According to the INE, one in three employed persons in the Ñuble region are informal, that is, 78,876 people. In the December-February mobile quarter, the informal employment rate reached 35.7%, which represented an increase of 1.1 points compared to 12 months. This is the second highest rate in the country, after Los Ríos (36.0%) and is well above the national average of 27.3%.
In the case of women, the informal employment rate in Ñuble reached 38.4%, while for men it was 33.9%.
One of those women is Alejandra Mora Fernández, who is self-employed in her small nursery Jardín Aristata, in Chillán, where she grows succulents and cacti that she sells on social networks and at fairs. After working as a salesperson in a multi-store for 15 years, seven years ago this head of household had this informal business that she was able to start with the support of Fosis and that today she proudly points out that it has allowed her to maintain her home and educate her two children. . “It is my main income, I have been able to get ahead with my business, it has given me many fruits, I have been able to support my children (25 and 19 years old), the oldest graduated from Medicine a little while ago and the youngest entered to Chemistry and Pharmacy”.
“I had the intention of formalizing myself as a first-category taxpayer, I have attended municipal talks so that we formalize ourselves, but I was researching and I realized that if I formalized I would lose my children’s scholarships, the gratuity, because I was going to to change my score on the social protection tab; I believe that this system harms us; once my youngest son finishes university, I’m going to formalize myself,” argued Mora, who is also president of the Artemix group of entrepreneurs.
However, he added another important obstacle: “the big problem with formalizing, in addition to losing some social benefits, is that they fill us with taxes, and in the end our ventures could not exist because we would barely earn.”
Upward trend
Bernardo Vásquez, director of the Sence de Ñuble Labor Observatory and the Faculty of Business Sciences of the Bío-Bío University, contextualized that “the INE figures show that the informal employment rate has had a downward trend since the start of the pandemic (beginning of 2020), both nationally and regionally, due to the confinement and sanitary restrictions that have affected many economic sectors. However, as of the second half of 2020, an upturn in informality has been observed, associated with the economic reactivation and the easing of sanitary and confinement measures.
Vásquez stressed that “more than 78,000 people work without access to social security in the Ñuble region” and explained that “within this group of people, differences are observed according to age group. Although the largest number of informally employed persons are in the 45 to 59 age range (25,294 informally employed persons), the highest informal employment rate is observed in persons aged 60 or over with 42.4% (which is equivalent to to 14,152 people). In addition, the age group from 15 to 29 has an informal employment rate of 41.9%, which means that 17,733 young people are working in an informal occupation”.
Along these lines, Carlos Inostroza, a qualitative analyst at the Labor Observatory, noted that in Ñuble there are 34,565 women and 44,312 men with an informal occupation. “Although the number of employed women has increased since the April-June 2020 quarter, so has their informal employment rate, which indicates that many of them have accessed jobs that would be considered of lower quality and do not have social protection. On the contrary, the informal employment rate for men has decreased in the last three quarters, which suggests a greater formalization of their jobs”.
Inostroza specified that “according to INE data, the regional informal employment rate (TOI) has behaved differently from that of the country in recent years. While the national TOI was 27.3% in December-February 2023, the regional TOI is 35.7% in the same period. A possible explanation for this difference is the role of local agricultural activity in the generation of informal employment. The regional TOI is strongly influenced by the agricultural sector, the opposite situation occurs in the country. In fact, if the agricultural sector is excluded, the difference between the regional and national TOI is 7.1 percentage points, and when the agricultural sector is included, the difference increases to 8.4 points. This indicates that informality in the region is more sensitive to changes in the agricultural sector, which is more vulnerable to climatic shocks, international prices”.
factors
Asked about the factors for the increase in informality in Ñuble, the analyst maintained that “one of the causes is unemployment, however, it is not the only one. Other factors also have an influence, the lack of formal education and training, the scant supervision and regulation, or the times of formalization. In addition, in 2021 the economic reactivation that occurred in the Ñuble region and the country after the vaccination process does not guarantee a reduction in labor informality. On the contrary, it can generate an increase in employment with less social protection, this is a product of the importance that self-employment has presented”.
