The article presents the results of a desk study of documents adopted by the ministers of labor and employment of the BRICS countries with special focus on formalization of labor markets. Declarations and other documents were analyzed through the prism of compliance with the concept of decent work, human centered development and development of inclusive labor markets. The author concludes that informal employment remains a challenge for the BRICS countries, both for workers and for governments. For informally employed workers, this status is increasing the risks of violation of labor rights, dismissal, exposure to unsafe or hazardous working conditions, limitation of accessibility of training and re-training needed to update their skills and competences, the risk of not accumulating sufficient pension rights by the time of retirement, etc. For governments, the phenomenon of informality limits their fiscal space and capacity to develop and implement employment and social protection programs and strategies aimed at formalizing labor markets, increasing the well-being of the population and developing human capital. The multilateral co-creation of the BRICS countries in addressing labor and employment issues demonstrates their strong commitment to ensuring full implementation of the decent work concept within their human centered and inclusive development strategy. The constant exchange of information and experience contributes to the fine-tuning of national employment policies to respond to the emerging challenges and opportunities. Strengthening of cooperation among the BRICS countries increases the perspectives of progress in formalizing their labor markets.

BRICS, labor markets, decent work, inclusive development, informal employment

Modern economic development is characterized by deepening globalization, technological revolution, digitalization, demographic changes. All these phenomena are changing the world of work and people’s attitude towards their work and stimulate the need to transform and modernize labor and employment policies.

Although global trends are similar all over the world, countries are different and each country has its own specific situation and priorities in the field of economic and social development, depending on different national circumstances. But despite the differences between countries, there are some concepts of the functioning and development of labor markets that are recognized by all countries and serve as a basis for their policies on labor market.

The first basic concept is the concept of decent work. The second basic concept is the concept of human-centered development, and the third basic concept is the concept of inclusivity. All these concepts are interrelated and provide a comprehensive set of criteria for labor market and employment policies. The concept of “decent work” was first mentioned in 1999 in the Report of the ILO Director-General at the 87^th session of the International Labor Conference. It was declared that the goal of the organization was to promote opportunities for women and men to obtain decent and productive work in conditions of freedom, equity, security and human dignity (ILO, 1999). Four main areas of action were named within the strategy for promoting and implementing the decent work concept: promotion of workers’ rights; employment; social protection; and social dialogue. It was stated that all workers should have an adequate opportunity for decent work, remuneration (in cash and in kind), safe and healthy working conditions, access to social security and income security defined according to each society’s capacity and level of development. The decent work concept envisages protection of the fundamental rights of workers (freedom of association, non-discrimination in the workplace, absence of forced and child labor, as well as their participation in social dialogue, in which workers exercise their right to present their views, defend their interests and engage in discussions to negotiate work-related matters with employers and authorities.

Under the umbrella of the decent work concept the international community integrated the main components of social, labor market and employment policies and formulated objectives guiding policy makers in the countries of the world ever since. In fact, the decent work concept has opened a door to the second concept – that of human centered development and the need for integration of economic and social policies. The human centered development is about the central role of the human being in ensuring economic growth. Technological progress, development of robotics and automation began to displace workers from the labor market, replacing them with more productive automats and robots, and led to an increase in labor productivity and, accordingly, to higher rates of economic growth. At the same time, the release of workers was not compensated by their new employment due to the lack of skills needed for new high-tech jobs, etc. Therefore, after the 2008 crisis, countries decided that a way out of their subsequent recession was possible only if a person, not a robot or an automaton, was taken as the basis for growth. The concept of human centered development as the basis for economic growth emerged and was widely supported. The international community adopted three pillars of human centered agenda, including (a) increasing investment in people’s capabilities; (b) increasing investment in labor institutions; (c) increasing investment in decent and sustainable work (ILO, 2019).

The third concept of inclusive development and inclusive economic growth expands and sort of combines the concepts of decent work and human centered development. It is based on the understanding that every human being should have equal opportunities and access to decent work, education, health and other services. An inclusive labor market should be open to everyone – be it a man or a woman, regardless of age, health status, citizenship or lack thereof. The need for inclusive development and economic growth was acknowledged and reconfirmed in the Sustainable Development Agenda adopted by the UN member-countries and the whole global community in 2015 and was reflected inter alias in Goal 8 “Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all” (UN, 2015).

Population groups facing difficulties in accessing the labor market, education, health or other services and, thus, requiring special protection and support are often referred to as vulnerable groups. Although vulnerable groups vary depending on the country, the most often listed are young people, women, elderly, migrants, low skilled, persons with disabilities, etc. Depending on national circumstances, these may be racial or ethnic minorities, refugees, or displaced persons.

The inclusivity concept requires that no one be left behind and that conditions be created for representatives of vulnerable groups to actively participate in economic and social life of their countries and societies.

