Informal Economy and Child Labour

Term Paper, 2006

21 Pages, Grade: 1,3


Table of Content

1. Introduction

2. Informal Economy and Child Labour
2.1 Definition: Informal Economy
2.2 Definition: Child Labour
2.3 Relation: Child Labour & Informal Economy

3. Labour and Social Standards
3.1 Definition: Fundamental Labour and Social Standards
3.2 Organisations promoting labour standards
2.2.1 Non-Governmental Initiatives
2.2.2 Governmental Organisations
3.3 Standards concerning Child Labour
3.3.1 Approaches for Intervention
3.3.2 The standards issued by the ILO
3.3.3 The Success of the ILO Standards

4. Initiatives against Child Labour in Practise
4.1 Unilever and the Hybrid Cottonseed Production in India – a Worst Case
4.2 Children in the Mining Regions in Bolivia – a Best Case

5. Conclusion

1. Introduction

Child labour is a term that has been loaded with many emotions in the past. In industrialised countries, people have a very gridlocked opinion about this topic. Especially the recent discussions about sweatshops or other industries children work for, have brought up the question, if Western societies can really adopt their concepts on the developing world. As many of the jobs, children work in are in the informal sector, the author chose to put another emphasis on this topic.

This paper will first define the terms “informal economy” and “child labour”. In section 3 the concept of fundamental labour and social standards is introduced and the different organisations dealing with labour standards are presented. Proximately the approaches in child labour abolition are shown and exemplary demonstrated by the relevant conventions of the International Labour Organization. In section 4 a worst case and a best case example in combating child labour are presented.

2. Informal Economy and Child Labour

Before talking about the relation between the informal economy and child labour, it is necessary to define both terms.

2.1 Definition: Informal Economy

Living in an industrialised country, like Germany, most people will define the informal sector as work, that has not been registered with the authorities. Regarding the economical point of view, the loss of taxes and social security contribution is of special interest. This paper will not only focus on the economical impacts of the informal sector. Thus a broader definition is needed.

Economical and social scientists do not agree on a single definition on informal economy. The German Federal Statistical Office defines it as non-paid work, for example taking care of children and elderly, repairing items and other voluntary and social work.[1] Other economists argue, that all work, that can not be categorised into the formal sector, automatically is part of the informal one.[2]

In this paper, the informal economy will be defined by the following criteria. As some of them can also occur within the formal sector, a combination of them will help to concrete the classification in questionable cases:[3]

- There are no tax payments by the workers.
- The entrance barrier to the activity is low.
- There are very few employees working together.
- The activity is set up by a family and only family members work within the activity.
- The production is very labour-intensive and very capital- extensive.
- There is no or very few access to credits or other supporting programmes.
- The qualifications are trained on the job. They are not acquired within the formal school system.
- Work is divided to a very low degree.
- Simple and technological old means of production are used.
- Working hours are not well-regulated, agreements are made orally and payments are on a daily basis.
- There are no social securities.
- The intensity of work is very high, and the productivity very low.
- The products’ quality is poor.

Most authors exclude the criminal and the subsistence sector from the informal one. Although their inclusion would be interesting they will not be regarded, due to the restriction in time and extend of this paper.

2.2 Definition: Child Labour

In all centuries and all societies, children have worked. They helped in the households, raised their smaller brothers and sisters and contributed to the farm work. They were also working outside of the household in order to support the family’s income.[4]

Historically child labour only became a social problem, when education was spread to the whole society. Especially after education became compulsory, the combination of work and studies was not possible anymore. As society believed, that the education of children was a benefit and necessary, their work had to be abolished continuously. The negative image of child labour, that is common today in the industrial world, is hence a consequence of the changes in political, economical and social conditions.[5]

Defining the term “child labour” is not easy. Especially when thinking internationally, the concept “child” can be interpreted very differently. It could for example be defined by a certain age. But different societies may have different ideas of the age that tags the point when a child turns into an adult. In some societies certain social or religious rites and obligations may be more important than the age. In others the transition from child to adult happens so slowly, that it is not possible to abstract a certain point for the distinction of the life phases. Due to this, we have to agree upon the fact that when talking about the term “child”, different concepts could be meant depending on the context.[6]

In literature, the term “child labour” is used with many different concepts. The ones used most are:[7]

- All work of any kind performed by children
- Economic participation by children
- Full-time work performed by children
- Work that is harmful to children
- Work that interferes with schooling
- All remunerated work
- Wage employment
- Work that exploits children
- Work that violates national child labour laws
- Work that violates international standards

In order to respect national traditions, this paper will adapt the concept of positive and negative child labour.

Child labour is positive, and acknowledged as such, if it influences the development of a child positively. In developing countries working children can increase their status within their families and the society. They can learn their parents’ skills early and like this have an easier start into the adult life. Even in industrialised societies, work of children is accepted, because it is proved to support their self-esteem and –confidence.[8]

Child labour turns negative when it comes to an exploitation of the children. Alec Fyve defines this exploitive child labour with the following characteristics:[9]

- Children work too young
- Children work too long hours
- Children work for too little pay
- Children work in hazardous conditions
- Children work under slave-like conditions

When using the term “child labour”, this paper keeps with the use of the term by the International Labor Organization[10] and will refer to the latter, the exploitive kind of labour.

2.3 Relation: Child Labour & Informal Economy

According to Rosalind Boyd, child labour can be divided into four broad types of activities.[11]

Children can be employed in industries. In developing countries children mostly start by the age of four or five. Often they are sold to the owners by their parents and work with little or no pay. Typical industries, children’s work is abused in, are the carpet, the garment and the matchstick industry profiting of the cheap labour. Recent movements in industrial countries against child labour and deriving boycotts caused a hiding and informalisation of the work of these children.

A similar picture arises when examining child work on agricultural farms. While farm work performed by family members is acknowledged, the work of other children has been disapproved by Western societies. Thus the pressure to hide the child workers is high and many of them have been forced to move to urban areas in order to find any kind of new job, that in most cases is even more hazardous.


[1] cp. Teichert, V., p.21

[2] cp. ibid

[3] cp. Florisbela dos Santos, A.-L., p.11/12

[4] cp. Seelaus, A., p.38

[5] cp. ibid, p.19

[6] cp. Fyve, A., p.6

[7] cp. Seelaus, A., p.38/39

[8] cp. Fyve, A., p.7

[9] ibid, p.7/8

[10] cp. ILO, Global Report on Child labour, p.23

[11] cp. Boyd, R., p.155-157

Excerpt out of 21 pages


Informal Economy and Child Labour
Berlin School of Economics
Workers' Rights in the Informal Economy
Catalog Number
ISBN (eBook)
File size
587 KB
An introduction to labour and social standards as well as to initiatives against hazardous child labour and their effectiveness. Including a worst case and a best case example.
Informal, Economy, Child, Labour, Workers, Rights, Informal, Economy
Quote paper
Yasmin Shoaib (Author), 2006, Informal Economy and Child Labour, Munich, GRIN Verlag,


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