“Poverty and Development” Visualizes a Fairer Economy by Transitioning the Informal Sector

On Thursday, November 8, 2012, the Pell Center hosted a lecture given by Karen Tramontano, the founder and President of the Global Fairness Initiative (GFI) at DiStefano Lecture Hall. The lecture, Poverty & Development: The Role of the Informal Economy in Changing People’s Lives discussed how developing countries’ economies benefit from integrating the “informal sector” of businesses with the formal sector.

The informal sector, as defined by GFI, refers to the “billions of unprotected workers engaged in legal but unregistered enterprises outside formal economic structures.” Third world countries with struggling economies are linked to having high rates of informality, which is responsible for unequal opportunities, low wages, corruption, and child labor.

Tramontano listed three downfalls of businesses to participating in the informal economy: the workers in informal business have a small chance of rising above the poverty line; the businesses are impervious to market forces of global businesses, and the impact of powerful economic consequences as a result of moving towards the formal sector are not realized.

Transitioning informal businesses to the formal sector is the best way to aid employers, protect workers, and grow the economy.  To develop programs that encourage and maintain the transition, GFI surveys the poor in the informal sector to identify how to attract informal businesses to the formal. Since establishing GFI in 2002, Tramontano has transitioned informal businesses to the formal sector in developing countries all over the world, including Costa Rica, Peru, and Ghana.

Tramontano discussed two different businesses –one formal, the other informal—working in Ghana’s cocoa farming industry. The formal business, dominated by men, has access to roads, storage facilities, and a John Deere tractor. They also had access to foreign trade and had better control over their supply chain.

On the other hand, the informal business had no access to those resources. The informal business, which is run by women, earns lower wages, struggles to transport goods, and has less control of the supply chain.  Tramontano says more “insight can change development” by raising awareness of the opportunities the formal sector can provide to improve the informal business.

Investing in women’s labor in developing countries is crucial to a sustainable economy, but it is only effective when women are out of sustained instability in the informal sector, which Tramontano describes as a “painful existence.” Unfortunately, child labor, which parallels the rate of women laborers, poses an even more challenging lifestyle.  Not only do child laborers lose their freedom of childhood, but they are cut off from earning a better education.

Tramontano established GFI to solve the problem of inequal opportunity among the poor and minorities, a misrepresented group in the midst of macroeconomic industry. Senator Claibrone Pell, a former boss of Tramontano’s , urged her to “look for the next huge idea that people are missing.”

By the end of the lecture, Tramontano made two things clear: GFI wants to make sure no one is exploited or excluded from opportunity.

To learn more about the Global Fairness Initiative on their website, please click here.