EVALUATING THE CONTRIBUTION OF THE INFORMAL SECTOR IN ALLEVIATING UNEMPLOYMENT IN CAMEROON

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

The global population includes about 1.2 billion individuals between the ages of 15 and 24. Approximately 90 percent of these individuals reside in underdeveloped countries. The youth population in Sub-Saharan Africa accounts for 14 percent of the total population. In Ethiopia, this proportion is approximately 21 percent, while in Cameroon it is 30 percent (UN, 2021). Approximately 75 million young individuals were unemployed globally in the year 2021. In addition, young people were three times more prone to unemployment compared to adults. The Sub-Saharan Africa region had a young unemployment rate of 11.5 percent according to the International Labour Organisation (ILO) in 2022. In Ethiopia, the rate was approximately 28 percent, while in Cameroon it was 23 percent. Hence, the issue of youth unemployment poses a significant peril to the social, economic, and political stability of a nation, as stated by the International Labour Organisation (ILO) in 2022.

Multiple reasons contributed to the elevated youth unemployment rate in Africa. The notable factors contributing to high youth unemployment include a large proportion of youth population (slightly more than 20 percent), underdeveloped economies resulting in low job creation, limited private sectors to employ the growing youth population, low quality of education leading to a mismatch of skills required by the labour market, lack of general and job-related skills, and limited formal work experience (Semboja (2017; UNECA, 2017). The issue of unemployment has compelled numerous African adolescents to resort to violence and criminal behaviour, while young women and girls have been forced into engaging in sex work, experiencing sexual violence, and succumbing to substance and drug misuse. Additionally, they have been vulnerable to HIV/AIDS. (Christopher et al., 2022)

Unemployment, especially among the younger population, continues to be a significant and urgent issue that Cameroon's economy is grappling with. The formal sector has failed to adequately meet the work demands of the expanding population, resulting in elevated rates of unemployment and underemployment (INS, 2021). According to the National Institute of Statistics (INS) report, the overall unemployment rate in Cameroon was 3.9% in 2021. However, this statistic does not accurately represent the significantly higher rates of unemployment and underemployment among key demographic groups, such as young people and women. The elevated level of unemployment is worsened by the disparity between the skills imparted by the educational system and the requirements of the labour market, together with economic volatility and insufficient infrastructure. A significant number of individuals who have completed their education are facing challenges in securing employment that aligns with their skill set and educational background. Consequently, they are compelled to explore opportunities in the informal sector as a temporary measure. Nevertheless, for a significant number of individuals, the informal sector serves as a durable means of employment, providing greater stability and income compared to the unpredictable opportunities of the formal labour market (Ndedi, 2020).

Unemployment poses a significant challenge in developing nations. The increasing population and scarcity of formal employment possibilities are exacerbating the proportion of unemployed individuals in the overall labour force. During such circumstances, employment opportunities in the informal sector serve as the main means of income for unemployed individuals to fulfil their fundamental necessities, including food, housing, clothes, and household bills. Currently, over 60% of the global employed workforce sustains their livelihood by engaging in the informal sector (Palmer, 2020). This sector comprises a heterogeneous workforce, unincorporated self-governing enterprises, and small-scale businesses with less than 10 employees (Usman, 2019). According to the statistics analysis from the International Labour Organisation (ILO), this type of job is prevalent in all parts of the world, regardless of their socio-economic position (ILO, 2017). Nevertheless, the occurrence of this phenomenon is significantly more common in underdeveloped countries in comparison to industrialised ones (Bonnet et al., 2018). 

The rigidity of the official work market is a primary factor contributing to the expansion of this sector. In addition to this, the lack of functioning enforcement procedures for registration and taxation, as well as insufficient regulatory frameworks in developing countries, also contribute to the expansion of the informal sector (Nordling, 2017). The ILO employment report indicates that a significant proportion of employment opportunities in developing nations are created by self-operated informal enterprises, which hire millions of workers (ILO, 2017; Palmer, 2020). These enterprises are exempt from the same restrictions as conventional businesses, which grants them greater flexibility for workers. The inherent adaptability of this phenomenon offers prospects for employment, revenue creation, and business ventures, especially for marginalised demographics (Mujeyi & Sadomba, 2019). The dependence of a substantial segment of the labour force on informal employment becomes highly evident during periods of economic uncertainty, such as the COVID-19 epidemic. According to a study conducted in India, the COVID-19 shutdown resulted in a loss of livelihood for 78% of informal workers, and about 82% of informal workers experienced food insecurity (Chopra, 2022). A multitude of informal enterprises were forced to shut down during this duration, resulting in substantial financial setbacks for the government. 

