Informal Economy

Informal Economy

The informal economy can refer to economic activities that occur outside the formal labor market. Most commonly, the formal labor market as compared to the informal labor market are referred to as "legal" and "illegal"; "market" and "non-market"; "paid" and "unpaid". The informal economy can also be referred to as "underground" or "criminal". Generally, the informal labour market refers to production, distribution and consumption of goods and services that are not accounted for in formal measurements of the economy. 

Informal economic activities can include doing odd jobs or providing services for which you are paid in cash. Examples include: home renovations, car repairs, etc. These informal activities can be considered quasi-legal in that the work is considered "legitimate". But because it is unregulated and no taxes are paid, it is not considered part of the formal labor market economy. Other informal economic activities, including crime and drug dealing, are considered less legitimate or "criminal". The informal economic activities that are directly associated with homelessness in Canada, include aspects of the sex trade, panhandling and squeegeeing. 

Key research in Canada (Hagan & McCarthy) shows that homeless people participate in the informal economy not because of their inherent criminality, but rather, because the circumstances of homelessness shut people out of the regular labour market and force them to find alternatives to generate income. An advantage of informal economic activity for people who are homeless is that it allows them to have cash in hand on a daily basis in order to meet immediate needs such as the purchase of food.