Why informal sector remains small in developed countries
Xn Iraki
By
XN Iraki
| Mar 04, 2026
A welder installs electrochemical protection on a trunk pipeline. [file Courtesy]
We all dream of office jobs, with a necktie and a big table and easy chairs for our guests. And if possible, a view of the skyline. But for the vast majority, that remains a dream.
The reality on the ground is different. In Kenya, over 80 per cent of the population will hustle without an office and at times, without a workplace. The streets are their offices.
Remember several attempts to remove hawkers from the roadside? In Germany, the informal economy is referred to as the shadow economy, estimated at 11.5 per cent in 2025 by LBBW research.
Technology has been incorporated into hustling. You can now hustle digitally; trade currency, buy and sell goods and services online. It’s easy to pay with M-Pesa and motorbikes for delivery. What we forget or pretend to forget is that many of the hustlers long for the emancipation day, to get a job without worry over sales, rain, county askaris and no pension.
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A visit to developed countries finds very few hustlers. You will not find hawkers and traders on the streets. Curiously, traders and hawkers would have great markets; walkways are often wider than roads!
Regulation is one reason the walkways are free. In developed countries, citizens obey laws and regulations, even the simplest ones.
The bigger reason is economic. Why do we drown in the Mediterranean Sea heading to Europe? We are seeking jobs in Europe or generous welfare benefits.
European population growth is low, creating a shortage of workers that immigrants easily fill. Immigrants come from within Europe and beyond. In a hotel, I met two employees, one from Afghanistan and one from Portugal.
My taxi drivers were from Ghana, Türkiye, and Kurdistan. When I asked which country Kurdistan is, the driver insisted Kurdistan is Kurdistan!
Are we willing to slow down population growth while politicians urge us to procreate and get more voters? What else does the voter do beyond voting? He or she needs an economic activity to be productive.
These countries do one more thing, their hustles are nurtured into either medium-sized companies, multinationals, or listed firms.
Patriotism comes from buying their own products and services, helping create a sustainable market.
Add a conducive business environment and links to global supply chains. We focus too much on the job demand side, not the supply side of job seekers.
It’s not accidental that the informal sector of developed countries is small. What are we willing to do as individuals and governments (county and national) to reduce informality? Informality should be a transient stage to a mature economy (Singapore). We seem to think it‘s “normal.”