Employment and employability are among the key issues within the framework of decent work, human-centered and inclusive development and are a basic issue of the labor market policy.

Formal and informal employment are two opposite characteristics of a person’s employment status. Definitions and measurement of formal and informal employment differ in different countries and remain a subject of discussion (Hausmann, 2005). While statistical definitions were elaborated internationally (ILO, 2000), legal definitions are not elaborated, and when analyzing data and information from countries on formal and informal employment, possible variations in national definitions should be kept in mind.

While formal employment is a cornerstone of all basic concepts, informal employment is regarded as a negative phenomenon.

The reason for such an attitude is often formulated as follows: the informal economy (covers all workers outside the formal labor market as almost everyone works, but not everyone is employed; e.g., self-employed, unregulated wage workers, homeworkers, etc.) is a major challenge for the rights of workers, gender equality and inclusive development. It also has a negative impact on: (1) the development of sustainable enterprises (i.e. productivity, technological change and fair competition), (2) the environment, (3) public revenues, and (4) scope of government activity (ILO, 2015). The informal economy presents a hindrance to economic growth and social development as it is widespread within the unproductive sphere that is deleterious to broader economic development and growth (Williams, 2017).

However, some experts consider informality as a useful means of expanding the opportunities of the poor, stating that informal employment provides a chance for survival to a person who cannot find a job in the formal sector (Williams, 2017). Other experts state that workers make the choice to work informally not because of the lack of formal job opportunities but voluntarily (Sparks & Barnett, 2010). At the same time, other experts argue that the productivity of informal enterprises lags behind the productivity of formal units (Perry et al. 2007).

Though the rationale behind these positions definitely exists and cannot be fully denied, the fact that informality as a phenomenon has a negative “face” is also undeniable. The complex and diverse phenomenon of informality limits governments’ fiscal space and capacity to develop and implement employment and social protection programs and strategies aimed at increasing the well-being of the population and the development of human capital.

Informally employed workers face high risks of violation of labor rights, a high risk of being fired or exposed to unsafe or hazardous working conditions, they are at risk of limited availability of training and re-training needed to update their skills and competences, not accumulating sufficient pension rights by the time of retirement, etc. All these risks are much higher for informally employed than for those working in the formal sectors.

Nowadays informal employment exists in every country of the world. According to international statistics, 2 billion people, or more than 60% of the total employed population, and eight out of ten economic entities work informally. The contribution of the informal sector to GDP ranges from 14% in high-income countries to 36% in low-income countries (ILO, 2018).

The BRICS countries, like other countries of the world, face the challenge of informal employment. In 2019, the BRICS countries accounted for 45% of all informally employed in the world (ILO, 2020). At the same time, the distribution of informally employed across the BRICS countries is uneven. India and China are the leaders in the share of informally employed, and South Africa closes the list (see Annex 1, Figure 1). In Brazil, informal employment is more often met in agriculture, construction, hotels and restaurant, domestic work and wholesale and retail trade, where a lot of low skilled work is widespread. Informal employment in Russia is concentrated in wholesale and retail trade and auto repair, agriculture, forestry, fishery, and construction (Rosstat, 2020). Salaried workers constitute the majority of the informally employed. In India, informality is widespread in different sectors of economy, mostly among self-employed workers (street vendors, home-based and sub-contracted workers in supply chains, etc.). In India, only 18% of salaried workers work informally – the lowest share among the BRICS countries (Mehrotra, 2021). In China, informal employment is concentrated among rural migrants and workers dismissed by the state and collective enterprises, mainly in construction, small workshops, domestic work and self-employment. The share of salaried workers among informal workers in China is the second largest in the BRICS countries after Russia. In South Africa, informal employment is concentrated in wholesale and retail trade, education, health, public administration, construction and agriculture. The majority of those working informally are self-employed.

Countries use different approaches in their formalization-oriented policies in line with their national circumstances and priorities. Nevertheless, within the framework of their multilateral collaboration on labor and employment issues, the BRICS countries on an annual basis exchange information on their progress in labor market formalization and its perspectives. Ministerial declarations reflect consensus-based commitments and outline the next steps towards decent work and human-centered development, inclusive and formal labor markets.

The objective of this article is to review the development of an approach to labor market formalization through the prism of the implementation of the basic concepts of labor market development in the BRICS countries and to outline the BRICS cooperation on the development of the labor market and its perspectives in the area of labor formalization.

The desk-study is based on a qualitative retrospective analysis of different international and national documents, including, but not limited to, the declarations of the Ministers of Labor and Employment of the BRICS countries and documents related to the meetings of the international Employment Working Group of the BRICS countries. The existing definitions and national data are not argued and are used in the review based on the assumption that the differences in the definitions and statistical or other empirical data could be neglected, because all the analyzed documents are consensus-based and adopted by all BRICS countries.

A complex, holistic approach is used to track the linkages between employment-related political decisions and actions and measures undertaken to promote decent work, human-centered development and labor market inclusivity.

