Role of Informal Sector in the Neoliberal Reform Report (Assessment)

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Politics and everything that is connected with it has always been one of the most interesting and important topics. There is a great number of articles that depict different problems of countries all over the world. These articles provoke numerous discussions and various points of view. Especially it concerns the articles that touch upon political issues and the political economy of different states. Political reforms have always been the primary targets of every state as they are forwarded to improve the current situation of the country. Neoliberal reform in Latin America is one of the most interesting topics, which has its advantages and disadvantages, concerning its effect on the labor market.

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First, of all, it is necessary to point out the main features and reasons of the neoliberal reform in Latin America and its effects on the labor market. Needless to say that the crisis touched practically every country of Latin America. In the case of Mexico, neoliberal economists made attempts to release the crisis by stating that it was a kind of deviation rooted in the country’s exceptional features. Neoliberals asserted that economic unprofessional conduct, corruption, and political unsteadiness were the primary reasons for the Mexican crisis. The same can be said about the other countries of Latin America, which had the same situation in the political sector.

Some years later, when most of the world’s fastest rising economies in Asia appeared in collapse, neoliberals for a second time found the protection in exceptionalism in explaining the crush of the very states that they described before as marvel economies. One more country that had fallen under the neoliberal reformation and its consequences were Brasil. Neoliberals found the explanation of the crisis in Brasilia as the result of the governments unsuccessful try to fix the cost of the currency and its doubtful fulfillment of neoliberal reorganization.

As a final point, neoliberals recognized domestic political divergence, the malfunction of objective corruption, and follow political and economic reform. Neoliberals relied on the profit of an expediently small memory taking into account the intermittent crises in the fast-growing countries. The last country that got to know the consequences of the neoliberal reform was Argentina. Neoliberal financial reform induced currency instability and this way damaged the economy of Latin American countries.

Neoliberal reform persuaded currency unsteadiness in other ways as well. Neoliberalism both augmented the position of market forces in the purpose of values of the currency and made it easier and more striking for financiers to penetrate or egress the country rapidly in chase of temporary speculative possibilities. Unfortunately, neoliberal reform had some negative effects on the labor market of Latin American countries. especially it concerns the labor market in formal and informal sectors. “The neoliberals’ rhetorical argument based on “flexibility” and “attractiveness” gave way to an objective basis for increased informality that emerged as a result of slower economic growth, restrictive fiscal and monetary policies, low employment elasticity, and global competition” (Jonakin 292). The disagreements intrinsic in the neoliberal financial organization were obvious.

These disagreements left fast-growing states prone to resources flight, currency and financial unsteadiness, and crisis; persuaded economic recession; concussed independence; and exaggerated the differences in power and wealth. The last two points are the inherent characteristics of industrial economies. To my mind, one of the main aims of the neoliberal reform was utilizing the urban and rural areas, which required an additional labor force.

This means that it was necessary to find new and experienced stuff both for formal and informal sectors. Two main definitions were used to define the informal sector: those who were self-hired, in familial service, and salary workers in little organizations as usual with ten workers; or the labor force which was not sheltered by existing, defensive labor rule which governed components such as employment and firing, disjointing payments, access to a minimum salary and particularly societal safety and some benefits connected with the health care.

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Both definitions involved mainly overlapping populations of employees who were non-unionized and produced in most cases the products and services, which were non-tradable and with poorly-developed technologies. The reform of the informal sector appeared to be unsuccessful due to some reasons. First of all, they were connected with the neglect of the government to the problems of the informal sector, that is low level of life and poverty. With a poor development of the informal sector and the growth of unemployment, some economists considered the informal work under the new organization as an unqualified virtue.

The difficulty faced by promoters of reform was to reconcile the earlier criticism of a

regulatory regime,–which was believed responsible for consisting many to informal

work, low wages, and poverty with the exposed reality of a neoliberal world of greater

labor market “flexibility” and choice wherein the conditions of informal work,

wages and poverty had worsened (Jonakin 296)

Latin America continued to be a congested economy with very well-built domestic benefits in every particular country. The domestic private companies that were under the protection of the government possessed the required resources, which allow addressing the government for extra defense against all competition that might occur. Actually, the formal sector of Latin American countries had rather a high level of development, which would help the countries to be on a good level, but the formal sector was suffered from poor development and misery of the informal one. The government considered that the lack of education of working people of the informal sector was the main reason for the poor productivity and weal development.

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That was why increasing the educational level was one of the primary actions that the government tried to perform in the informal section to close the productivity gap. In this case, it was something like an apology for the appalling performance of the economy. There were a great number of examples, beginning from the banking system and finishing by the food production when the companies of the informal sector tried to increase the level of development using additional training and education.

The real problem of the formal sector was not the education, but the expensive costs of carrying out the legal industry in the area of the formal sector. Needless to say, that big government needed big taxation. Companies of the formal sector had high productivity, but at the same time, the levels of taxation were also very high. This problem concerned not only the formal but informal sector as well, especially the labor market.

Bureaucracy was another very important problem of the neoliberal regime. The bureaucracy and its laws can become a real obstacle to the development of any fast-growing country. The formal sector of Latin America during the neoliberal regime was characterized by the presence of a well-educated labor force and companies that had the best level of productivity. That is why the less-skilled workers had no complete access to the labor market of the formal sector to be taught to perform high-quality work in the future. To my mind, one more reason the informal market being in such a situation was some kind of a prejudiced attitude of the representatives of the formal market to informal ones.

The viewpoint that the informal sector consisted mainly of poor and badly educated people, neglected by the society became the reason to treat informal market’s representatives as vice. The government in its turn did not make any attempts to control and change this situation considering the informal sector less important and focused mainly on the formal sector. This also can be regarded as the main feature of the bureaucratic government.

So, the present paper demonstrates the degree to which neoliberal reform can be discussed by concentrating on the main field of public policy that is the labor market. Like any other field, the labor markets were straightly and not directly subjected to rigid reforms of the neoliberal ideas. Labor markets are fundamentally domestic policy fields whose structural peculiarities are connected with the worldwide structure of production. The problems of labor markets of the informal sector were the primary to solve during the period of the neoliberal regime.

Works Cited

Jonakin, Jon. “Review of International Political Economy: Cycling between assessing the informal sector’s awkward role under neoliberal reform”. Review of International Political Economy 13.2 (2006): 290-312. Print.

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IvyPanda. (2021) 'Role of Informal Sector in the Neoliberal Reform'. 20 December.

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IvyPanda. 2021. "Role of Informal Sector in the Neoliberal Reform." December 20, 2021. https://ivypanda.com/essays/role-of-informal-sector-in-the-neoliberal-reform/.

1. IvyPanda. "Role of Informal Sector in the Neoliberal Reform." December 20, 2021. https://ivypanda.com/essays/role-of-informal-sector-in-the-neoliberal-reform/.


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IvyPanda. "Role of Informal Sector in the Neoliberal Reform." December 20, 2021. https://ivypanda.com/essays/role-of-informal-sector-in-the-neoliberal-reform/.

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