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Informal Self-Employment in Developing Countries:

Entrepreneurship or Survivalist Strategy? Some
Implications for Public Policy

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DOI: 10.1111/j.1530-2415.2009.01174.x · Source: OAI

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Analyses of Social Issues and Public Policy, Vol. 9, No. 1, 2009, pp. 135--156

Informal Self-Employment in Developing Countries:

Entrepreneurship or Survivalist Strategy? Some
Implications for Public Policy
Benjamin Temkin∗,1
Facultad Latinoamericana de Ciencias Sociales (FLACSO), Mexico

A central debate around labor market informality, which has enormous implica-
tions for the design and implementation of public policy, relates to the nature
of informal employment. Is informal employment and, in particular, informal
self-employment, a symptom and, at the same time, a reproductive factor of pre-
cariousness and inequality, as well as social and individual poverty? Or is it,
on the contrary, a space of individual and social action that reflects economic
initiative and business potential which, if channeled and fostered properly, could
contribute to social and economic development and, consequently, to the reduc-
tion of inequality and poverty? In this article, the findings of the 2005 edition of
the Mexican version of the World Value Survey—concerning relevant values and
attitudes of informal participants in the labor force in Mexico—are used to assess
whether informal self-employment is a reflection of incipient entrepreneurship
and individual choice or, rather, a survival strategy forced on individuals by their
precarious circumstances. This article explores the public policy implications of
the results obtained.

Introduction

The impressive growth of the informal economy and informal employment

in contemporary societies, particularly those that are less developed, has been
intensively studied and analyzed over the last four decades from a multitude of
theoretical and empirical perspectives. Nevertheless, there is no general consensus
regarding the causes and impact of labor informality or about the best public
policies to deal with the problems and challenges it creates. Even the definitions

∗ Correspondence concerning this article should be addressed to Benjamin Temkin, Latin Ameri-
can Faculty of Social Sciences (FLACSO), Carretera al Ajusco 377, Col. Heroes de Padierna, Tlalpan
14200, Mexico DF, Mexico [e-mail: temkin@flacso.edu.mx or temkinator@gmail.com].
1
The author teaches at the Latin American Faculty of Social Sciences (FLACSO) in Mexico City.
135
DOI: 10.1111/j.1530-2415.2009.01174.x "
C 2009 The Society for the Psychological Study of Social Issues
136 Temkin

of informal employment and of the informal sector are the subject of continuous
debate.2
Some analysts conceptualize labor market informality in terms of the size and
characteristics of the informal sector that encompasses productive units sharing
specific characteristics, such as being small in scale, with a low level of organi-
zation, little or no division between labor and capital, and labor relations based
mostly on casual employment, kinship, or personal and social relations rather
than on contractual arrangements with formal guarantees. (International Labour
Organization, 2002).
Alternatively, others prefer to focus on informal employment, defined in ref-
erence to characteristics of individual participants in the labor force. According
to the International Labour Organization [ILO] (2002), “informal wage employ-
ment is comprised of employees of informal enterprises as well as various types
of informal wage workers who work for formal enterprises, households, or who
have no fixed employer. These include casual day laborers, domestic workers,
industrial outworkers (notably home workers), undeclared workers, and part-time
or temporary workers without secure contracts, worker benefits, or social protec-
tion.” Also included among the informally employed are street vendors as well as
self-employed individuals owning microenterprises, their salaried employees and
unpaid relatives. Domestic employees are also part of the informal labor market.
To summarize, the concept of informal employment refers to the significant part
of the global workforce that remains outside the world of full-time, stable, and
protected jobs (Women in Informal Employment: Globalizing and Organizing,
2007), regardless of whether they work in the formal or informal sector. The spe-
cific operationalization of informal employment utilized in this research includes
elements from both “the informal sector” and “informal employment” perspectives
and will be presented below.
In recent years, according to the International Labour Organization (2002), in
developing countries, informal jobs have reached 50–75% of all nonagricultural
employment. For Mexico, the ILO estimates that, in 2002, nonagricultural informal
jobs were 55% of the total. When including the agricultural sector, this figure rises
to 62%. Given that the majority of jobs generated in Mexico since 2002 are within
the informal labor market, today’s figures are actually higher. It should also be
noted that developed nations do not lack a significant informal sector.3

2
Because of the heterogeneity of the informal sector, and its multiple dimensions, conceptual
and statistical definitions of this sector are not as clear-cut as one might expect. (International Labour
Office, 2002)
3
Three categories of nonstandard or atypical work/self-employment, part-time work, and tempo-
rary work—comprise 30% of overall employment in 15 European countries and 25% of total employ-
ment in the United States. Although not all self-employed, part-time workers, and temporary workers
are informally employed, a majority receive few (if any) employment-based benefits or protection. In
the United States, for instance, less than 20% of regular part-time workers have employer-sponsored
health insurance or pensions.(International Labour Organization, 2002).
Informal Self-Employment in Developing Countries 137

Informality, a Survival Response, or an Expression of Initiative

and Independence?

