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Doug Saunders

Where are the world's poor finding hope? Under the table Add to ...

I only wanted a ride. But when I stepped into a three-wheel auto rickshaw the other night in Sri Lanka to return from an interview, the driver spent most of the trip pitching me his well-integrated suite of goods and services.

He could sell me a designer shirt. Or introduce me to a friend who could mend, press or alter my existing clothes. He could get me a "full-body massage" - not, I hoped, performed by him.

He had, right in his vehicle, an interesting range of music and movies, and if I didn't mind stopping, he could procure me premium beverages, a hamburger meal or a private lap dance.

He could upgrade my Windows XP to Vista, or get my laptop's memory or hard drives expanded. With help from his daughter, he was willing to design, debug or host my website on a scalable platform.

"Just drive," I said.

As official economies splinter and crumble, this is increasingly how work is done in the world - off the books, under the counter, without tax or regulations from the government, without pensions or health plans or unemployment insurance for the people who do the work.

A generation ago, such work was on the fringes of the poorest and most authoritarian countries. Now, according to a study by a group of economists from the Organization for Economic Co-operation and Development, the majority of the world's jobs are "informal" or officially non-existent, and that proportion is increasing rapidly.

"Informality is increasingly becoming normal," they conclude, "not least in middle- and even high-income countries."

In a generation, we could all wind up like my driver, pitching our skills on the sly. This could be very bad for us. It could also be our salvation.

More than half of the world's non-farm jobs and self-employed businesses are now informal. It's a quarter of all jobs in post-communist countries, a third in North Africa, 50 per cent in Latin America, 70 per cent in the Indian subcontinent and 70 to 90 per cent in central and southern Africa. In places such as Chad, virtually all work takes place without the knowledge of the state.

If you think this is a phenomenon of the very poor, look around you. The crew of Polish guys painting my neighbour's house in London at the moment does not, officially, exist.

Many people in Canada, including some well-known politicians, have their children tended to, their houses cleaned, their lawns mowed, their cars repaired or their buildings cleaned without paying tax or benefits. Maybe you know some.

As the OECD says, it's a credit-crunch growth area: The recession is driving people to perform such off-the-book work for lack of formal jobs and is driving consumers and businesses to seek it out for lower costs and more flexible work relationships.

In the next few years, as taxes rise to pay for bailouts, the temptations on both sides may become greater. If you run a car company, you might not take the risk; if you run a restaurant, you just might.

As the OECD economists see it, this is trouble. High rates of informal employment, they note, "mean narrow tax bases and insufficient capacity to address pressing social objectives such as the provision of health and unemployment protection. They also imply ... lower efficiency and productivity. For individuals, being informally employed often means being locked in low-paid, high-risk and precarious activities."

But another important study casts this flood of underground work in a different light.

Deepa Narayan and her team of analysts at the World Bank have been transforming our understanding of global poverty for the past several years, and their work has culminated in a huge-scale work, Moving Out of Poverty: Success from the Bottom Up.

Based on interviews with 10,000 very poor people in a dozen countries, their work demolishes, I hope permanently, the idea of a "culture of poverty" that holds people back across generations.

It finds, overwhelmingly, that 80 to 90 per cent of very poor people are trying actively, all the time, to engineer routes for their families into a better life.

The word entrepreneurship surely applies better to what a typical $2-a-day African labourer does - saving and collecting investments; seeking out small, vacant market opportunities; freeing up capital from homes and assets; and calculatedly suffering present-day losses in exchange for future gains - than to anything that has been done in Lower Manhattan or Canary Wharf or Bay Street in recent years.

Dr. Narayan and her colleagues found that what stops people from making it out of poverty is, most often, a lack of market opportunities. Because the world of jobs, businesses, licences and investments is tied up and tightly controlled by the established middle class, poor people's only avenue is through the informal system - hang out a shingle, start buying and selling and investing and don't worry about formalities.

While on the whole informal work pays less and offers less of a future than "real" jobs, entering the informal sector almost always means an improvement in income for the individual.

In most countries, informal workers and entrepreneurs earn several times more than the minimum wage, which is usually the best they could hope to get in the formal sector.

It is, fundamentally, a step from nothing into something - though the next thing, a "something else," is tougher. Not just individuals, but whole countries, seem to benefit: In almost all the countries of south and east Asia and Latin America, economic growth has been accompanied by equivalent big rises in informality.

Whether this rough-and-tumble, informal labour market is a cause of rising fortunes or an unfortunate byproduct is a matter of endless debate. Both the OECD and the World Bank, after years of myopia, have discovered a new balance on this question, recognizing that the off-book economy is the world's principal path out of poverty and should not simply be policed or quashed.

But it also needs to be turned into something else: Without big investments by governments in health, schools, pensions and business development, there is no reason to enter the world of real work.

That these investments must be funded by taxes earned from the formal sector is, perhaps, the great paradox of our age.

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