What Drives Filipino Workers to Embrace Informal Labor?

Written by: Dimple Paz and Clarice General Edited By: Jovie Galit

The Informal Economy encompasses a wide range of unregulated economic activities, initially linked to small, unregistered enterprises but later expanded to include unprotected wage employment. First introduced by W. Arthur Lewis in 1955, the concept gained attention as it persisted and grew in developing countries despite expectations of decline with economic modernization. The 1970s saw debates on the role of the informal sector, with some viewing it as peripheral, while others argued it was integral to developing economies. By the 1980s and 1990s, the informal economy had become a significant part of both developing and advanced economies, driven by economic crises and globalization. Recently, there has been renewed interest in this sector, which now represents a substantial yet often overlooked share of the global workforce.

The Philippines was a pilot site for several International Labour Organization (ILO) initiatives focused on the urban informal sector. A 1995 survey by the ILO and the National Statistics Office (now the Philippine Statistics Authority) found 539,000 people employed in the informal sector in Metro Manila. Major findings of the study included that 88% of informal enterprises were household-based, with 40% home-operated by the owner and only 19% mobile. Most households (64%) relied on enterprise income, averaging less than $177.42 per month, with female-headed households earning less. Trade was the primary activity, representing 47% of informal sector work, and nearly half of the enterprises had been operating for over five years. Wages ranged from $30.91 to $106.45 monthly, with only 58% of workers considered permanent, and just 25% of enterprises provided social security coverage.

Global estimates published by the ILO in 2018 indicate that 61% of workers worldwide—about 2 billion people—are informally employed. These estimates reveal a strong correlation between low GDP levels and high informal employment. Increasing recognition of the informal economy's link to the formal sector underscores the importance of supporting informal workers to reduce poverty and inequality and address gender disparities within this sector.

Informal Work in the Philippines

Informal workers in the Philippines, often referred to in Tagalog as engaging in 'Diskarteng Trabaho' (Strategic Work), are Filipinos who create livelihoods through various unregulated means. According to the latest Labor Force Survey by the Philippine Statistics Authority, employment decreased by 1.41 million from January 2023 to January 2024, with significant job losses occurring in informal work. IBON Foundation reported a one million drop in self-employed individuals and a 1.7 million reduction in unpaid family workers. As of May 2024, the Labor Force Participation Rate is 64.8%, with an Unemployment Rate of 4.1%, or 2.11 million people. Informal employment remains high, with 73% of Filipino workers engaged informally—37% in the informal sector, 4% in private households, and 32% in the formal sector but informally employed.

Many in the informal sector are undocumented due to varying interpretations of “informal work.” Inadequate minimum wages and limited job opportunities drive the shift towards informal work. Former Philippine Statistics Authority Undersecretary Dennis Mapa noted that while the economy is opening up with more full-time positions, it is unclear if these opportunities are high quality. Additionally, the lack of access to quality education, particularly in rural and marginalized areas, limits job prospects and contributes to the growth of the informal sector. The Philippine Institute for Development Studies highlighted in 2022 that quality basic education is primarily accessible only to children from middle- or high-income households, exacerbating the educational and employment gap.

The Faces of Filipino Informal Workers

Salve Laynes, Wholesale Sewer

Salve Laynes, 46, previously worked as a sewer at LS PHIL MFG, INC., a garment company located in the Philippine Economic Zone Authority (PEZA), Cavite. She worked there for seven years. LS garments exported products for brands like Macy’s, Ralph Lauren, Jennifer Lopez, and others. Salve mentioned that the company began to shut down after a union was established in 2022.

This situation is similar to that of Faremo International Inc., a Korean-owned garment factory and leading producer in the Cavite Export Processing Zone in Rosario. On October 21, 2016, Faremo filed a notice of permanent closure with the Department of Labor and Employment (DOLE), resulting in the loss of jobs for about 1,200 regular and contractual workers. The company claimed that client withdrawals led to the shutdown, and losses reportedly began after the union and management finalized their collective bargaining agreement in June 2016.

Currently, Salve works temporarily as a wholesale sewer of cargo pants to cope with joblessness. She works from 7 AM to 9 PM, earning between 400 PHP - 500 PHP (US$ 7.10 - US$ 8.87 ) per day, depending on the number of pants she makes and the client who subcontracts the work, which is sold on TikTok.

Diona Car Bongola, Snack Vendor

Diona Car Bongala, 39, lives in Quezon City and currently works as a vendor at the University of the Philippines Diliman. This is the only expected source of income for their family that has five (5) members, they do not earn enough for their children who are currently studying, besides, there is no guarantee that their snacks will run out or if they will be able to sell everyday, especially if there is a disaster. From Monday to Thursday, Diona sells alone and earns about 800 PHP (USD$14.19) per day. On Fridays and Saturdays, she sells with her husband and son, making around 1500 PHP (US$ 26.61) a day when they work together.

Diona supports her children’s education through this work, despite the uncertainty of daily sales. Her husband has struggled to find a regular job, so he takes on extra work in construction. Their six-year-old daughter helps out on Saturdays because the family relies on their combined efforts to support each other. 

Beverly Tan, Notebook Binder

Beverly Tan or Ling Ling, 51, has worked for Aspen Paper Products Corporation for 23 years. There, she worked for almost every possible job description in the factory, from binding notebooks with spring and yarn by hand, working on calendars and gift certificates, to ironing Carolina papers and folders. After she and several others were laid off by the company,  they were approached by another company selling notebooks, offering that they get paid per box of notebooks they finish. Since then, many notebook manufacturers have found that they can also do the same. It was evident that they were pushed into informal labor by the corporations that exploited them for cheap labour.