The informal sector in Cameroon covers a diverse array of activities, such as small-scale trading, artisanal work, agriculture, and other services. It is distinguished by the lack of official employment agreements, restricted availability of loans, and minimal oversight from the government. According to the International Labour Organisation (ILO), almost 90% of the labour force in Cameroon is employed in the informal sector, which is a crucial part of the country's economy (ILO, 2018). The sector is especially prominent in metropolitan areas, where it functions as a safeguard against the elevated levels of unemployment and underemployment. The informal sector in Cameroon has experienced significant growth in recent decades due to factors such as rapid urbanisation, population growth, and the formal sector's incapacity to accommodate the growing labour force (Fonjong, 2017). Insufficient work prospects in the formal sector have compelled some persons, especially young people and women, to resort to informal employment as a method of sustaining themselves. The informal sector has emerged as a crucial means of generating income and employment for individuals who are marginalised from the official economy. It plays a substantial role in reducing poverty and maintaining social stability.

The informal sector has been crucial in absorbing the excess labour resulting from the deficiencies of the formal economy. The provision serves as a safeguard for individuals who are unable to obtain traditional jobs, presenting possibilities for self-employment and entrepreneurial endeavours (Mbaye, et al., 2022). Small-scale firms and informal businesses in Cameroon have emerged as a vital means of generating money for several households, thereby mitigating the economic strains resulting from unemployment. Although the informal sector has made great contributions, it nonetheless faces obstacles. The industry is frequently linked to meagre salaries, unfavourable labour conditions, and a deficiency in social safeguards, all of which can sustain poverty and inequality (ILO, 2018). Furthermore, the casual nature of these occupations sometimes results in workers being deprived of formal labour rights and benefits, such as healthcare coverage and retirement plans. These problems emphasise the necessity of governmental initiatives that might bolster the informal sector while enhancing the standard of work it offers.

Although there is an increasing amount of literature on the informal sector in Africa, the majority of it has concentrated on topics such as alleviating poverty, gender dynamics, and the sector's impact on GDP (Ndedi, 2020; Fonjong, 2017; Becker, 2004). The importance of the informal sector in tackling unemployment and its potential to generate sustainable and good work possibilities is not given enough attention. This study seeks to address this deficiency by conducting a comprehensive investigation of the informal sector's contribution to mitigating unemployment in Cameroon.

1.2 Statement of the problem

Unemployment is a widespread problem in Cameroon, especially among the younger generation and women, who have restricted prospects in the official job market. Although the country possesses significant economic potential, the formal sector has been unable of accommodating the swiftly expanding labour force, resulting in elevated rates of unemployment and underemployment (INS, 2021). According to the National Institute of Statistics (INS, 2021), the reported national unemployment rate in 2021 was 3.9%. However, this figure does not fully represent the actual level of unemployment, particularly among young people and women. These groups are disproportionately impacted by the limited job prospects in the formal sector. Many people have been compelled to pursue employment in the informal sector as a result of this predicament, which has now become a vital source of sustenance in the country.

The informal sector in Cameroon is extensive and varied, comprising small-scale trading, artisanal activity, agriculture, and different service-oriented occupations. The informal sector is believed to employ almost 90% of the labour force, making it the primary source of employment in the country (ILO, 2018). The informal sector, despite its importance, is frequently associated with meagre salaries, unfavourable working conditions, and a dearth of social safeguards. These factors can contribute to the persistence of poverty and inequality among workers (Fonjong, 2017). Nevertheless, the informal sector serves as a crucial lifeline and a safeguard against the economic strains of joblessness, especially for several Cameroonians who are marginalised from the formal economy.

Although the informal sector undeniably plays a significant role in generating employment, its contribution to easing unemployment in Cameroon has not been sufficiently investigated or comprehended. The predominant focus of policy discussions has been on the difficulties linked to informal work, including its repercussions on tax revenues, labour rights, and social protection (Mbaye et al., 2022). The positive contributions of the informal sector in reducing unemployment and creating economic opportunities for individuals who would otherwise be without any means of livelihood have received little attention. The absence of a thorough study has led to policy deficiencies that overlook and neglect the informal sector's capacity to stimulate economic growth and create employment opportunities.

An important concern is the paradox of the informal sector: although it offers jobs to millions of individuals, the nature of these jobs is frequently of low quality, characterised by insecurity, exploitation, and a lack of legal safeguards (Becker, 2004) as mentioned in Fonjong (2017). Furthermore, it is essential to comprehend the determinants that compel individuals to engage in the informal sector and the degree to which this sector can offer not only employment opportunities, but also high-quality occupations that contribute to the alleviation of poverty and upward social mobility. If these issues are not addressed, the informal sector's ability to reduce unemployment in Cameroon may be restricted, and the country may continue to experience difficulties with economic instability, social inequality, and inefficiencies in the labour market. This study aims to assess the role of the informal sector in reducing unemployment in Cameroon, considering the various complications involved. 

