Limits to Labour Absorption

Abstract

"The Nigerian Structural Adjustment Programme (SAP) descended on an informal sector ill-prepared to withstand the onslaught of market forces. The new macro-economic environment created by SAP, which was supposed to promote informal sector development by freeing up resources and encouraging linkages with local industry, seems to have had precisely the opposite effect. Out-competed by industry for access to local raw materials and swelled by rising unemployment and falling real wages, the informal sector has found itself squeezed from both the supply and the demand sides, to the point of threatening its continued capacity to absorb surplus labour. By 1987, only one and a half years after the inauguration of SAP, the government was forced to intervene in order to stem the alarming rise in unemployment and urban poverty. The question now facing policy-makers is why the informal sector has failed, so far, to respond to market incentives, and, more urgently, what the precise impact of Structural Adjustment policies has been on the members of the informal sector. Part of the attempt to answer these questions has involved increased concern over improved methods of statistical collection in order to find out why Structural Adjustment policies have not had the expected effect, and to monitor future developments. The problem, however, is not a function of the adequacy of available statistics but of the conceptual framework within which such statistics are collected and interpreted. As a socio-economic category, the informal sector is a recent creation; it arose in the early 1970s in the context of a disenchantment of neo-liberal development thinkers with the inefficiency of state-led capitalism in developing countries. Thus, the emergence of a concept of the informal sector as a form of popular development based on market forces is part of the political, economic and ideological context that ultimately produced structural adjustment programmes. As a result, the prevailing framework within which the informal sector is analysed within the literature1 tends to support the structural adjustment perspective on the importance of deregulation for economic efficiency and popular participation in the development process. It is therefore important to disentangle the evolution of the concept, with all its ideological trappings, from the development of the informal sector itself. With this in mind, the first section of this paper will trace the conceptual evolution of the informal sector in the development literature, consider some of the more recent critical perspectives on the concept of informality, and discuss definitional and statistical issues within this context. The following three sections will look at the development of the informal sector in Nigeria in the period prior to the Oil Boom, during the Oil Boom and during the crisis of the early 1980s. In each case, the examination of developments in the sector will involve a consideration of the prevailing policy attitudes toward the informal sector. The fifth section will consider the effect of Structural Adjustment policies on the informal sector, and possible strategies adopted by informal sector participants to deal with the effects of crisis, at the level of the workplace, the household and the community."(pg 1)