018 is still in its pilot stage and requires to undergo verification by the ILO to be available for sharing. Such statement contrasts with in-person interactions with representatives of the ministry who stressed that collected data are reliable and have been continuously approved by the ILO. At the same time the representatives of the ministry have repeatedly expressed concerns that their data could be used “to criticize the policies and measures of Uzbekistan in a negative way.” Unfortunately, despite the requirements of the Law “On the openness of the activities of bodies of state power and administration”, some data in Uzbekistan remain inaccessible, which causes more grounds for distorting reality.
Figure 2:
According to WIEGO, a leading organization advocating for the rights of informal workers, effective targeted policies require the collection of data by sectors of the economy, employment status, place of work, gender and other demographic indicators. Currently, data are available only by agricultural and non-agricultural sectors (see Figure 3) and gender (see Figure 4), but these data are insufficient. Disaggregated data helps to better understand reality and allocate resources more efficiently.
Figure 3:
Figure 4:
Thus, it is critical to disaggregate data on informal employment by gender, age, level of education, disability, and other socio-demographic characteristics.
Gendered perepsective of the problem
In Uzbekistan, much attention is paid to the category of self-employed, while contributing family workers or houseworkers, who are predominantly women, are overlooked. In addition to the status of employment, it is important to capture the place of work. Due to increased risk of harassment and sexualized violence, it is vital to collect information about women who work in markets or at home, for instance.
As the World Bank study has revealed, there is a strong gender and age discrimination in employmentpractices in the formal sector in Uzbekistan. The study also describes a strong segregation in the labor market, where there exist predominantly "male" and predominantly "female" occupations, and often "female" professions are paid lower than the "male" ones. Employment in the informal sector is also highly segregated, but due to the limited availability and “exclusiveness” of the data, there are no studies on this topic.
The available data in the context of Uzbekistan shows that more women than men are employed informally (see Figure 4), and the proportion of women has not declined over the past 4 years despite the measures taken. This suggests that policies to reduce informal employment should be gender-sensitive and targeted. For example, the formalization of the self-employed and the introduction of pensions for this category is a necessary measure, but it does not consider gender aspects such as maternity benefits. It is insufficient to discursively highlight women and other vulnerable groups in regulations - it is crucial to understand what problems various categories of informal workers face and build public policy based on such evidence.
In other words, statistical data should not be collected for showcasing to international organizations or for internal reporting to higher officials, but for designing effective evidence-based policies aimed at workers and their needs.
How can informal employment be reduced?
The approach to reducing informal employment should be comprehensive and include the following 5 areas:
- Registration and regulation of informal work through the simplification of bureaucratic procedures and the provision of benefits and incentives in exchange for paying taxes.
- Creating more jobs in the formal sector and improving working conditions, including minimum wages, safety regulations, and health benefits in the formal sector.
- Expanding state social and legal protection to cover the informal workforce.
- Increasing the productivity of informal enterprises and the income of informal workers.
- Engaging informal workers in social dialogue through organization and representation.
One of the most successful examples of a policy in Uzbekistan in the field of reducing informal employment is the introduction and formalization in 2019 of the “self-employed ”, when tutors, housekeepers, nannies and other activities received the legal opportunity to work at/from home with the right to pension. This policy has brought out of the shadows and regulated activities of more than one and a half million people in two years. As of September 2022, the number of self-employed was 1,866,139 people. Among them, 48% were women, but they were predominantly registered as seamstresses, nannies, housekeepers, and caregivers - activities in which men are the least represented. Men are disproportionately more involved in construction, renovation, and agricultural work. Among the self-employed women, there is a tangible decrease in activity among the 20–24 and 25–29 age groups, while there is no suchdecrease among men in these age groups [6]. Reproduction of gender segregation and feminization of the workplace in the informal sector is evident.
Another positive example was the linkage of the amount of disability pension to the length of officially registered employment of persons with disabilities of groups I and II, which also encourages the disabled to come out of the shadows and demand formal employment contract. Unfortunately, not all measures taken are successful. For example, the introduction of various kinds of registries like “Iron Notebooks” (contains complete information about low-income families), for women and youth to expand social protection coverage and assist in finding employment has generated more corruption than employment. Moreover, such policy innovations are rarely monitored and analyzed for their effectiveness in reducing informal employment, which undermines people's trust in state institutions.
