Informal Employment, Weak Policy Enforcement, and Labour Rights Deficits: Socio-Economic and Governance Implications for Sustainable Development

This publication investigates how persistent informal employment practices such as wage withholding, lack of formal contracts, and arbitrary dismissals stem from weak policy enforcement and governance gaps. Drawing on Institutional Theory and Labour Market Segmentation theory, it analyses the socio-economic and governance consequences of widespread informality, supported by empirical data from the ILO, World Bank, and regional studies. The study highlights the global scale of the challenge, with over 2 billion workers in informal employment as of 2023, and examines successful policy interventions, such as Uruguay’s formalization model. It proposes a multi-stakeholder enforcement framework involving governments, SMEs, civil society, and labour unions to strengthen legal protections, promote formalization, and enhance sustainable economic development.