 Thank you, everybody, for coming today. Thank you for the invitation to be here and to discuss about this topic. The title it was given to me is Formality versus Informality in Job Creation. And I'm going to say something specifically about formality and informality. I'm going to spend more time talking about job creation and raising people's earnings and standards of living. So before I proceed, I just want to put two pieces of terminology on the table. The first is that at least in my 20 minutes, I'm not going to distinguish it all between a job and employment. And that is to say that we have the standard ILO definitions. You are employed if you worked one hour or more for pay last week. You are employed if you worked 15 hours or more, not for pay last week. You are unemployed if you were not employed but you actively looked for work and you're out of the labor force if you did not actively look for work and you were not working either. So those are the standard definitions. We'll use those. Now one place where the labor economist in me uses different terminology from what we just heard from Martin is what is a labor market? I define a labor market as labor economists do, which is the place where labor services are bought and sold. And the richer the country, the more likely it is that the labor services of a worker are sold to an employer through an employer-employee relationship. But the poorer the country, as Martin showed us, self-employment is particularly important. And in those cases, the labor market, as labor economists think about it, is that people are selling their labor services to themselves precisely because no employer is buying their labor services. So I just want to say that when I talk about labor markets, I'm not going to exclude in any way self-employed. Quite to the contrary, it's important to include the self-employed. OK, so growth and development. It's important to start with definitions, I think. And that is that, for me, economic development is about improvements in people's material standards of living. There are other aspects of social development that get into other aspects of people's standards of living. But the material part is what I think defines economic development. I like to think in terms of ultimate development objectives and to ask, what is the ultimate development objective? A bit of jargon, I sometimes call it bottom line management. I wrote a book on that. It was one of the world's great non-sellers. And in technical language, what people might call the bottom line is what we economists call maximans. What is it you're trying to maximize, or what is it that you are trying to minimize? When I say that the teams remaining in the soccer World Cup are all trying to win the soccer World Cup, I think that goes without saying that that's what their maximand is. So we, when we're talking about economic development, what is our maximand? What are we trying to achieve? And I think we're trying to achieve improvements in people's material standards of living. Economic growth, productivity growth, lots of other things, then I would regard as intermediate objectives, but they are not the ultimate objectives. They're not the bottom line objective. There are ways of getting there, just like scoring goals and preventing the other team from scoring goals are approaches to winning the game in order to win the soccer World Cup. And so in seeking higher household incomes, the data show, and Martin talked about this, that most people get most of their income from the work they do, that therefore jobs, employment, are important for people to attain higher material standards of living. And it's said that there are two kinds of people in the world, those that put things into two categories and those that don't. I'm one of those people that puts things into categories, and so the two categories I have here are two means for improving household incomes and achieving better work opportunities. One is through more and better wage employment or salaried employment, wage and salary together. There's an issue in translating from the Spanish, but let me not get into that. And the other is through higher self-employment earnings. And those two, that is more and better wage employment and higher self-employment earnings, are precisely what I understand two of the three themes of this conference to be that is structural transformation and inclusion. So this talk is very much about those issues. Countries face conflicting jobs goals. On the one hand, they want more jobs. And they want jobs with higher earnings. Anybody who has taken basic labor economics knows that an ordinary downward-sloping labor demand curve has embodied in it the idea that higher wages paid will cause employers to hire fewer workers. And so there's a trade-off right there. In addition, some jobs offer social protections, and some do not. So I'll talk here a little bit about labor market protections, such things as health and safety legislation, hours legislation, other sorts of things. And then what is in British English called social security that is pensions, health insurance, and other social programs. And there may be conflicts between wages and these protections on the one hand between more employment and more protected employment. On the other hand, economics is called the dismal science for a reason. And these are among the reasons. Now, the title of this talk they gave me was formality versus informality in job creation. I quote my friend and colleague Ravi Kanber, who said, informality is a term that has the dubious distinction of combining maximum policy importance and political salience with minimal conceptual clarity and coherence in the analytical literature. I think the very best thing to do with the term informality is not use it. And instead, to talk about self-employment or wage employment, to talk about registered employment or non-registered employment, to talk about workers who are covered by social protections and workers who are not. But I understand what the point is. The point of this title is to say that in addressing the issue of job creation, there may be these kinds of trade-offs. And policymakers are going to find those trade-offs difficult to achieve. It's no answer, by the way, to say, well, there are three good things, and so I want all three if we know that they conflict in a fundamental sense with each other. So let me talk for a moment about informal sector and informal employment. It actually took me a number of years and conversations that we had Ravi and Koshik Basu and Harun Borat and others for me to understand the difference between informal employment and informal sector. Informal sector, by definition, is that the enterprise itself is not registered with the government. Informal employment would occur when those people who work in as employees in those enterprises or those people who are self-employed are not registered with the government. But that's not the end of informal employment. Informal employment also occurs when the enterprise is registered with the government, but the worker is either not registered with the government or registered with the government but not protected for a variety of reasons. For example, because the worker is a probationary worker because the worker is hired in casual employment, where the employer says we will hire you today, maybe we'll hire you tomorrow, or we will hire you today. And after 89 days, the employer says we won't hire you tomorrow because legislation kicks in tomorrow. But if you'd like to come back next week, there's a good chance that we'll have a job for you again. And so what does that mean? In a country like India, here are the percentages. Of the people who are employed in India, 85% of them are employed in informal employment in the informal sector, defined as the employer, the work, the entity, the self-employment activity is not registered with the government. Another 7% of employment is informal employment in the formal sector. People who work in jobs where the employers registered with the government, but the workers don't have the protections that might come to others. And 8% of employment in India is formal employment in the formal sector. The metaphor is often used of let's