Informal Sector Economy: Sustainability and Policy Implications on Urban Employment in Tanzania, 2020.

Abstract

The paper addresses the informal sector sustainability and its policy implications for urban employment in Tanzania. Applying the case study method, the paper reviews the informal sector in the context of Tanzania National Employment Policies (NEP, 1997, 2008). The informal sector concept was popularised in 1972 (ILO, 1972), it has no universal definition (Arvin-Rad et al., 2010; Jason, 2008). However, the sector’s main defining characteristics are enterprise size and regulation. Until the mid-1980s, the sector received less attention in policy circles in Tanzania, because it was perceived as a transition to the mainstream economy, and its operators were viewed as disorganised and tax-evaders (Maliyamkono & Bagachwa, 1990). However, this paper argues that in recent years the sector has been acknowledged as a shock absorber or an opportunity (Wuyts, 2001; Günther & Launov, 2012). Results show that the informal sector provides non- agriculture employment to 55% of the Tanzanian labour force; and over 60% of Tanzania urban households depend on the informal sector for subsistence livelihoods (URT, 2006). Furthermore, it absorbs 35% and 11% of urban and rural labour force respectively. The labour force supply in Tanzania is estimated to be 800000 people entering the labour market annually, mainly from colleges and universities (URT, 2008). However, the new entrants to the labour market are unable to access the formal sector because of lack of experience, relevant training and skills for self- employment (Theisen, 2005). Findings suggest that there are prospects for sustainability of the informal sector, and thus it is likely to continue generating employment to most people in urban areas who cannot find employment in the formal sector economy. Policy efforts to promote urban informal sector economy are polarised by less support on rural informal sector employment. Hence, policy support to promote, monitor and evaluate the informal sector economy in Tanzania is extremely necessary.