A central debate concerning informality, which has enormous implications

for the design and implementation of public policy, relates to the nature of infor-
mal employment. Is informal employment a symptom and, at the same time, a
reproductive and perpetuating factor of precariousness, inequality, as well as of
social and individual poverty? Or is it, on the contrary, a space and dimension of
individual and social action that reflects economic initiative and business potential,
which, if channeled and fostered properly, could contribute to social and economic
development and, consequently, to the reduction of inequality and poverty?
At one extreme of this debate, some analysts see economic informality as
a residual phenomenon, that is, a heterogeneous and growing set of unstable
and marginal labor activities stemming from the lack of capacity of the formal
economy to absorb unemployed workers (PREALC, 1981, 1982; Tockman, 1987)
In a somewhat different interpretation that also stresses the precarious nature of
informal employment, it is seen as resulting from developments occurring in the
formal sector of the economy, specifically, from formal companies’ efforts—under
national and international pressures—to lower their labor costs and increase their
competitiveness level.4 For the first version, the informal segment includes mainly
individuals who have been temporarily or permanently displaced from the formal
sector, while for the second, it is composed increasingly by informal workers who
are employed directly or indirectly by formal enterprises as part of a chain of
unequal but functional relationships. In any case, according to both versions of the
informality as a survivalist response perspective, a growing number of individuals
are forced, due their low position in the socioeconomic structure and low levels
of human capital, to take low-paying informal jobs.
At the other extreme, some observers, consultants, and policy makers, main-
tain that informality—at least in the case of the self-employed informals—should
be understood as a form of incipient entrepreneurship on the part of people with
low levels of income and education who prefer the independence and initiative
opportunities supposedly associated with informal trade and production to being
employed at low wages and subordinated to superiors in companies or occupa-
tions in the formal sector. This approach visualizes the informal labor market
as an unregulated sector in developing countries, equivalent to the voluntary en-
trepreneurship of small-business people in developed countries. The image is of
individuals who choose to position themselves in the informal sector because of
the relative advantages it offers, including relatively high profits (De Soto, 1987,

4
The informalization of the work force and of the supply networks of formal companies is also
very significant in Mexico. For example, the uniformed vendors of phone cards or newspapers in the
streets of Mexico City. Also to be noted is the large number of subcontracting companies that function
informally and are suppliers of goods and services to firms in the formal sector, thus lowering their
production costs (Portes, 1989; Portes, Castels, & Benton, 1989; Portes & Shauffler, 1993).
138 Temkin

2001; Maloney, 2004). This study examines with particular attention the informally
self-employed, or own-account workers, who are perceived and conceptualized
by many as the main protagonists of this purported voluntary entrepreneurship.
In this article, an attempt is made, using the Mexican case, to explore which of
those two contrasting perspectives provides a more accurate diagnosis of the nature
of informal employment in general and of informal self-employment in particular.
As will be explained in more detail below, the research strategy utilized here is
to identify a number of central values and attitudes held by informal employees
and self-employed participants in the Mexican labor force, draw comparisons
with their formal counterparts, and evaluate the extent to which those values
and attitudes are more consistent with an explanation of informality that stresses
entrepreneurship or precariousness.
It is important to point out that the debate just described has momentous im-
plications for public policy choices, particularly in developing countries. Should
public authorities in those countries invest scarce financial and human resources
in the promotion and support of the incipient entrepreneurship that supposedly
characterizes informal self-employment? Should they, for example, funnel public
funds to grant loans to informal microbusinesses? Should they ease rules and direc-
tives, including labor market regulations that are allegedly stifling the significant
growth and innovation potential of informal entrepreneurs and of their micro and
small enterprises? Or, alternatively, should governments concentrate their efforts
on designing and implementing public policies and programs that generate growth
in the formal sector, thus encouraging the generation of larger numbers of secure,
stable, and better paid jobs with social benefits, while simultaneously improving
long-term human capital availability through investment in education?
And if the answer is that both strategies should be pursued, clearly a better
evaluation of the characteristics of informal employment could help decide the
relative weight of the resources and efforts dedicated to each of them.

Entrepreneurship, Precariousness, and Informal Self-Employment

In order to better elucidate the character of informal self-employment, and

ascertain whether it fits better the description of survivalist strategy or that of incip-
ient entrepreneurship, it is worthwhile to briefly review some relevant insights that
have been offered in the rich and well- established literature on entrepreneurship.
Since, within a market economy, entrepreneurial initiatives and behavior are
considered essential for economic growth and development, interest and research
in those subjects have surged in recent years (Alstete, 2002; Frank, Karunka,
Lueger, & Mugler, 2005; Green, David, Dent, & Tyshkovsky, 1996; Gurol & Atsan,
2006; Hatten & Ruhland, 1995; Klapper, 2004; Morrison, 2000; Outcalt, 2000;
Rohaizat & Fauziah, 2002).5 A specific question that has been of central interest in

