Recent trends on informal employment in Georgia

Drawing on data from the Georgian Labour Force Survey (2021-2022), this paper provides a detailed statistical profile of informal employment in Georgia and discusses its key drivers.Around four workers out of ten were informally employed in Georgia in 2022.The large majority (69 per cent) of informal employment occurs in the informal sector, with a smaller but significant share (27 per cent) taking place within formal sector enterprises.The rate of informal employment is higher among men (43 per cent) compared to women (30 per cent), while being higher among both younger and older individuals compared to prime-age workers.The rate of informal employment is also inversely associated with educational attainment: around 80 per cent of those with primary education are informally employed, compared to less than 20 per cent among those with tertiary education.Informality is also concentrated in micro-enterprises, agriculture, construction, and low-skilled occupations.Informal workers earn substantially less than their formal counterparts, work fewer hours on average but more frequently at atypical times, and frequently lack clear information about their employment contracts.To compensate for lower labour earnings, they rely more heavily on non-labour income sources, particularly support from family members.The persistence of high informality in Georgia -higher than expected given the country's income level -is driven by a combination of (i) macroeconomic factors such as limited formal job creation and the relatively high share of employment in agriculture and construction, (ii) worker and firm characteristics (i.e.low productivity and skills, prevalence of small firms and small role of exports), as well as (iii) institutional/regulatory features (e.g.social security design features, preferential tax regimes, administrative barriers, and debt enforcement practices).