Why Informal Workers Organize: Contentious Politics, Enforcement, and the State. 2021. Oxford University Press.

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Informal workers make up 50% of the global workforce (International Labor Organization 2014, p. xi), but surprisingly, scholars know little about informal workers’ political or civil society participation (Baker & Velasco Guachalla 2018). For decades, researchers argued that informal workers rarely organized or participated in civil society and politics (Perry 2007, Rueda 2007). Furthermore, many asserted that these low levels of participation stunted political and economic development. The conventional wisdom holds that informal workers break laws, avoid taxes, produce less, and participate less in civil society than formal workers (King & Rueda 2008, Schneider, Buehn, & Montenegro 2010). 

However, in countries like Bolivia, informal workers such as street vendors, fortunetellers, witches, clowns, gravestone cleaners, sex workers, domestic workers, shoe shiners, and many others come together in powerful unions. In Bolivia, South Africa, South Korea, and India, national informal worker organizations represent millions of citizens (Agarwala 2013, Bhowmik 2012, Lazar 2007). Why do informal workers organize? 

I find that officials pay informal workers to organize. Officials have the power to encourage or discourage civil society participation among any group and they strategically use that power to start, help, or hurt informal workers’ organizations. In many places, officials offer informal workers cash and in-kind incentives to organize self-regulating groups, participate in those organizations, and enforce local regulations through those groups. Some governments pay informal workers to organize: In La Paz, Bolivia, officials and street vendors report that some political parties and city administrations pay leaders to cooperate, while in El Alto, Bolivia, the city government had an agreement to return half of all licensing fees to street vendor organizations. In India, the government issues organized informal workers debit cards for health care expenses (Agarwala 2013, p.3-4). In many more cases, officials offer informal workers policy input or incentives that can be used for material gain—on the condition that they organize. 

I argue that officials and informal workers are more likely to pursue this strategy under the following conditions: First, where informal workers’ compliance affects officials’ career advancement. Second, where the number and activities of informal workers exceed officials’ enforcement capacity. Third, where at least some informal workers have the know-how and resources to organize their colleagues. Where these conditions exist, incentives from officials promote organization, compliance, and civil society participation that would not otherwise exist. Leaders in informal markets use these incentives to make it worth their colleagues’ time to join and participate in informal workers’ organizations. Once informal workers organize, officials can bargain over legalization, regulation, and enforcement with a representative group. The group, in turn, enforces laws more thoroughly than officials could on their own.

The book marshals original interview, survey, and ethnographic data from bureaucratic offices and street markets to develop the theory. I ground the theory’s assumptions in ethnographic data that I collected while working as a street vendor in La Paz and São Paulo. I then formalize the theoretical core in a game theoretic model. I use machine learning techniques to estimate who is an informal worker and build a dataset of over 37,000 informal workers across Latin America. I test the implications of the theory on the machine-generated data and on cross-national data from the Latin American Public Opinion Project, the OECD, Varieties of Democracy, and the World Bank. Regressions find significant associations between lower state capacity, higher personal resources, and increased civil society participation. Case studies of unorganized and organized street vendors and the officials they interact with in La Paz, El Alto, and São Paulo illustrate the model’s equilibria. I conclude by suggesting that governments can increase compliance by delegating some enforcement to civil society groups.