5
Quoted in Mohar, Manjit, & Kamal (2007).
Informal Self-Employment in Developing Countries 139

this area of research, and is extremely relevant for this study, refers to the nature of
self-employment. Earle & Zakova (1998), for example, acknowledge the difficulty
of evaluating the level, changes and characteristics of self-employment and remind
us that “on the one hand, a self-employed worker may be an entrepreneur exploiting
new opportunities and inventing and improving products, production processes,
and ways of distribution. At the other extreme, self-employment status may reflect
the inability of a perhaps destitute worker to find a satisfactory ‘regular’ job as
an employee, and her activities and income may differ little from those of an
unemployed person. A self-employed worker may be striving to grow wealthy
by taking risks with new ventures, or she may be casting about desperately for
any means to ensure survival. She may be developing new markets and creating
jobs for others—her employees—or her self-employment may involve withdrawal
from markets, a return to pre-modern self-sufficiency.”
A related issue in the literature is the conceptual distinction between small
business ownership and entrepreneurship. As Martin (1982) argued, “a person who
owns an enterprise is not necessarily an entrepreneur.” Carland, Hoy, Boulton, &
Carland (1984), on their part, suggested: “Not all new ventures are entrepreneurial
in nature. Entrepreneurial firms may begin at any size level, but they key on growth
over time. Some new small firms may grow, but many will remain small businesses
for their organizational lifetimes.”
Also to be noted in this regard is the sharp distinction drawn by Glueck (1980)
between entrepreneurial ventures and family business initiatives. The strategic
practices of entrepreneurial ventures are geared toward the best interest of the
firm and are growth oriented as well as innovative. Family businesses, in contrast,
emphasize preferences and needs of the family as opposed to those of the business.
In line with Shumpeter’s (1934) criteria for entrepreneurship, Carland and his
colleagues (1984) maintain that the critical factor that sets apart entrepreneurs
from nonentrepreneurial small business owners is innovation: “The entrepreneur is
characterized by a preference for creative activity, manifested by some innovative
combination of resources for profit.”
Particularly relevant for the research strategy employed in this article are stud-
ies that deal with the personal traits purportedly associated with the entrepreneur.
These studies adopt a psychological perspective that “views entrepreneurs as in-
dividuals who have unique values, attitudes and needs which drive them” (Mohar,
Manjit, & Kamal, 2007). This approach focuses on personality/psychological fac-
tors and characteristics. Among the traits considered to be strongly linked with
entrepreneurship, most researchers within this approach stress measurable syn-
dromes such as: the need for achievement, internal locus of control, risk taking,
tolerance for ambiguity, self-confidence, and innovativeness.6
6
Need for achievement, ( Hornaday & Aboud, 1971; McClelland, 1961), internal locus of control,
(Borland, 1974), risk taking (McClelland, 1961; Palmer, 1971; Timmons, 1978), tolerance for am-
biguity, (Bygrave, 1989), self-confidence, (Begley & Boyd, 1987) and innovativeness, (Schumpeter,
1934).
140 Temkin

Entrepreneurial characteristics frequently referred to in the entrepreneurship

literature

Self-confident Independent
Determined Innovative
Energetic Demonstrates leadership
Resourceful Versatile
Calculated risk taker Gets along with others
Creative Responds to suggestions and criticism
Self-motivated Profit-oriented
Flexible Perceptive
Responds to challenges Optimistic
Eager to learn Impatient
Responsible Goal-oriented
Competitive Needs to achieve
Competent decision-maker

The emotional, cognitive, normative, and attitudinal components of these syn-

dromes are diverse and researchers do not always agree about the relevance of all
of them. Still, some ostensible common traits of entrepreneurs are most frequently
cited in the field. The following list, elaborated by a group of experts, includes
personal traits that conform to what they label the portrait of an entrepreneur.
(Pennsylvania Partnership for Economic Education and Economics, 2003):
From this succinct review, it is possible to identify in the general field of en-
trepreneurship research a similar preoccupation to that which permeates the debate
on the character of informal self-employment as a survival strategy or as incipient
entrepreneurship. In putting forward contrapositions such as: (a) small business
owner versus entrepreneur, (b) family business versus entrepreneurial venture, and
(c) innovative enterprise versus family needs-oriented initiative, researchers have
helped identify the specificity of entrepreneurial endeavors and of the personal
traits that are most conducive to them.
In contrast, the syndromes that are often associated with the literature about
labor markets and working conditions7 , with the vulnerability of informal em-
ployment, include:

7
Ver por ejemplo, Amable, Benach, & González, (2001); Beccaria, & Groisman (2007); Burchell,
(1989); Cabrera, (2005); Chen et al. (2005); González de la Rocha, (2001); Ludermir & Lewis (2003);
Nun, (2001); Wichert, Nolan, & Burchell (2000) offer the following depiction of the impact of informal
work on people: “The consequences of working informally go far beyond the income dimensions of
poverty to include lack of human rights and social inclusion. Compared to those who work in the
formal economy, those who work in the informal economy are likely: to have less access to basic
infrastructure and social services; to face greater exposure to common contingencies (e.g., illness,
property loss, disability, and death); to have less access to the means to address these contingencies
Informal Self-Employment in Developing Countries 141

a. Lack of self-confidence.
b. Low levels of subjective well-being.
c. Lack of personal initiative.
d. Negative self-perceptions of health.
e. Absence of motivation and determination.
f. Dearth of creativity and self-reliance.
g. External locus of control.
h. Low value attributed to determination, perseverance, and independence.
In the following sections, we make use of the conceptual and empirical contribu-
tions just described and of information obtained from the 2005 Mexican version
of the World Value Survey (WVS) to evaluate the extent to which informal par-
ticipants in the labor force in Mexico, and in particular the self-employed among
them, share personal traits associated with entrepreneurship, such as indepen-
dence, initiative, and creativity, for example, or whether on the contrary, they
are characterized by personal syndromes that reflect vulnerability, precariousness,
insecurity, and a survivalist orientation to work and life.

