The hidden penalties of informal work: Life-job satisfaction and negative affect

• Informal workers in Cali, Colombia, exhibit lower life and job satisfaction compared to formal workers. • The study reveals that informal workers experience more negative emotions such as worry, depression, and anger. • A satiation point in the relationship between income and life satisfaction is identified, but it is out of reach for most informal workers, indicating a significant gap between actual income and the income that would cover basic needs and allow for a comfortable living. • The research highlights the need for policy interventions to support the informal sector, especially considering the expansion of informality due to the pandemic. • Investments in education and human capital are suggested as potential avenues to improve the well-being of informal workers and to address the structural low productivity and informal employment in the region. The study of the subjective well-being of informal workers in the global South is new and scattered. Little is known about informal workers' job and life satisfaction or this group's positive and negative emotional experiences. Using an extensive population survey in Cali, Colombia, we analyze the subjective well-being of over 1,100 formal and informal workers. Two questions guided the analysis: i) how is life satisfaction for formal and informal workers, and ii) how satisfied are formal and informal workers with their jobs? Informal workers score lower in all factors analyzed. The same pattern is found in job-related factors like wages, daily activities, challenges, and interpersonal relationships in the work environment. Informal workers also experience more often negative emotions like worry, depression, and anger. The subjective well-being dimension of informal employment explored in this analysis aims to inform better policy-making in the global South.