What are the advantages of informal employment
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What are the advantages and disadvantages of an informal economy?
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Activities in an informal economy take place outside of government regulation or recordkeeping. It’s often very small scale, someone selling something for cash on the street. Working off the books (ie for cash and with no reporting to the government) is part of the informal economy.
Any illegal activity, like drug dealing or smuggling obviously takes place in the informal economy.
The advantage is that it allows people without the capital to open a store and keep records and pay employment taxes to make a living. In some cases, stupid government regulations (like ridiculous official exchange rates, or subsidies) work to keep goods out of stores by making the trade unprofitable. Informal sellers can sell at market prices, so they can stock the stuff that people want.
The disadvantages include these:
The government can’t measure the actual state of the economy to help make policy
The government isn’t collecting the taxes that it should
Consumers are not protected from people selling fake/unsafe goods
Workers injured on the job don’t have recourse to required insurance
Workers don’t accumulate government pension benefits
Informal businesses have to stay small to avoid attracting attention. Big companies are more efficient.
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Activities in an informal economy take place outside of government regulation or recordkeeping. It’s often very small scale, someone selling something for cash on the street. Working off the books (ie for cash and with no reporting to the government) is part of the informal economy.
Any illegal activity, like drug dealing or smuggling obviously takes place in the informal economy.
The advantage is that it allows people without the capital to open a store and keep records and pay employment taxes to make a living. In some cases, stupid government regulations (like ridiculous official exchange rates, or subsidies) work to keep goods out of stores by making the trade unprofitable. Informal sellers can sell at market prices, so they can stock the stuff that people want.
The disadvantages include these:
The government can’t measure the actual state of the economy to help make policy
The government isn’t collecting the taxes that it should
Consumers are not protected from people selling fake/unsafe goods
Workers injured on the job don’t have recourse to required insurance
Workers don’t accumulate government pension benefits
Informal businesses have to stay small to avoid attracting attention. Big companies are more efficient.
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4
There is a formal as well as an informal sector of an economy.
The informal sector does not come under any regulations or monitoring by the government, and also the production associated with this sector is not covered under Gross domestic product( GDP).
There are several advantages of informal employment:
It is a sector that functions without any government interference and therefore no tax payment is required here, as a result of which people can enjoy their income without any deductions.
Also, it involves no requirement of any capital to have a store and maintain records.
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