Income Insecurity, Job Insecurity and the Drift towards Self-employment in SSA

This study contributes to the explanation to growing informality by proposing and testing a simple framework that link income insecurity to the proliferation of informal enterprise through job insecurity in selected SSA countries. The study adopted a quantitative approach and used ANOVA analysis to analyze a uniform firm level data on informal enterprises in Ghana, Kenya and the DRC. The analyses suggested that income insecurity exist in the form of significant seasonal variations in sales returns. Enterprises that employ more than one worker, on the average, cut employment significantly during the slowest months as compared to employment in the busiest months. Thus a link is established between income insecurity and job insecurity which deters the informal enterprises from increasing permanent employment and hence remains small overtime. Instead firms resort to casual workers and unpaid workers to facilitate production. The insecurity in the informal sector paid employment drive paid employees into self-employment after learning the employer’s trade and hence multiply the number of enterprises in a locality which in turn keep returns fairly normal in the sector. The major recommendation of that study is that owners of informal enterprises must be regulated in their current jobs and assisted to build capacity to deal with sales variations and other employment uncertainty after which the demand for formality and growth in decent employment shall be a natural course of action to the firms.