Informal Sectors in Ethiopia

The Role of Informal Sector Employment in Poverty Alleviation: The Case of Hawassa City, Ethiopia
Abstract:
<p>Informal sector plays an important role in urban poverty alleviation through creating jobs and reducing unemployment. It serves as a breeding ground for new entrepreneurs, and contributes for the reduction of urban crime and violence. This study is aimed at assessing the role of informal sector in solving unemployment and alleviating poverty. Primary data are gathered from a sample of 450 informal sector operators in Hawassa city. Ordinary logistic regression is used to determine the factors that can contribute to the livelihood improvement of the operators. Consequently, lack of working capital, working premises, adequate market, and raw materials are found to be the major impediments for informal sector operators. Nearly, nine out of ten operators have witnessed that their livelihood improved after they joined the sectors. Those operators who are more educated, younger, females, more profitable, stayed longer in the activity, natives to the city, and have a culture of saving, have depicted better livelihood improvement vis-a-vis their counterparts. Given the immense contribution that the sector has, therefore, the government needs to consider the sector as one of the fundamental pillar to combat poverty reduction. Thus, the operators should be encouraged to join the formal sector by lessening the bureaucracy to get license, minimizing entry cost such as lowering registration or licensing cost, and providing tax-holidays for sometimes</p>

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The Effects of the Informal Sector on Construction
Most construction sectors around the world have a high percentage of output being produced informally. In developing countries informal construction activities can account for as much as 80% of employment (Farrell 2004). In general, the informal sector equates to a significant percentage of country's GDP — 40% in developing countries and 18% in the OECD high-income countries. The informal sector in construction is not well understood and difficult to measure and is thriving both in the developed and developing world. Construction industries are made up of a large number of small firms and a small number of large firms. Many small firms are less likely to be able (or to want to) afford the bureaucratic demands of a nation's fiscal and legal system. This evasion means a reduction in tax income for the government, and also leads to inaccurate estimates of the true value of construction output. Some national statistical agencies factor in an estimate of the size of the informal sector, but without effective measurement, there is no guarantee that the estimate is a fair one. The message from the paper is that the informal sector in construction is likely to grow. We need to understand the sector and recognise its impact on construction.