Characteristics and Originality of the Research

It is a surprising fact that, although economic informality has long been iden-
tified as a central public policy issue in Mexico as well as in many other developing
countries, and that it has been studied by numerous academic researchers and pub-
lic officials, so little is known about the informal workers individual perceptions,
values, attitudes, and opinions. Research has generally focused on “macro” is-
sues: the informal economy and the informal sector; their related social, economic
and political networks; and the legal context, and other important aspects of this
phenomenon.
On the other hand, it should be noted that micro-level studies have generally
adopted a qualitative methodology that, while providing in-depth information
about the informal workers’ backgrounds, relationships, and attitudes, does not
allow to draw generalizations or to develop reliable statistical inferences (Temkin
& Zaremberg, 2006).
This work attempts to begin to fill this information gap concerning informal
participants in the labor force. As far as we know, this endeavor constitutes an
unprecedented effort, at least in Mexico. It was made possible through the inclusion

(e.g., health, property, disability, or life insurance); to have, as a result, lower levels of health, education
and longevity; to have less access to financial, physical and other productive assets; to have fewer rights
and benefits of employment; to have less secure property rights over land, housing or other productive
assets; and to face greater exclusion from state, market and political institutions that determine the
‘rules of the game’ in these various spheres. Together these costs take an enormous toll on the financial,
physical, and psychological well-being of many informal workers and their families.”
142 Temkin

of three specific questions in the 2005 Mexican version of the8 WVS, which made
it possible not only to identify the informal participants in the labor market, but
also to ascertain their particular level and kind of informality. The survey was
administered to a national representative sample of 1,560 people, in face-to-face
interviews. The trust level is 95%. Our study focuses on 796 of those surveyed
individuals, 18 years of age or older, who reported being employed at the time of
the survey.
The variable informal employment is operationalized, as employment without
a formal agreement between employer and employee, without social protection
or benefits, or in unregistered economic units or occupations. Specifically, the
three questions on informality included in the survey inquired about whether the
interviewees work with or without a contract, with or without social security, and if
they are employed in a work place or occupation that issues official receipts9 . This
last element is included because although informal employment exists in formal
enterprises, employment in an informal economic unit strengthens the informal
nature of employment.
Thus, individuals at the highest level of informality are those who responded
that they work without a formal contract, lack social security, and work in eco-
nomic units that do not issue official receipts. In contrast, those who responded
affirmatively to all three questions belong to the highest level of formality. Be-
tween both extremes are those individuals who show one or two of the informality
characteristics. As a result, the following classification is obtained:
(i) Formals (with no characteristics of informality);
(ii) Informals level 1 (with only one characteristic of informality);
(iii) Informals level 2 (with two characteristics of informality); and
(iv) Informals level 3 (with all three characteristics of informality).
It is important to stress that in Mexico, as in many other societies, there is
no sharp dichotomy between formal and informal participants in the labor force.
Therefore, it becomes necessary to identify, and in this case quantify, their level
of labor informality.
A second classification employed in this study refers not to the level of
informality but to the type of employment and distinguishes between:
(i) Formal participants in the labor force (the same individuals included in a
above, that is, those showing none of the characteristics of informality)
(ii) Informal employees (all informal wage earners regardless of their level of
informality.

8
Special appreciation is due to Alejandro Moreno (Instituto Tecnologico Autonomo de Mexico
and Reforma), coordinator of the World Values’ Survey in Mexico, for agreeing to include the questions
about informality and for providing me with the database.
9
By including the question about whether or not official receipts (official sale and taxes notes)
are used at the place of work, the level of informality in this research is defined in terms of both
employment and work-place characteristics.
Informal Self-Employment in Developing Countries 143

(iii) Self-employed or own account informals (again regardless of their level of

informality)10
In this classification, the informals are divided into employees and self-
employed. The rationale behind this classification is that, as was pointed out
above, the informal self-employed or own account workers are often presented as
incipient entrepreneurs.
It should be noted that the WVS does not allow us to distinguish which of the
informally self-employed are actually employers of other people. The reason is
that the relevant question in the survey treats responses of the subject as a “patron”
(employer of others in Mexico’s usage) or “gerente” (manager) as one and the
same category.11
In the following sections, we present some of the most important findings
from the survey. It is important to stress that—with few exceptions which will
be expressly pointed out—all the differences between groups are statistically
significant.12
Main Findings

In this section, the data obtained from the WVS survey is presented in two
parts. First, the sociodemographic profile of the subjects in the survey is described,
to show the good fit between the results from the WVS and what is known from
previous research about the characteristics of formal and informal participants in
the labor force. Second, a number of relevant results of the survey in terms of
entrepreneurial or survivalist values and attitudes are presented with the objective
of evaluating to what extent those results are congruent with the hypothesis of
informal self-employment either as incipient entrepreneurship or as survivalist
strategy.
Both the sociodemographic and the subjective results are provided for both
sets of groups described in the previous section.

Sociodemographic Profile

Throughout the world, economic informality is strongly associated with low

levels of income and education, as well as with older age groups and an increasingly
feminine participation.13 The sociodemographic data derived from the 2005 WVS

10
The distinction between b and c was obtained through a specific question in the Mexican WVS
2005, which inquired whether the individual is an employee or works on his own account.
11
Moreover, the N of the patron-gerente category among the self-employed was only 13, that is,
5.4%.
12
Chi-Square tests were applied to analyze the percentage distribution of formal and informal
workers in each of the areas under study. The results show statistically significant differences ranging
from .0 to .05.
13
According to ILO data, over 60% of the women in developing countries who are employed in
the nonagricultural sector, work in informal jobs. (International Labour Organization, 2002)
144 Temkin

Table 1. Monthly Household Income by Level of Informality, Mexico, 2005 [Percentages]

