Informality will block poverty reduction in Argentina

Significance

The informal sector, accounting for some 25% of real output and nearly half the workforce, undermines development prospects. A high tax burden and macroeconomic instability push many small and medium-sized enterprises (SMEs) into the informal sectors, while pandemic-related lockdowns accelerated the rising trend for informal, small entrepreneurs to offer their products on social media.

Impacts

• Though medium-term prospects for comprehensive reforms are minimal, more modest sectoral reforms may advance.
• Poor educational attainment will continue to undermine many workers’ prospects for overcoming poverty and informality.
• Informality levels highlight the need for pension reform, given shortfalls in the pay-as-you-go system and the numbers lacking a pension.