1.3 Objectives of the study

The primary objective of this study is to critically evaluate the contribution of the informal sector in alleviating unemployment in Cameroon. Specific objectives of this study are to:

To ascertain the extent informal sector contributes to job creation in Cameroon

To evaluate the impact of informal sector employment in alleviating unemployment in Cameroon

To investigate the challenges faced by the informal sector in creating sustainable employment opportunities in Cameroon

To propose strategies to enhance the effectiveness of the informal sector to employment in Cameroon

1.4 Research Questions

The following research questions which are in line with the objectives of this study will be answered in this study:

To what extent has the informal sector contribute to job creation in Cameroon? 

What is the impact of informal sector employment in alleviating unemployment in Cameroon?

What are the challenges faced by the informal sector in creating sustainable employment opportunities in Cameroon?

1.5 Research Hypotheses

To determine the effectiveness of this study, the following research null hypotheses will be formulated to guide the study and it will be tested at 0.05% levels of significance.:

Ho:  The informal sector has no significant impact in alleviating unemployment in Cameroon.

Ha: The informal sector has a significant impact in alleviating unemployment in Cameroon.

1.6 Significance of the study

The examination of the informal sector's role in reducing unemployment in Cameroon is of great importance due to its implications for economic policy, social stability, and development initiatives. The study will function as a comprehensive storehouse of information for informal sectors, governments, communities, the general public, scholars, and academics.

A significant proportion of Cameroon's economy is comprised of the informal sector. It encompasses a range of activities and enterprises that function without adherence to official regulations, such as street vending, small-scale commerce, and informal services. An assessment of this sector's contribution can offer valuable insights into its role in absorbing labour and providing livelihoods, particularly in the setting of elevated unemployment rates.

Moreover, comprehending the role of the informal sector in mitigating unemployment might assist policymakers in formulating precise actions. This entails formulating laws that facilitate the expansion of informal firms, enhancing the availability of financial resources, and offering training and resources to workers in the informal sector. 

Moreover, the informal sector frequently offers prospects for marginalised demographics, such as women, young individuals, and individuals with limited skills. An evaluation of its role can provide insight into how it facilitates social inclusion and empowers these groups to achieve economic autonomy and stability.

Furthermore, the study has the capability to pinpoint deficiencies in current research and establish a basis for further exploration into particular facets of the informal sector. Potential future research endeavours may involve doing in-depth case studies, examining the repercussions of rules on the informal sector, and evaluating the efficacy of different support programs.

1.7 Scope of the study

Broadly, this study focus is to critically evaluate the contribution of the informal sector in alleviating unemployment in Cameroon. Empirically, the study will discuss the types of jobs provided by the informal sector in Cameroon, the impact of informal sector employment in alleviating unemployment in Cameroon and the challenges faced by the informal sector in creating sustainable employment in Cameroon. 

 Geographically, the study will be carried out in Yaoundé, Cameroon. 

1.8 Limitations of the study

During the examination, the researchers observed intrinsic constraints that exist in all human behaviours. The primary constraint was the dearth of comprehensive literature on the topic, stemming from the paucity of data on Assessing the Impact of the Informal Sector in Mitigating Unemployment in Cameroon. Hence, a substantial investment of time and effort was required to ascertain the suitable materials, books, or information and collect data. 

Moreover, this study is limited by its limited sample size and restricted geographical coverage, primarily centred on Cameroon. Hence, the applicability of the results obtained in this study is limited, emphasizing the necessity for additional research. 

Furthermore, the researcher's shortcomings were predominantly attributed to financial restraints, as they are a student with inadequate financial resources to support themselves. The excessively high transportation fees at the research site presented a difficulty in fulfilling the financial responsibilities associated with transportation costs.

In addition, the researcher encountered a time limitation as a result of the necessity to do this research while concurrently meeting the responsibilities of attending lectures and engaging in other educational endeavors.

1.9 Definition of terms

Unemployment: Unemployment is a term referring to individuals who are employable and actively seeking a job but are unable to find a job. Included in this group are those people in the workforce who are working but do not have an appropriate job.

Unemployment rate: The unemployment rate is the percentage of people in the labor force who are unemployed. Consequently, measuring the unemployment rate requires identifying who is in the labor force. The labor force includes people who are either employed or unemployed.

Informal employment: Informal employment refers to working arrangements that are in practice or by law not subject to national labor legislation, income taxation, or entitlement to social protection or other employment guarantees.

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