An Education in the Informal Economy

By Alvaro Huerta, PhD

A typical day in 2004 saw 303,800 informal workers in the city of Los Angeles. According to Hopeful Workers, Marginal Jobs: L.A.'s Off-the-Books Labor Force by Daniel Flaming, Bren Haydamack, and Pascale Joassart, this figure accounted for 16 percent of the city's labor force.

Alvaro Huerta, PhD, holds a joint faculty appointment in Urban & Regional Planning and Ethnic & Women's Studies at California State Polytechnic University, Pomona. He is also a scholar and practitioner of the informal economy, among other fields.

Today, millions of informal workers and petty entrepreneurs are in business every day across the U.S. These workers are ubiquitous, yet planners have little experience with the informal economy, both in education and in practice.

As a scholar and practitioner of the informal economy, I don't blame my dedicated and capable colleagues. The informal economy isn't incorporated into planning curricula at the undergraduate or graduate levels.

But it's time we learn.

As planners and policy analysts, we need to educate ourselves on the indispensable and interrelated relationship between the informal and formal economies.

In an edited volume of The Informal Economy: Studies in Advanced and Less Developed Countries, Manuel Castells, PhD, and Alejandro Portes, PhD, provide an oft-cited definition, emphasizing its unregulated characteristics: "The informal economy [is] a process of income-generation characterized by one central feature: it is unregulated by the institutions of society, in a legal and social environment in which similar activities are regulated."

In general, this encompasses small companies, workers, and petty entrepreneurs operating in an unregulated economy, people like gardeners, day laborers, childcare providers, domestic workers (like my late mother), and street vendors.

Policies should differentiate this work from illicit goods and services. Street vendors selling tacos on the corner and drug dealers selling cocaine on that same corner are very different cases. While both participate in the informal economy, there's a clear distinction between them.

"As planners and policy analysts, we need to educate ourselves on the indispensable and interrelated relationship between the informal and formal economies."
— Alvaro Huerta, PhD

Still, many policies treat these activities as equally punishable by law. Even in major cities like New York and Los Angeles, where street vending is legal (or in the process of being legalized), vendors who operate in restricted areas or don't secure permits are treated like criminals. A Latina street vendor named Elsa made headlines in November after she was handcuffed and arrested for selling churros at a New York City subway stop without a license. Her experience is common.

Cities create significant financial barriers for these petty entrepreneurs. While they generally face no jail time, their goods and other supplies can be confiscated by law enforcement, and they are forced to pay a citation, like $500 for a third violation in Glendale, California.

But selling goods legally can be even more expensive. Permits are difficult to obtain and come at a high cost — LA, for example, has proposed a $541 annual fee for licensure. Health permits and background checks are also required in some places.

It's up to planners to combat these inequitable policies. In the tradition of Paul Davidoff — one of my role models, along with the late Leo Estrada, PhD, from the University of California, Los Angeles — we must become advocacy planners in this arena. As we study the informal economy, we should advise policy makers and other leaders on how to best design, plan, and manage our communities to support the millions of productive informal workers and petty entrepreneurs in this country.

Viewpoint is Planning's op-ed column. The views expressed here are the author's own and do not necessarily reflect those of the magazine or the American Planning Association. Please send column ideas to Lindsay R. Nieman, Planning's associate editor, at lnieman@planning.org.