Informal Employment Rate in Ecuador Surges to 54.8%, Second Highest in 2023

Informal Employment Rate in Ecuador Surges to 54.8%, Second Highest in 2023

Ecuador’s labour landscape has witnessed a surge in the informal employment rate which hit 54.8% in July, marking the second-highest percentage this year after January’s peak. This is according to data released by the National Institute of Statistics and Censuses (INEC).

Persistent Rise in Informal Employment

The latest data from INEC revealed that the informal employment rate has been on a consistent rise, indicating a substantial increase of 2.9 percentage points compared to the same month in the previous year. With the informal employment rate reaching one of the highest points in the year, this trend underscores the challenges faced by Ecuador’s workforce, especially in accessing labour rights and social security.

Magnitude of Informal Workforce

An estimated 4.4 million individuals in Ecuador are part of the informal sector, engaging in work within companies that lack a Single Taxpayer Registry (RUC). This sector operates outside the tax system and lacks access to essential labour rights and benefits. These individuals, comprising nearly four out of 10 Ecuadorians, are unable to contribute taxes and often experience precarious working conditions.

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Full Employment and Underemployment Dynamics

Interestingly, the concept of full employment, where individuals earn at least a basic salary of USD 450 and work 40 hours per week, does not necessarily translate into formal employment. In July 2023, the rate of full employment stood at 35.5%, signifying a notable increase of 3.4 percentage points compared to the same period in 2022. This phenomenon sheds light on the discrepancy between full employment and formal employment.

Meanwhile, underemployment, characterized by inadequate work conditions such as lower wages or insufficient working hours, demonstrated a positive trend. The underemployment rate decreased from 22% in July of the previous year to 20.2% in July 2023, suggesting a slight improvement in the quality of employment conditions.

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Unemployment Remains Steady

While the unemployment rate stood at 3.7% in July 2023, showcasing a marginal decrease from the 3.9% reported a year ago, these figures indicate relative stability in the unemployment landscape. The insights are drawn from the National Survey of Employment, Unemployment, and Underemployment (ENEMDU).

The challenges posed by rising informal employment, coupled with the dynamics of full employment, underemployment, and unemployment, underscore the need for comprehensive policies to promote formalization, protect labor rights, and ensure social security for Ecuador’s workforce.