The subjective well-being of people in informal employment: empirical evidence from Mexico
Pages | 169-186 |
Published date | 07 October 2013 |
DOI | https://doi.org/10.1108/EBHRM-04-2013-0006 |
Date | 07 October 2013 |
Author | Mariano Rojas |
Subject Matter | HR & organizational behaviour,Global HRM |
The subjective well-being of
people in informal employment:
empirical evidence from Mexico
Mariano Rojas
FLACSO-Me
´xico, Mexico City, Mexico and UPAEP, Puebla, Mexico
Abstract
Purpose – The purpose of this paper is to use a subjective well-being approach to address a long-
standing debate on informal employment: whether it is a low-quality or a high-quality option. The
literature generally refers to these options as exclusion vs exit. Policy makers often assume that
informal employment constitutes a low-quality option.
Design/methodology/approach – The paper relies on a mid-size survey from Mexico as well as on
a group of subjective well-being indicators to explore whether people in informal employment display
lower or higher well-being. Information on life satisfaction, job satisfaction, andsatisfaction with some
job-related attributes, satisfaction in other domains of life, and experiences of well-being is used to
assess the situation of those in informal employment.
Findings – The empirical research finds that there are substantial differences in the socio-
demographic and economic characteristics of those in formal and in informal employment.
These differences in the population characteristics partially explain differences in subjective well-
being. However, once these differences are taken into consideration there is little difference in
subjective well-being between informal workers and formal ones. Hence, the paper concludes that in
comparison with people in formal employment, informal employment is neither associated with a
better life nor with a worse life. Neither the exclusion nor the exit view of informality is supported by
the empirical evidence.
Practical implications – Contrary to common perceptions, informal employment does not
constitute a low-quality option in the subjective well-being arena. This is a powerful message for
policy makers who wish to maximize the employment-related well-being of its citizens. There may
well be legitimate policy reasons why the degree of informality should be reduced. However, based on
the findings in the Mexican context, the paper stipulates that reducing informal employment primarily
on the grounds of greater general unhappiness is not one of them.
Originality/value – The paper contributes to the relevant literature by studying informality from
a subjective well-being perspective, which extends much beyond job satisfaction. No research on
informal employment has previously used such a large set of subjective well-being indicators
comprising variables such as life satisfaction, satisfaction in domains of life, and experiences of
well-being.
Keywords Welfare studies, Well-being at work, Work-life studies, Mexico, Informality,
Informal employment
Paper type Research p aper
1. Introduction
Large segments of the Latin American labor force work in the so-called informal sector
(Perry et al., 2007). Mexico is no exception to this general Latin American phenomenon.
Official statistics show that approximately 58 percent of Mexican workers hold
informal employment (INEGI, 2013). That is, these workers engage in economic units
which do not have formal labor contracts, do not provide health insurance, and do not
issue formal receipts (Henley et al., 2006).
Different theories address the causes of considerable informality in Latin America.
These theories provide arguments ranging from cultural reasons and tax evasio n to
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/2049-3983.htm
Received 30 April 2013
Revised 20 May 2013
Accepted 3 June 2013
Evidence-based HRM: a Global
Forum for Empirical Scholarship
Vol. 1 No.2, 2013
pp. 169-186
rEmeraldGroup Publishing Limited
2049-3983
DOI 10.1108/EBHRM-04-2013-0006
169
Subjective well-
being in informal
employment
high transaction costs emerging from a large bureaucracy and governmental corruption.
Some authors emphasize a view of informality caused by structu ral conditions, which
force large segments of the population to hold low-quality employment. Other authors
emphasize the role of agency: people are pursuing their best interest by holding
informal employment. The first view approaches informal employment as a trap where
conditions external to the person end up forcing him or her to work in a low-quality
job. The second view approaches informal employment as a way fo r people to escape
from low-quality conditions and to pursu e living conditions, which are relatively
superior. It is clear that both views may coexist. However, they emphasize different
matters and may lead to different conclusions on the role of informal employment in
people’s lives. Thus, informal employment may end up being viewed as a superior way
of living – compared with those who cannot exit from the formal sector – or as a low-
quality kind of job (and living) where people are somehow forced to be due to external
constraints. Irrespective of the causes of informality, it is clear that this is a major
characteristic of labor markets in Latin America. As a consequence, infor malitycannot
be treated as an exception, since it represents a nor mal way of life for large segments
of the population.
Following a long-standing tradition of using objective indicators to assess the
quality of options, the majority of studies about informal employment evaluate its
quality on the basis of lists of indicators such as earnings, working schedule,
observable perks at work, commuting time, and other observable job-related benefits
(Heckman and Hotz, 1986; Pradhan and Van Soest, 1995). The emphasis has been
mostly placed on the earnings gap betwe en those working in formal and those
working in informal employment. Irrespective of whether earnings gaps exist or
whether they sustain themselves after controlling for workers’ characteristics, researchers
have frequently used these objective indicators as “good proxies” for the quality of
informal employment and even for thequality of people’s life. It is worthnoting, however,
that researchers’ presumptions are not always correct.
The emerging literature on subjective well-being claims that it is the role of people
themselves to judge the quality of their life, and of their job. However, there are only
a few papers studying the relationship between infor mal employment and job
satisfaction, and no paper at all – to the best of the author’s knowledge – which goes
beyond job satisfaction in order to study satisfaction with life and subjective well-being
with regard to informal employment.
This paper thus aims to contribute to the scarce literature on informal empl oyment
and subjective well-being by studying the situation in Mexico. By following a subjective
well-being approach the assessment of the quality of informal employment is based not
on researchers’ judgment but on how it affects people’s self-reported living experience.
Specific measures on people’s job satisfaction as well as satisfaction with some job
attributes are taken into consideration. In addition, this research studies the relationship
between informalemployment and satisfaction with life aswell as satisfaction in several
domains of life. The paper thus follows the domains-of-life literature to understand
life satisfaction as a result of satisfaction in many domains where people act and live.
Put differently, the domains-of-life approach states that it is correct that p eople work but
that people are much more than workers. Thus, focussing exclusively on the working
domain would provide an incomplete pi cture of the quality of life people experience.
Hence, the approach calls for studying satisfaction at work (job satisfaction) as well as
global satisfaction with life and satisfaction in other relevant domains of life. In addition,
the paper uses information of people’saffective and evaluative states to understand their
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