Informal economy refers to the economy that is not recorded in parallel during economic studies. According to the International Monetary Fund, the informal economy includes activities that have a market value. If they are recorded, they contribute to revenue tax and GDP.

The economies of poor or developing countries are often informal. According to the research of the World Monetary Fund, 35 percent of the gross domestic product of low- and middle-income countries is occupied by the informal economy, while in the case of developed countries it is 15 percent. South Asian countries including Nepal are based on informal economy. 

The presence of elements such as low-quality jobs, inadequate social security, mismanagement, exploitation, and low productivity is strong within the informal economy. Within the informal economy, it is difficult to imagine equal respect for everyone's work and a decent workplace. However, it cannot be ignored as the majority of the population in poor countries depend on the informal sector for their livelihoods.

Nepal's economy is based on informal labor. According to the latest census, 65.5 percent of the country's population above the age of 10 is economically active. 84.6 percent of the economically active population is engaged in informal labor. This population has contributed 42.66 percent to the country's gross domestic product. The economically active population is 72 percent of the male population, while only 60.4 percent of the female population is. 

Looking at the economically active population divided by sector, 57.3 percent of the workforce is involved in the agricultural sector. After that, retail trade, transportation maintenance (12.5 percent), and construction sector (8.1 percent) are the second largest respectively. 2.9 percent of the population is active in education, 1.1 percent in human health, 0.3 percent in public administration and 0.3 percent in information and communication. 

According to the census itself, students (34.6 percent) make up the majority of the economically inactive population. Second is household work (23.1 percent). According to another data of the census, 87.4 percent of the female population considered to be economically inactive said that they are engaged in household work. Domestic work is not counted or valued economically by the Census. A large proportion (77.4 percent) of the population said to be involved in family care is women. The census did not count any men or women engaged in these activities as economically active. Thus, looking at the country's population and its gender division and division of labor as a basis, it is clear that the country's economy is dependent on informal labor and the majority of workers in that sector are women. Moreover, there is no count of the large population of people who go from Nepal to India to work in the informal sector, nor is there any mention of their contribution to the economy. 

What kind of labor is included in the informal sector? 

Work that is not directly covered by the formal standards or arrangements of the state, service facilities fall into the informal sector. These areas are not regularly regulated and managed by the state. Although it does, it does so only partially. Some of these businesses or sectors are subject to registration and tax payment and some are not. Mainly sectors like agriculture, garment factories, tea plantations, brick kilns, domestic labour, retail trade, handicrafts are covered under this. The entertainment and hospitality sector, which is developing extensively in Nepal recently, tourism business also belongs to the informal sector. Certain criteria need not be met to get employment in such fields. No specific education, professional competence or skills are required. It is the informal sector that has provided livelihood opportunities to a large part of Nepal's population. A large part of the same informal sector is occupied by women's labor. While a large number of men have left the village for foreign employment, women have handled all the agricultural work in rural areas. Construction work is going on all over the village/town. In which majority of the workers are women. Raising children and taking care of the elderly are the responsibility of women. Most of the work done at home, such as handicrafts, sewing clothes, running small businesses, and earning income by trading in haat bazaars and street stalls, are done by women. Women seem to be active in the work from crushing gravel, cutting rice and wheat to digging roads. The low-wage jobs of hotels, restaurants, bars, and dance bars that are developing in urban areas are occupied by women. Apart from this, the participation of women in jobs like security guards and tempo drivers has also increased significantly. If you look at it this way, it is no wonder that women are the backbone of the economy. Those who do such work include people of all classes, communities and castes. But the marginalized communities who are most deprived of education, opportunities, and resources are among the first. 

Dalits, tribals, residents of geographically difficult areas, excluded communities or individuals, disabled, gender, sexual, minority, single women, agricultural-based ex-kinship workers (Kamaiya, Haliya, Harwacharwa) belong to informal sector workers. In this sense, the informal sector has created employment and livelihood opportunities for a large part of the marginalized and unskilled or semi-skilled workforce within the country. But due to its lack of proper management and regulation, workers working in this sector are largely deprived of economic and social security.  What are the

problems? 

The problems of countries dominated by the informal economy are often similar all over the world. Workplace insecurity, precarious employment, limited legal rights, high labor exploitation are prominent. Workers in this sector are often deprived of benefits such as social security, pension, insurance, health care. Workers have no certainty of wages and working hours. Workers always feel insecure because they depend on the discretion of the employer rather than being bound by any set rules. They either do not have access to financial investments or facilities provided by the state or cannot meet the criteria to receive such services. Apart from this, these workers are among the most affected by the economic instability that occurs from time to time. For example, informal sector workers were among the first to lose their jobs around the world during Covid. As the group working in this sector is of low economic status, marginalized or landless, in some cases the workers do not have legal bases such as citizenship, birth registration, marriage registration. As a result, workers are automatically excluded from many of the protections the law provides. Sexual violence, exploitation, and gender discrimination are high as the majority of workers in the informal sector are women. And, due to the lack of regulation in this sector and many other reasons including poverty, the use of children in labor is high. 

The problems of informal workers working in Nepal are no different. According to the Nepal Labor Force Survey, 87 percent of the child laborers are in the agricultural sector. There is no identification, counting, social and economic security of workers working in agriculture and construction sector. Even though the minimum daily wage set by the government of Nepal is 500 and the monthly salary is 17,300, the workers in this area have not received it. Even now in the rural areas of the far and mid-west, unjust practices such as Balighare and Khalo are still in place. Due to the lack of fair rehabilitation of agricultural based pre-bonded labourers, this community continues to do forced labor for free or nominal wages to the landlords. 

Another big problem in Nepal's informal sector is the proliferation of brokers (labor intermediaries). Majority of workers have to rely on brokers for employment. But taking advantage of the condition of the workers, such brokers are exploiting the economy on a large scale. For example, workers used in the construction industry in rural areas, their wages, and open economic and labor exploitation by security or other domestic service companies in urban markets can be taken. This fact is revealed only by studying the salary of security guards working in offices, companies, banks or non-governmental organizations and the amount payable by that organization to the company. Compliance with the provisions of the Labor Act of Nepal is no more than a daydream for the workers. Even though the minimum wage or salary appears on the paper as prescribed by the Labor Act, the actual workers have not been able to receive it. Another major problem is that workers in the informal sector are not organized and cannot collectively bargain for their rights. Even within the informal, male-dominated sectors are comparatively organized, and there are examples of securing rights by joining trade unions. But this has not happened in sectors where there is a majority of women workers (such as agriculture, entertainment). 

Gender issues within informal labor  Another complex issue within the

problem is discrimination based on sex. Gender-based discrimination is high even within the informal workforce around the world. It is still a chronic disease in South Asian countries including Nepal. A striking example of this is the wage differential. Although the law states that there can be no discrimination in wages, there is still a difference in wages for men and women for the same job. Incidents such as sexual abuse, violence, use of abusive language, rape against women workers are regular fates faced by working women, young women and girls. In the absence of a systematic body to address and hear such incidents, the workers are forced to work with all these violence. Majority of the women in the informal sector are forced to carry out hazardous work with small children. What to do to improve