Local economic development fuels the transition to formality

Geneva (ILO News) - Local economic development is essential in transitioning businesses and workers from informality to formality, as highlighted at the World forum on local economic development (WFLED) in Sevilla. Participants emphasized the importance of the triple transition, social justice, public-private collaboration, and employment strategies that promote sustainable economic growth while safeguarding livelihoods.

At an-ILO moderated panel, experts at the forum stressed that formalization must enhance working conditions rather than displace workers, with local governments playing a key role in linking formality to essential services. Panellists highlighted multi-stakeholder dialogue, simplified regulatory frameworks, and the social and solidarity economy (SSE) as vital tools for successful transitions.

Carmen Roca of WIEGO, Peru, shed light on the challenges faced by informal urban workers, including street vendors, recyclers, and home-based workers. She emphasized the need for pro-poor policies, municipal engagement, and care services to support their formalization while safeguarding their livelihoods.

In Cameroon, Elise Pierrette Memong of RAESS (Réseau Africain de l'économie sociale solidaire) presented SSE initiatives as an entry point for women and youth into formal employment. She highlighted a successful women's oyster-harvesting cooperative in Mouanko, where municipal collaboration and training have boosted incomes and market access. However, she cautioned that legal safeguards are needed to expand such initiatives.

Meanwhile, Nancy Casas Montilla from Colombia's Huila Coffee Chain showcased a 16-year development plan that integrates training, certification, and innovation to formalize rural coffee workers through bipartite regional dialogue. The initiative has strengthened worker representation and youth inclusion in rural employment.

Brazil's "MEI" scheme for micro-entrepreneurs was presented by Bruno Quick of SEBRAE, Brazil, as a scalable model for formalization. By simplifying registration, reducing fees, and leveraging mobile platforms, the programme has formalized over 17 million micro-entrepreneurs, boosting their income by 25 per cent and expanding Brazil's formal workforce by 8 per cent.

The ILO has reiterated the urgent need for formalization to ensure decent work conditions, as millions of informal workers lack basic rights, social protection, and job security. Transitioning to formality provides access to labour protection, financial services, and social benefits, significantly improving livelihoods and economic stability. Formalization strengthens workers' rights, while boosting productivity, resource allocation, and public revenue, contributing to long-term economic growth.

To drive this transition, the ILO is calling for a integrated approach founded on social dialogue among governments, employers, and workers and ensuring that the views of workers and economic units in the informal economy are heard and considered. Experts stress that countries should adopt targeted approaches to promote the transition to formality of certain workers and economic units close to the frontier, while reducing decent work deficits and vulnerabilities among those who are too far removed from formality.

The forum concluded with a push for peer learning, documentation of local innovations, and embedding formalization into local economic strategies. By expanding social protection, supporting entrepreneurship, and enhancing workforce development, local economic development (LED) can create the right conditions for a sustainable and inclusive shift to formality.

About WFLED

The World Forum on Local Economic Development (WFLED) is a multi-stakeholder alliance of committed governments, national and international organizations, whose objective is to promote the local economic development approach and advance political debate and strengthen global partnerships for concrete actions at local, national and international levels. Its general objective is to promote the 2030 Agenda and address the challenges associated with the implementation of the Sustainable Development Goals (SDGs) at the local level. To this end, the WFLED promotes knowledge exchange, learning and the co-creation of inclusive local economic development policies.