Conclusion
The complexity of the topic of informal employment demonstrates that it is difficult to solve this issue alone, without the participation of those who are targeted by this policy. Cooperation with the ILO is an effective step forward, but it is necessary to involve in discussions not only representatives of responsible ministries and departments, but also the informally employed themselves. And not only men, but also women of different ages with different employment status from different regions. During interviews with representatives of the Ministry of Labor Relations and Employment, the author noticed not only the predominance of men in positions that make important decisions, but also the lack of a gender perspective in considering the objectives of reducing informal employment. Until the author herself began to ask about informally employed women and their special needs, such as maternity leave, employees talked about measures, only through a male gaze.
Due to the lack of legal recognition and the right to representation in rule-making and political processes, informal workers do not have a platform to voice their needs (i.e., they do not participate in policymaking and rule-making processes that directly affect them). Informal workers are fragmented and are not collectively organized, which is not a deviation from the norm in a country where the power of trade unions is monopolized in the hands of the Federation of Trade Unions of Uzbekistan, which serves everything but the interests of workers. Trade union policy should be reviewed to ensure that informal workers have the right to organization, representation and to social dialogue.
Countries where the government initiates tripartite political negotiations involving the informal workers themselves are more likely to move towards the formalization of work and the promotion of decent work. An analysis of the measures taken by the state since 2017 shows that the voice of the informally employed themselves is not considered, and they are perceived simply as objects of state policy. Perhaps if informal laborers in Uzbekistan had a representative voice, the resources spent on empty day labor centers for women “mardikors” would be more effectively allocated.
Uzbekistan has come a long way towards reducing informal employment over the past five years. But the policy in this area can be even more effective if the definition of informality in the labor market is finally spelled out by the law and the protection of informal workers of all categories is put in the policy focus. This would improve the quality of the data collected, as the lack of a clear definition and transparent methodology is a breeding ground for data manipulation. Today, a huge amount of data is being collected, but it remains closed.
The key to the effectiveness of the policy - is a policy based on an open and transparent data, but not for reporting to the international organizations, but to improve the living conditions of informal workers. Unfortunately, many measures are being taken to reduce informality in the labor market, but there is no mechanism for monitoring their effectiveness. State policy cannot be perfect, mistakes cannot be avoided. But an open multi-stakeholder dialogue involving the informal workers themselves is another area for improvement. Providing informal workers with the possibility of collective participation through organization will be a big step forward towards the formalization of the workforce in Uzbekistan.
Any views expressed are those of the author and do not reflect the official policy or position of any institution or funding body.
[1]Tagaev B.E. Regulation of informal employment in Uzbekistan in the context of economic modernization. Bulletin of the Plekhanov Russian University of Economics . 2020;(2):74-84. https://doi.org/10.21686/2413-2829-2020-2-74-84
[2]Chen, M. & Carré, F. (2020) The Informal Economy Revisited: Examining the Past, Envisioning the Future . Routledge.
[3]According to the Decree of the President of the Republic of Uzbekistan No. PF-269 dated December 21, 2022, the Ministry of Employment and Labor Relations of the Republic of Uzbekistan was reorganized into the Ministry of Poverty Reduction and Employment from January 1, 2023.
[4]According to the Decree of the President of the Republic of Uzbekistan No. PF-269 dated December 21, 2022, the State Committee on Statistics of the Republic of Uzbekistan was transformed into the Agency of Statistics and transferred to the jurisdiction of the President of the Republic of Uzbekistan from January 1, 2023.
[5]According to the Decree of the President of the Republic of Uzbekistan No. PF-269 dated December 21, 2022, the State Tax Committee of the Republic of Uzbekistan was transformed into the Tax Committee under the Ministry of Economy and Finance from January 1, 2023.
[6]Data from the official website of the State Tax Committee of the Republic of Uzbekistan