Monthly household Informals Informals Informals
income Formals Level 1 Level 2 Level 3 Total
N= 119 186 205 245 755
5,200 Pesos or more 62.2 60.8 44.4 21.6 43.8
Up to 5,199 Pesos 37.8 39.2 55.6 78.4 56.2
Total 100.0 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 86.975 Sig.: .000
Table 2. Schooling by Level of Informality, Mexico, 2005 [Percentages]
Schooling Formals Informals Level 1 Informals Level 2 Informals Level 3 Total
N= 121 188 209 249 767
None 1.6 1.6 2.8 6.4 3.5
Elementary school 8.1 11.5 17.2 39.8 22.0
Junior high school 16.3 19.9 22.8 27.8 22.8
High school 34.1 26.7 19.5 14.7 21.9
Higher education 39.8 40.3 37.7 11.3 29.8
Total 100.0 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 140.529 Sig.: .000
Table 3. Age by Level of Informality, Mexico, 2005 [Percentages]
Informals Informals Informals
Age group Formals Level 1 Level 2 Level 3 Total
N= 123 191 216 266 796
18–24 30.1 15.2 17.6 12.8 17.3
25–35 38.2 37.7 28.7 27.1 31.8
36–45 13.0 22.0 25.9 26.3 23.1
46–55 15.4 17.3 16.7 18.4 17.2
56–65 3.3 6.3 9.3 10.5 8.0
66 and over 0.0 1.6 1.9 4.9 2.5
Total 100.0 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 46.170 Sig.: .000

in Mexico presented in Tables 1–4 regarding income, schooling, age, and gender,
confirms these associations for the Mexican case as well. The results of the survey
show that a higher level of informality increases the degree of precariousness and
vulnerability.14
On the other hand, as can be appreciated in Tables 5–8 below, which present the
data according to the type of informal self-employment, the informally

14
“Informal employment is most common for workers typically disadvantaged in the labor market:
women, the low-skilled and either younger or older workers. The majority of informal wage earners
earn less than they would in formal salaried jobs suggesting that informal employment is a survival
strategy, particularly in the absence of unemployment benefits. However, informality may be a choice
for the upper tier of own-account workers. Reducing the costs and raising the benefits of formality
requires a multifaceted strategy.” (OECD, 2008)
Informal Self-Employment in Developing Countries 145

Table 4. Gender by Level of Informality, Mexico, 2005 [Percentages]

Informals Informals Informals
Gender Formals Level 1 Level 2 Level 3 Total
N= 123 191 216 266 796
Men 80.5 72.8 69.0 70.7 72.2
Women 19.5 27.2 31.0 29.3 27.8
Total 100.0 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 5.667 Sig.: .129

Table 5. Monthly Household Income by Type of Participants in the Labor Force, Mexico,
2005 [Percentages]
Monthly household Informal Informally self-employed
income Formals employees (own account) Total
N= 119 418 218 755
5,200 Pesos or more 62.2 45.5 30.7 43.8
Up to 5,199 Pesos 37.8 54.5 69.3 56.2
Total 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 31.917 Sig.: .000

Table 6. Schooling by Types of Participants in the Work Force, Mexico, 2005 [Percentages]
Informal Informally
Schooling Formals employees self-employed Total
N= 123 431 241 795
None 2.7 4.2 7.1 5.0
Elementary School 2.7 8.7 21.4 12.4
Junior High School 10.8 18.4 23.0 19.0
High School 45.9 45.8 35.7 42.3
Higher Education 37.8 22.9 12.8 21.3
Total 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 48.670 Sig.: 0.000

self-employed subjects not only share the precarious sociodemographic char-

acteristics of the rest of the informal participants in the Mexican labor force, but
they are actually poorer, older, and less educated, not only when compared with
formal participants in the labor force, but also in relation to informal employees.

Values and Attitudes of Self-Employed Informals

The level of precariousness of the informally self-employed in Mexico can

also be gauged from their answers to a series of attitudinal questions included in
the WVS. For reasons of space and clarity, in what follows, only the results per-
taining to the comparisons between the formal, informal employees and informal
146 Temkin

Table 7. Age by Types of Participants in the Labor Force, Mexico, 2005 [Percentages]
Age group Formals Informal employees Informally self-employed Total
N= 123 432 241 796
18–24 30.1 18.5 8.7 17.3
25–35 38.2 34.7 23.2 31.8
36–45 13.0 24.3 26.1 23.1
46–55 15.4 15.5 21.2 17.2
56–65 3.3 5.6 14.9 8.0
66 and over 1.4 5.8 2.5
Total 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 77.080 Sig.: .000

Table 8. Gender by Type of Participants in the Labor Force, Mexico, 2005 [Percentages]
Gender Formals Informal employees Informally self-employed Total
N= 123 432 241 796
Men 80.5 68.5 74.7 72.2
Women 19.5 31.5 25.3 27.8
Total 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 7.876 Sig.: .019

Table 9. Self-Description in Class Terms by Types of Participants in the Labor Force, Mexico,
2005 [Percentages]
Social class Formals Informal employees Informally self-employed Total
N= 121 425 236 782
High class 0.8 0.9 0.6
High middle-class 33.9 24.9 16.1 23.7
Lower middle-class 43.8 42.1 42.8 42.6
Working class 17.4 21.4 20.3 20.5
Low class 4.1 8.9 18.6 11.1
Middle-class 1.6 2.1 1.5
Total 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 35.897 Sig.: .000

self-employed will be presented in the body of the text, while the parallel results
according to the level of informality will be included in the appendix.
As shown in Tables 9–11, in comparison with other participants in the labor
force, the informally self-employed perceive themselves as: lower in the socioeco-
nomic scale, less satisfied with the economic situation of their households, as well
as less sanguine about the capacity of their households to save, thus confirming at
the subjective level the sociodemographic profile just described.
Furthermore, the data on their subjective self-evaluation presented in
Tables 12–18, unveil very clearly their feelings of vulnerability and insecurity.
Informal Self-Employment in Developing Countries 147