study the dog, let's not study the tail. It's not the tail that's wagging the dog, it's the dog that's wagging the tail. And if we look just at formal employment and those enterprises that are registered with the government and those workers that are working in those enterprises, we're missing most of them in India and many other countries at similar stages of development. So broadly speaking then, there are groups of jobs policies to consider. I used to use the term that groups of labor market policies to consider, except that people sometimes object. And they say that labor market policies are those things that happen within the labor markets, narrowly defined as they think about it. You just heard Martin talk about labor supply, labor demand, and wage determination. And we also heard him say that very important policies happen outside the labor market. So the terminology I like to use here to capture the ideas that you just heard him put forward are that there are policies in the labor market and policies impinging upon the labor market. Policies in the labor market are addressed to how specifically the labor market works. Policies impinging upon the labor market are policies that affect in particular where the labor demand curve is positioned. Also where the labor supply curve is positioned. And so all of these are policies to consider. So in order to consider policies with regard to wage employment, with regard to self-employment, let's first consider the broad economic policies. There's lots of talk at this conference. And I think rightfully so about these issues that I've put on this slide. Economic growth, trade, aid, investment climate, harnessing the energies of the private sector because it's the private sector that's an important creator of jobs. Just say by the way that when people are self-employed, they certainly are not self-employed in the public sector, so they get counted as working in the private sector, but they're not working as employees in the private sector. They're working as self-employed in the private sector. And so the statement is sometimes made that the private sector is responsible for creating most jobs, which is a really weird way of thinking that I have created my own job by buying a pack of 20 cigarettes and then selling them to people poorer than I am one at a time at a higher unit cost. I don't think of that as the private sector has created a job for me. I think of that as I have created a job for me, but anyhow, these are some of the broad economic policies and it certainly helps. It's not sufficient, but it certainly helps to get these broad economic policies right. So there are lots of things that can be done to increase the opportunities for paid employment. I know this is a cluttered slide and I cluttered it up just so this would all fit on one page and I could tell you that there's a lot to be said about this. And in my last book, which I was very surprised to find is actually on the Oxford University Press table out here. It's called Working Hard, Working Poor, and there's a chapter on increasing the opportunities for paid employment that includes these points that I'm not going to read out to you. And there's also a chapter on raising the returns to self-employment and I'm also not going to read out what those issues are. But these are some of the means of thinking about how to raise people's standards of living through the work they do. Okay, now I talked earlier about trade-offs in the labor market. One big labor market policy trade-off must be faced is resources are limited. Yes, thank you, okay. Resources are limited that to use money for one thing means not to use it for another. Another limitation, an important one, is that policy attention may very well be limited and so too may administrative capacity. And so we have to avoid in our policy making getting policy makers so distracted that they can't actually do the work of making policy and or administering policies that have been decided upon. So we have to make choices. This is the economist's question. How do we allocate scarce resources among alternative uses? And we have to ask the question then how much effort should be devoted to creating more jobs with social protections versus using some of the resources or all of the resources to help formalize the informal versus or and or helping those who remain unprotected to be protected perhaps by getting out of where they are and moving into those sectors of the labor market where job protections are more plentiful. These are some of the challenges to be faced. What I wanna conclude with is a policy case study. I thank Ravi for organizing an opportunity for a number of us to have had homestays with working women and their families in India, South Africa and Mexico and then repeat visits to India and South Africa. We were divided into groups of two. We lived with working women and their families and when we went to South Africa, I lived with a woman named Masi Bisi who had earned her livelihood by selling handicrafts. The way that she had sold her handicrafts before I met her for the first time was that she had obtained a license from a friend in order to rent a stall along the oceanfront in Durban. And this was a government regulated place with a limited number of spaces and for several years she sold her handicrafts in that particular place. And one day a police inspector came by and he said, show me your identity card and she showed her card. And then the police inspector said, show me your license for this stall and she showed the license for the stall. But the license for the stall was not in her name. The license for the stall was in the name of a friend from whom she had rented the license. And the policeman said, this is not legal. You have to get out of here. I will give you 24 hours. If you are here 24 hours from now, I am going to confiscate whatever I find in this stall. So she left and she had difficulty finding a new livelihood. But then she and her husband found a new way to make an even better living, which was that they made and sold Zulu shields, which Zulu people bought for ceremonial purposes in which tourists like me bought to decorate, in my case, the office I have at Cornell and if you come visit me at Cornell, you can see my Zulu shield I bought from her. That's how they made their livelihood. But what happened is that the government had been hassling them and making it impossible for them to earn a livelihood the way that they had been trying to. Yes. Another thing that was striking about the oceanfront in Durban was the absence of something that one sees every place else in the developing world, which is people who are selling fruit juices and ice creams and slices of pineapple and all sorts of other things, walking along the beach and trying to sell it to people on the beach. There were no such people there. And the reason there were no such people there is because the local authorities had decided that these people were threats to the people who were enjoying themselves on the beach. And so to conclude the story then, we in our group, Ravi and Koshik and Harun, the others of us, Francie, met with the government. And the government official who was responsible for this said to us, we are doing this. My job is to protect you, he said, pointing to us, the foreign visitors against them. And normally I keep my mouth shut in such things when I'm in other people's countries, but I couldn't that time. So I just said, sir, excuse me please, I do not want to be protected against them. I would like them to be able to learn, earn their livelihoods. So to just finish the thought in 30 seconds. The point is, I said at the beginning, remember that there are ultimate development objectives. The ultimate development objective, as I said, is to try to enable people to earn higher material standards of living. That's the essence of economic development. If we lose sight of those ultimate objectives and put into effect other things that get in the way, such as these kinds of regulations, people are gonna lose their livelihoods. And I think the question to ask then is how can they earn their livelihoods? I've given what I think are some answers and this last part is what not to do. Thank you very much.