From making notebooks inside the factory, the community of women including Ling Ling now works from their homes where the suppliers dump the notebook covers, pages, and yarn for them to bind.Instead of the company paying for workspace rent and electricity and water bills in a work onsite set up, they can now save costs (and by doing so increase their profits) by just making more employees work from home. Currently, the community has a makeshift tent where the notebooks are to be binded, aside from space in their homes. With the ongoing rainy season in the Philippines, the responsibility of keeping the materials dry and intact falls upon them.

Additionally, their compensation has been significantly reduced due to a piece-rate system imposed by these companies, replacing the standard hourly or daily wage. Previously earning 60 PHP (USD1.06) per 100 pieces of yarn notebooks, they now only get paid 50 PHP (USD 0.89) per box completed which contains about 200 pieces of yarn notebooks. 

The Exploitation of Informal Workers

Informal workers in the Philippines lack legal protection, job security, social benefits, and stable incomes, leaving them vulnerable to exploitation, including wage theft, excessive hours, unsafe conditions, and discrimination.

IBON Foundation warns that stagnant employment and a shrinking labour force signal worsening disguised joblessness. While the lower unemployment rate may seem positive, the actual number of employed Filipinos, particularly in manufacturing, has decreased. Many job seekers may have left the labour force, skewing the statistics. Job quality remains poor, with 70-80% of workers in informal, underpaid positions. In November, over 21 million people—40% of the workforce—were in informal roles, including self-employed individuals, family workers, and household help. Additionally, 16-18 million wage and salary workers are likely in irregular, informal work arrangements.

The rise in part-time and unpaid family workers highlights the administration's failure to create quality jobs. IBON criticizes President Marcos Jr.'s administration for its inability to improve job creation, pointing to systemic issues in policy and economic management. Recently, DOLE declared that Filipinos would be considered "employed" if they worked at least one hour during the Philippine Statistics Office's survey week. This definition, following ILO guidelines, has been criticized as a way to mask the lack of quality jobs. Labor groups, including Kilusang Mayo Uno, strongly oppose this definition, arguing that it changes the meaning of employment without addressing the underlying economic issues. Kilusang Mayo Uno Secretary General, Jerome Adonis says, “Binago ang depinisyon ng mahirap. Binago kung ano ang gutom. Ngayon naman, binago ang depinisyon ng may trabaho.” They changed the definition of poor; changed the definition of hungry; now they are changing the definition of employed.

Filipinos are Advocating for Higher Wages and Job Security

Filipinos are advocating for better pay and more stable jobs. They aim to ensure that workers earn a living wage and have secure, regular employment rather than being stuck in precarious or unsafe conditions. Specifically, they are pushing for a family living wage—a sufficient income to meet the basic needs of a family of five, including food, shelter, and healthcare. This demand stems from the growing concern that many workers are trapped in low-paying, unstable jobs that fail to provide financial security or a sustainable livelihood.

According to data compiled by IBON Foundation, the national average daily minimum wage in March 2024 stood at 440 PHP (US$7.81), while the family living wage—calculated using the National Wages and Productivity Commission’s (NWPC) minimum wage data and March 2024 inflation data from the Philippine Statistics Authority—averaged 1,207 PHP (US$21.40), resulting in a national wage gap of 762 PHP (US$13.52). The NWPC defines the family living wage as the income needed to cover the cost of living, including all food and non-food requirements, with enough left for savings and investments for social security.

This is in stark contrast to the statement from the National Economic and Development Authority (NEDA), where Secretary Arsenio Balisacan noted that individuals who spend less than 64 PHP (US$1.14) for three meals a day are considered "food poor." During a Senate hearing on the proposed PH 2025 budget, Balisacan added that as of 2023, the monthly food threshold for a family of five was 9,581 PHP (US$169.98), equating to about 64 PHP (US$1.14) per person.

Economist Emmanuel Leyco criticized the government's daily food allowance of 64 PHP, arguing that it falls short of meeting the nutritional needs of Filipinos. He emphasized the need for a more comprehensive survey to accurately determine the population’s requirements, stating, “We need to consider the nutritional needs and whether 64 PHP (US$1.14) a day can provide the necessary nutrients.”

In the National Capital Region, the daily minimum wage stands at 610 PHP (US$10.82)—the highest in the country—up from 450 PHP (US$8.16) as of April 2023. However, the family living wage in Metro Manila has also increased to 1,200 PHP (US$21.24) from 1,167 PHP (US$20.58) in April 2023.

In their statement, Kilusan ng Manggawang Kababaihan emphasized, "What we women workers want is simple: for our families to live with dignity. How? Let's start by raising the minimum wage in the country to a family living wage, regularizing every worker, and ensuring we are free and safe in the workplace."

Additionally, there is a strong call for job regularization, as workers seek to move away from temporary and informal employment arrangements that lack benefits, job security, and protection of workers' rights, leaving them vulnerable to exploitation and sudden job loss. By advocating for regular employment, Filipinos are striving to secure steady, long-term positions that offer safety, fair treatment, and a more secure future.

May Filipinos in the diaspora support the fight of all Filipinos for higher wages, job security, and regular employment. We can help workers in both formal and informal sectors by supporting mass organizations such as Kilusan ng Manggagawang Kababaihan, Kilusang Mayo Uno, and other labour groups and advocates.