In light of the pervasiveness and persistence of informality in the MENA region and the increasing exposure to global and regional shocks, the ILO, OECD, and UNDP have joined forces to advocate for effective forward-looking policies in MENA countries that can encourage gradual formalisation of businesses and jobs, and at the same time, that help create resilience to absorb new shocks while promoting the creation of decent jobs and sustainable growth. The ultimate objective is to achieve broader social and labour protection, higher level of labour income including fairer wages, a more even tax burden, and higher potential growth.

This joint ILO-OECD-UNDP report reflects the work so far conducted in the context of the cooperation. It contains initial policy recommendations to address informality in protracted times of shocks.

This report introduces a Framework for assessing the impact of economic and social policies on informality.

The Framework, designed by ILO, OECD, and UNDP, is a hands-on instrument, allowing policy makers to foresee early on in the policymaking cycles the effects diverse economic and social policies could have on the informal economy. This tool adds to the vast literature on informality, and also complements recent work by the World Bank (June 2023).

The Framework aims to evaluate the direct and indirect effect of implemented social and economic policies, regardless to their primary objective, on informality of employment and business. It was developed on the basis of desk research and consultations with experts and policy makers from the MENA region. The accuracy of the Framework is fortified by relying on mainly meta-analysis studies that have previously tested the effect of the different policies on informality.

The Framework was tested on a group of three countries, Egypt, Iraq, and Jordan. The analysis particularly focused on policy initiatives adopted since the COVID-19 pandemic in the specific context of the MENA region. Consequently, policies pertaining to education, training, and social solidarity economy, among others, fall outside the scope of this Framework.