Labour informality remains one of the main challenges in the world of work in Latin America and the Caribbean. This interview explores why it is a multi-causal and multidimensional phenomenon, what responses have proven most effective, and how technology and digital platforms are shaping the debate.

LIMA (ILO News) – Labour informality continues to shape the working lives of millions of workers in Latin America and the Caribbean. Although the region has shown an ability to generate employment, a significant share of these jobs remains outside formal frameworks, with limited access to labour rights and social protection.

In this interview, Fabio Bertranou, Deputy Regional Director of the International Labour Organization (ILO) for Latin America and the Caribbean, examines the structural roots of this phenomenon, the importance of focusing on micro and small enterprises, and the emerging challenges linked to digitalization and platform work.

Why does labour informality remain such a persistent problem in Latin America and the Caribbean?

Informality cannot be understood solely as a lack of compliance with the law. It is a phenomenon linked to the economic structure of countries, the low productivity of many economic units and institutional limitations that hinder access to formality.

In the region, a significant share of employment is generated in micro and small enterprises or through self-employment, often characterized by unstable incomes, limited access to finance and low capacity to absorb the costs and requirements of formalization.

You describe informality as a multi-causal and multidimensional phenomenon. What does this mean in practice?

It means that it does not respond to a single cause and cannot be addressed through a single policy. Factors such as economic structure, labour regulation, productive dynamics and, increasingly, value chains all play a role.

There is also considerable heterogeneity between countries and across types of employment. The challenges faced by a self-employed worker are not the same as those faced by an informal wage worker. Responses therefore need to be tailored to each context and to the specific characteristics of those targeted for formalization.

Why is enforcing compliance alone not enough to reduce informality?

Because, in many cases, becoming formal remains difficult, costly or unclear. Administrative procedures can be lengthy and fragmented, and the benefits of formality are not always immediately visible.

If a microenterprise or a self-employed worker perceives formalization as involving only additional costs, without clear access to social protection, credit, training or better business opportunities, they are likely to postpone that decision.

Formalization advances when it becomes a viable, useful and sustainable option.

What types of responses have shown the best results in the region?

The most promising strategies combine simplification, incentives and stronger institutions.

For example, simplified regimes for small workers and enterprises can reduce entry barriers; modern labour inspection can combine guidance, prevention and more effective enforcement; and integration into value chains or markets that require traceability and compliance can create concrete incentives to formalize.

Linking the formalization agenda with productivity is also key, particularly for micro and small enterprises.

What role do technology and digitalization play in this discussion today?

Technology has a dual effect. On the one hand, it transforms production processes and, in some contexts, may reduce labour demand or shift workers into other activities, including informal ones—especially where economic growth is insufficient or reskilling opportunities are limited.

On the other hand, it can also support formalization by improving enforcement, facilitating access to information and helping compliance with labour regulations.

In this sense, technology influences both the causes of informality and the potential solutions.

How do digital platforms fit into this debate?

The platform economy has become a central issue because it introduces new forms of work that still pose regulatory and social protection challenges.

Although these activities do not yet represent the majority of employment, they are particularly relevant for certain groups, such as migrant workers, who often use platforms as an entry point into the labour market.

The challenge is to ensure that the expansion of these employment opportunities does not lead to increased informality or new forms of inadequate protection.

This interview was originally published by Radio Del Sol (Uruguay) and is available in full, in Spanish only, here.