Table 10. Average Satisfaction with the Economic Situation of Your Household (from 1 to 10), by
Type of Participants in the Labor Force, Mexico, 2005
Type of participants Satisfaction with the economic situation of your household [Mean (SD.)]
Formals 7.63 (2.02)
Informal employees 7.19 (2.33)
Informally self-employed 7.00 (2.82)
Total 7.20 (2.45)
Source: Self-elaboration, 2005 WVS, Mexico.
F: 2.751 Sig.: .064
Note: Scale from 1 (totally unsatisfied) to 10 (completely satisfied).

Table 11. Answer to the Question “Last year, your family could save money, barely managed to
make ends meet, spent some of its savings or had to ask for loans?” by Types of Participants in the
Labor Force, Mexico, 2005 [Percentages]
Formals Informal employees Informally self-employed Total
N= 123 424 239 786
Family could save 40.7 30.7 19.7 28.9
Barely managed 39.0 45.3 43.9 43.9
It spent some of its savings 13.0 8.3 6.7 8.5
It had to borrow 7.3 15.8 29.7 18.7
Total 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 44.028 Sig.: .000
Table 12. Self-Perception of Happiness by Types of Participants in the Labor Force, Mexico, 2005
[Percentages]
Formals Informal employees Informally self-employed Total
N= 122 431 239 792
Very happy 77.0 62.2 47.7 60.1
Somewhat happy 22.1 32.7 42.7 34.1
Not very happy 0.8 4.9 8.4 5.3
Not happy at all 0.1 0.2 1.3 0.5
Total 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 35.710 Sig.: .000

In comparison with the other groups, they feel: less happy, less healthy, less sat-
isfied with life, less able to choose and control the way their life unfolds, less
capable of deciding by themselves which are their goals in life, less ready to try to
be themselves instead of following others and, finally, they do not see themselves
as persons who think about new ideas, who are creative, or who do things in their
own way.
Finally, as can be appreciated in Tables 19 and 20, the informally self-
employed attribute less importance than the two other reference groups to the value
of independence and determination as qualities to be taught to their
children.
148 Temkin

Table 13. Self-Perception of Health by Types of Participants in the Labor Force, Mexico,
2005 [Percentages]
Formals Informal employees Informally self-employed Total
N= 123 432 239 794
Very good 39.0 25.2 18.8 25.4
Good 52.0 45.1 36.4 43.6
Regular 8.9 27.8 39.7 28.5
Bad 1.9 5.0 2.5
Total 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 55.152 Sig.: .000

Table 14. Average Ranking of Satisfaction with Life (from 1 to 10), by Type of Participants in the
Labor Force, Mexico, 2005
Type of participants Satisfaction with life [Mean (SD)]
Formals 8.59 (1.37)
Informal employees 8.26 (1.88)
Informally self-employed 7.90 (2.36)
Total 8.21 (1.98)
Source: Self-elaboration, 2005 WVS, Mexico.
F: 5.318 Sig.: .005
Note: Scale from 1 (totally unsatisfied) to 10 (completely satisfied).

Table 15. Average Ranking of How Much Freedom to Choose and of Control You Feel You Have on
the Way You Live Your Life (from 1 to 10), by Type of Participants in the Labor Force, Mexico, 2005
Type of participants Freedom to choose and control [Mean (SD)]
Formals 8.92 (1.25)
Informal employees 8.54 (1.80)
Informally self-employed 8.14 (2.32)
Total 8.48 (1.91)
Source: Self-elaboration, 2005 WVS, Mexico.
F: 7.226 Sig.: .001
Note: Scale from 1 (none) to 10 (a lot).

Table 16. Agreement with the Statement “I decide by myself which are my goals in life” by Types of
Participants in the Labor Force, Mexico, 2005 [Percentages]
Formals Informal employees Informally self-employed Total
N= 123 430 239 792
Very much in agreement 43.9 43.5 33.1 40.4
In agreement 53.7 52.3 61.1 55.2
In disagreement 2.4 4.2 5.4 4.3
Very much in disagreement 0.4 0.1
Total 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 10.820 Sig.: .094
Informal Self-Employment in Developing Countries 149

Table 17. Agreement with the Statement “I try to be myself more than to follow others” by Types of
Participants in the Labor Force, Mexico, 2005 [Percentages]
Formals Informal employees Informally self-employed Total
N= 123 431 237 791
Very much in agreement 47.2 39.4 33.3 38.8
In agreement 51.2 56.1 60.3 56.6
In disagreement 1.6 3.9 5.5 4.0
Very much in disagreement 0.5 0.8 0.5
Total 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 9.489 Sig.: .148

Table 18. Are You a Person Resembling “Somebody who thinks about new ideas, is creative; and
does things in his/her own way” by Types of Participants in the Labor Force, Mexico, 2005
[Percentages]
That person is. . . Formals Informal employees Informally self-employed Total
N= 123 426 231 780
Very much like me 24.4 22.3 25.1 23.5
Like me 42.3 31.2 24.7 31.0
Somewhat like me 21.1 25.6 25.1 24.7
A little bit like me 4.9 9.9 6.5 8.1
Not much like me 4.1 4.7 6.9 5.3
Not like me at all 3.3 6.3 11.7 7.4
Total 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 :24.332 Sig.: .007

