Report uncovers reality of informal economy

Low benefit rates, high rents, childcare costs and debt are among the reasons obliging people to engage in low-paid, informal work, a new study from inner-city charity Community Links has claimed.

People in low-paid informal work — need not greed examines the informal economy in Newham, a London borough ranked among the most deprived areas in the UK. Funded by the Joseph Rowntree Foundation, the report is based on 100 face-to-face interviews with people in informal paid work.

Contrary to the widespread portrayal of such workers as benefit cheats, the research found that poverty is at the root of informal working. Participants either needed the work to pay for basics like food and heating, or took the work as a route out of poverty.

The study found that the three issues underpinning most informal working were low benefit rates, low wages and rules limiting the hours that people on benefits can work.

Some participants said employers encouraged informal work, and told of large “reputable” firms engaging contractors who used low-paid informal work.

Among the report’s recommendations are research on the size and scope of the informal economy in other localities, welfare and tax reform and measures to move people successfully from informal to formal work.

The report is available at www.jrf.org.uk/bookshop