In this regard, Bernardo Vásquez recalled that “the figures indicate that the health crisis caused a significant drop in informal employment, especially among women, who were forced to leave the labor market, becoming inactive. However, as of 2021, a recovery of informality is observed, because many people returned to look for work due to the need for income and self-employment became more relevant.
Carlos Delgado, an academic from the School of Administration and Business at the University of Concepción, stated that “the high levels of labor informality are worrying, since they negatively affect the well-being of workers both in the short and long term. Since they are not subject to an employment contract, there are no guarantees of job security protection, nor can they access labor subsidies or training. In addition, since they do not pay social security contributions, they lose benefits associated with health insurance, improve their future pension (due to the generation of social security gaps), and cannot access unemployment insurance”.
In the teacher’s opinion, “the informal employment rate could be linked to poverty levels. Ñuble is the second region with the highest poverty rate in Chile. In many cases, informal jobs are sporadic, so many people living in poverty could be in a situation that is not enough to meet their minimum subsistence needs. On the other hand, there is the fear that being subject to formal employment is synonymous with loss of social benefits. In other cases, there is the fact that both the worker and the informal employer agree not to create a work contract so that the liquid salary is higher through non-payment of social security contributions, without taking into account the effect of the monthly bonus. It can also be the case of an entrepreneur who prefers to hire informally, offering wages below the legal minimum, because he perceives that it reduces the operational risk of his business ”.
economic impacts
For his part, Renato Segura, director of the Department of Economic and Productive Development (Didepro) of the Municipality of Chillán, warned that the problem of informality is having serious effects on the economy, citing as an example the unfair competition represented by illegal street vendors, to the point that they are reducing the sales of formal businesses in a complex economic scenario. Precisely, in the last 12 months in the commerce sector approximately 2,700 net jobs were lost due to the drop in consumption.
The professional asserted that “the system is perverse. There is no economy that has developed from informality. Informality is the food of underdevelopment, to the extent that countries have more informality, the quality of life of its inhabitants decreases considerably, because all the benefits of being in the formal market are lost, the security of a job, of pension savings. Think that many of these activities are not even counted in the GDP, so what we have is a net drop in production and the only thing that is sustaining the economy are the large economic activities, but the smaller ones are falling. There is a harmful, very perverse effect that informality has brought to established commerce and that has to change. The issue is that this has a political cost.”
Measurements
In this sense, Segura stated that “informality is very easy, while being formal brings complications. Somehow, we have to facilitate the procedures so that people who want to formalize can do so with as little paperwork as possible, I think we have to improve a lot in the bureaucracy. For example, when an entrepreneur wants to open a restaurant, he finds himself with a huge list of procedures. On the other hand, there must also be support from the State, preventing informality from being institutionalized, that is, the Carabineros should not be indifferent to seeing that the vendors are on the sidewalks, that is illegal and the Carabineros should act, but they do not act, then it is necessary to strengthen the State so that it creates the mechanisms so that these situations do not occur. And we, as municipalities, also have a role to play, with greater supervision, more education, encouraging the benefits to be associated with formalization, which is what we are trying to do with Didepro, in which we are demanding that, at least, the groups are formalized.
In the same way, the academic Carlos Delgado stated that “policies aimed at both the demand and the labor supply must be implemented. On the demand side, that is, companies, it is necessary to reduce labor rigidities, further simplify the procedures for creating new businesses, along with educating entrepreneurs regarding the benefits of formalizing their economic activity. On the supply side, that is, of people, it is necessary to expand the coverage and effectiveness of pension education campaigns, so that the population can understand the benefits of having a formal job (and the risks of not be). In addition, it would be convenient to evaluate the feasibility of generating equitable mechanisms that do not reduce the possibilities of receiving social benefits with the fact of obtaining a formal job, at least in the short term. In addition, since informal jobs are concentrated in those that are low-skilled, it is convenient to improve plans for training human capital in the population, not only in terms of the delivery of technical knowledge, but also in generating binding mechanisms for formal employment. as part of that plan.
Meanwhile, the Ñuble Labor Seremi (s), Hernán Valdés, stated that “as a Government we are promoting various measures to continue promoting employment, especially to promote formal employment and greater participation of women in the labor market. For this reason, we extended the IFE Labor until mid-2023 and we also extended the validity of the Protege Subsidy, which encourages more women to participate in the labor market”.