Table 19. Importance Attached to Teaching Independence to Children by Types of Participants in the
Labor Force, Mexico, 2005 [Percentages]
Formals Informal employees Informally self-employed Total
N= 123 432 239 794
Is important 46.3 47.2 36.0 43.7
Not mentioned 53.7 52.8 64.0 56.3
Total 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 8.312 Sig.: .01

Discussion and Conclusions

The sociodemographic and subjective profile that emerges from the data
presented above is quite clear. The personal traits of the informally self-employed
or own account workers in Mexico are patently dissimilar from those usually
attributed in the specialized literature to the entrepreneurial individual. The results
of the survey support the characterization of this group as composed of persons
150 Temkin

Table 20. Importance Attached to Teaching Children Determination and Perseverance by Types of
Participants in the Labor Force, Mexico, 2005 [Percentages]
Formals Informal employees Informally self-employed Total
N= 123 432 239 794
Is important 50.4 46.3 37.7 44.3
Not mentioned 49.6 53.7 62.3 55.7
Total 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 6.830 Sig.: .033

engaged in a survivalist strategy. Their objective situation and their self-appraisal

are marked by precariousness, vulnerability and insecurity. The conception of
the informally self-employed as incipient entrepreneurs and potential agents of
economic growth is, evidently, not corroborated by the findings of this study.
The same picture emerges from the results by level of informality presented in the
appendix. The higher the level of informality of an individual, the more vulnerable
and insecure are his or her situation and self-perception.
The findings and conclusions of this research are necessarily exploratory
and provisional, and lack a comparative perspective of time and space. As far as
we know, no parallel data are available on this subject from previous years in
Mexico, and no similar studies have been conducted in other countries.15 Still,
beyond the rich description of the values, attitudes, opinions, and sentiments of
the formal and informal participants in the work force presented above, some
preliminary conclusions regarding public policy can be advanced, which are not
only interesting, but extremely important.
Although much further research is needed, this study suggests that policies
based on the easing of diverse rules and directives, including further deregulation of
working conditions, and substantial reductions of labor costs in both the formal and
informal labor markets, even when accompanied by the funneling of public funds
as loans to informal microbusinesses, seems not likely to promote much economic
development or result in a significant reduction of poverty levels. The WVS data
presented in previous sections and in the appendix below, do not support experts
and policy makers whose hopes are set on the possibility of economic growth and
alleviation of poverty based on the entrepreneurship and initiative of the informal
participants of the economy.
If the findings of this study are an accurate description of the personal charac-
teristics of the informals, such policies will not reduce the number of informals in

15
It is my hope that public opinion surveys—in Mexico and elsewhere—including the World
Values Survey and the Latinobarometro, will, in the future, regularly include questions that will allow
the identification of the level of formality-informality of the individuals polled.
Informal Self-Employment in Developing Countries 151

the economy or the precariousness and vulnerability of their economic and social
situation. Rather, as Marta Novick and her colleagues at the Labor, Employ-
ment, and Social Security Ministry of Argentina have shown (Novick, Mazorra, &
Schleser, 2007), based on the experience of that country between 2003 and 2007,
the most appropriate strategy to overcome employment precariousness and vul-
nerability is one that promotes macroeconomic policies encouraging the creation
of formal employment, strengthens the inspection of labor conditions in the formal
sector, provides incentives for formalization of specific types of employment such
as domestic service, and, most importantly, raises the human capital level of the
general population.
To summarize, our results suggest that the best way to foster the growth
of formal employment, improve the lives of working people, and spur economic
development is to design public policies and economic strategies aimed at fostering
the growth of the formal sector, by creating more secure and better paid jobs. It also
seems imperative to carry out significantly higher and more efficient investments
in education and human capital.
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Appendix

Table 1A. Self-Description in Class Terms by Level of Informality, Mexico, 2005 [Percentages]
Informals Informals Informals
Formals Level 1 Level 2 Level 3 Total
N= 121 187 214 260 782
High class 0.8 1.6 0.0 0.4 0.6
High middle-class 33.9 26.7 27.6 13.5 23.7
Lower middle-class 43.8 43.3 42.5 41.5 42.6
Working Class 17.4 21.4 18.7 22.7 20.5
Low class 4.1 5.9 7.0 21.5 11.1
Middle-class 0.0 1.1 4.2 0.4 1.5
Total 100.0 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 77.922 Sig.: .000

Table 2A. Average Satisfaction with the Economic Situation of your Household, by Level of
Informality, Mexico, 2005
Level of informality Satisfaction with the economic situation of your household [Mean (SD)]
Formals 7.63 (2.02)
Informals Level 1 7.50 (2.10)
Informals Level 1 7.09 (2.43)
Informals Level 1 6.87 (2.82)
Total 7.20 (2.45)
Source: Self-elaboration, 2005 WVS, Mexico.
F: 4.010 Sig.: .008
Note: Scale from 1 (totally unsatisfied) to 10 (completely satisfied).
154 Temkin