A retrospective comparison of the BRICS countries’ cooperation agendas in the labor and employment area is conducted based on sets of issues suggested and agreed for discussion by the BRICS countries.

An assessment of the perspectives of the labor market formalization in the BRICS countries reflects the official vision defined in the declarations of the Ministers of Labor and Employment of the BRICS countries.

1. BRICS multilateral dialogue and cooperation on formalization of employment and labor markets began in 2016 in Ufa, Russian Federation, and has continued ever since. Twice during the recent years, formalization has become a separate topic of BRICS ministerial meetings (in 2016 and in 2021), while in 2017-2020, the discussed topics and labor and the commitments of the Ministers of Labor and Employment contributed to the formalization agenda.

2. The BRICS countries consider the formalization of their labor markets as the best option with multiple benefits. Formal employment brings higher income and better social security for workers, for enterprises – technological progress and stable industrial relations, which leads to high competitiveness and sustainable development, and for the government – higher tax income and lower administrative expenses. It is also good for other aspects such as innovation and technological progress, fair competition, etc. Informal employment is understandable but it is not the best choice. Informally employed workers have their reasons, such survival, and keeping current life quality, they do not have the tradition or awareness to join the social security system or to invest on their own, or other reasons. But they have lost their benefits in all aspects, such as social security, OHS and the opportunity to upgrade their skills to increase employability, public services, and other rights and interests.

3. In addressing the problem of formalization of labor markets, the BRICS countries agreed that the creation of quality jobs in the formal sector of the economy and diminishing the informality of the labor market required an integrated set of policies or the use of a so-called whole government approach that works both at the macroeconomic, financial and labor market levels and collaboration with social partners to develop and implement strategies facilitating the transition to formality, providing incentives for employers to work formally and for workers to seek employment in the formal sector, as well as supporting those who would like to move to formal jobs. It was agreed that formalization measures went hand in hand with those aimed at reducing working poverty, connecting wage and productivity trends and reducing job insecurity. An integrated approach with active participation of social partners provides strong potential dividends for meeting the growth and employment goals of the BRICS countries.

The BRICS countries define the following issues as the basis for increasing formal employment (open-ended list):

• integration of policies that promote job creation and income generation opportunities in the formal economy
• creation of formal employment opportunities through enterprise modernization and increase of productivity
• development of labor market infrastructure
• investing in skills that meet the demands of the formal economy
• improving the livelihood of workers engaged in the informal employment and facilitating their transition to the formal economy
• strengthening of labor inspections
• strengthening of occupational safety and health
• ensuring the fulfillment of workers’ rights and social protection
• extension of adequate social protection to all workers
• development of occupational standards.

The COVID-19 pandemic has affected labor markets in all BRICS countries and the governments have been forced to focus on the support of formal workers and enterprises. Informally employed and informal economic units received a high stimulus to shift to formality.

5. The BRICS countries have good perspectives for expanding their collaboration in the field of labor markets and employment formalization through the exchange of information, experience and knowledge.

The study explores the BRICS countries’ labor and employment development issues, which have become one of the important aspects of collaboration among BRICS. The formalization of labor and employment is one of the key topics of the collaboration agenda. The analysis proved the erroneousness of the statements of some researchers that the Ministers of Labor and Employment of BRICS were unaware of the formalization challenge (Mehrotra, 2021). The labor and employment policies in the BRICS countries are based on an overall negative attitude towards informal labor relations, and the rhetoric that informality allows the most needy and vulnerable workers to survive is not supported in the BRICS countries political declarations.

The policy of the BRICS countries in the field of labor and employment formalization is using both “carrots” and “sticks” to incentivize the transition to formalization and punish those who work informally. Overall, the political approach of “carrots” dominates. The complexity of the phenomenon of informality makes it difficult to develop precise definitions, and each country uses somewhat similar, but different definitions. The lack of the latter does not prevent a common understanding of the issues related to informality and formalization of labor and employment and the countries base their discussions on a common understanding.

The major prerequisites for the formalization of labor markets are: the existence of a significant number of decent jobs in the formal economy; attractive and business friendly environment in the formal sector; open access to education and training of workers to obtain the qualifications needed for formal employment; the availability of individualized employment services for workers who would like to switch to formality; attractive social insurance and social protection schemes for formally employed; a coordinated whole government approach to the development and implementation of formalization policies with active involvement of social partners. Behavioral aspects should be addressed to shift the attitude of population in favor of formal employment.

The basic concepts of decent work, human-centered and inclusive development provide a full range of conditions that must be met by the governments to achieve substantial progress in the formalization of labor and employment, and the progress in the implementation of these concepts contributes to the formalization of labor and employment. The efforts undertaken by the BRICS governments to move forward in the implementation of these basic concepts and labor formalization allow us to positively assess the perspective progress.