Table 3A. Answer to the Question “Last year, your family could save money, barely managed to
make ends meet, spent some of its savings or had to ask for loans?” by Level of Informality, Mexico,
2005 [Percentages]
Informals Informals Informals
Formals Level 1 Level 2 Level 3 Total
N= 123 189 212 262 786
Family could save 40.7 36.5 27.4 19.1 28.9
Barely managed 39.0 43.4 44.3 46.2 43.9
It spent some of its savings 13.0 6.9 8.5 7.6 8.5
It had to borrow 7.3 13.2 19.8 27.1 18.7
Total 100.0 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 44.899 Sig.: .000
Table 4A. Self-Perception of Happiness by Level of Informality, Mexico, 2005 [Percentages]
Informals Informals Informals
Formals Level 1 Level 2 Level 3 Total
N= 122 190 215 265 792
Very happy 77.0 65.3 56.7 51.3 60.1
Somewhat happy 22.1 30.5 38.1 38.9 34.1
Not very happy 0.8 3.7 4.7 9.1 5.3
Not happy at all 0.0 0.5 0.5 0.8 0.5
Total 100.0 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 32.838 Sig.: .000
Table 5A. Self-Perception of Health by Level of Informality, Mexico, 2005 [Percentages]
Informals Informals Informals
Formals Level 1 Level 2 Level 3 Total
N= 123 191 214 266 794
Very good 39.0 27.2 23.8 19.2 25.4
Good 52.0 48.7 45.8 34.2 43.6
Regular 8.9 23.0 27.6 42.1 28.5
Bad 0.0 1.0 2.8 4.5 2.5
Total 100.0 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 67.142 Sig.: .000

Table 6A. Average Satisfaction with Life, by Level of Informality, Mexico, 2005
Level of informality Satisfaction with life [Mean (SD)]
Formals 8.59 (1.37)
Informals Level 1 8.45 (1.72)
Informals Level 1 8.10 (1.99)
Informals Level 1 7.93 (2.33)
Total 8.21 (1.98)
Source: Self-elaboration, 2005 WVS, Mexico.
F: 4.444 Sig.: .004
Note: Scale from 1 (totally unsatisfied) to 10 (completely satisfied).
Informal Self-Employment in Developing Countries 155

Table 7A. Average Score of How Much Freedom to Choose and of Control You Feel You Have on the
Way You Live Your Life? By Level of Informality, Mexico, 2005
Level of informality Freedom to choose and control [Mean (SD.)]
Formals 8.92 (1.25)
Informals Level 1 8.63 (1.65)
Informals Level 1 8.30 (2.01)
Informals Level 1 8.31 (2.22)
Total 8.48 (1.91)
Source: Self-elaboration, 2005 WVS, Mexico.
F: 3.852 Sig.: .009
Note: Scale from 1 (none) to 10 (a lot).

Table 8A. Agreement with the Statement “I decide by myself which are my goals in life” by Level of
Informality, Mexico, 2005 [Percentages]
Informals Informals Informals
Formals Level 1 Level 2 Level 3 Total
N= 123 190 215 264 792
Very much in agreement 43.9 47.4 38.6 35.2 40.4
In agreement 53.7 48.4 57.2 59.1 55.2
In disagreement 2.4 4.2 4.2 5.3 4.3
Very much in disagreement 0.4 0.1
Total 100.0 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 10.715 Sig.: .296
Table 9A. Agreement with the Statement “I try to be myself more than to follow others” by Level of
Informality, Mexico, 2005 [Percentages]
Informals Informals Informals
Formals Level 1 Level 2 Level 3 Total
N= 123 189 214 265 791
Very much in agreement 47.2 43.4 39.3 31.3 38.8
In agreement 51.2 53.4 57.0 61.1 56.6
In disagreement 1.6 2.6 3.3 6.8 4.0
Very much in disagreement 0.0 0.5 0.5 0.8 0.5
Total 100.0 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 10.715 Sig.: .296 n = 791.
Table 10A. Are You a Person Resembling “Somebody who thinks about new ideas, is creative; and
does things in his/her own way”, by Level of Informality, Mexico, 2005 [Percentages]
Informals Informals Informals
That person is. . . Formals Level 1 Level 2 Level 3 Total
N= 123 188 215 254 780
Very much like me 24.4 23.9 24.2 22.0 23.5
Like me 42.3 31.9 29.8 26.0 31.0
Somewhat like me 21.1 27.1 26.5 23.2 24.7
A little bit like me 4.9 9.0 6.0 10.6 8.1
Not much like me 4.1 4.3 4.7 7.1 5.3
Not like me at all 3.3 3.7 8.8 11.0 7.4
Total 100.0 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 27.896 Sig.: .022, n = 780.
 156 Temkin

Table 11A. Importance Attached to Teaching Independence to Children by Level of Informality,

Mexico, 2005 [Percentages]
Informals Informals Informals
Formals Level 1 Level 2 Level 3 Total
N= 123 191 216 264 794
Is important 46.3 50.8 48.1 33.7 43.7
Not mentioned 53.7 49.2 51.9 66.3 56.3
Total 100.0 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2: 16.687 Sig.: .001

Table 12A. Importance Attached to Teaching Children Determination and Perseverance by Level of
Informality, Mexico, 2005 [Percentages]
Informals Informals Informals
Formals Level 1 Level 2 Level 3 Total
N= 123 191 216 264 794
Is important 50.4 47.6 49.1 35.2 44.3
Not mentioned 49.6 52.4 50.9 64.8 55.7
Total 100.0 100.0 100.0 100.0 100.0
Source: Self-elaboration, 2005 WVS, Mexico.
χ 2 : 13.524 Sig.: .004

BENJAMIN TEMKIN is a Professor at the Facultad Latinoamericana de Ciencias

Sociales (FLACSO) in Mexico. His research interests are in the general fields of
political economy, social psychology, and electoral behavior. He is the editor of
the journal Perfiles Latinoamericanos.

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