Illegal immigrants and the informal economy: worker and employer experiences in the Asian underground economy.

• Author: Jones, Trevor
• Position: Report

Abstract

The informal economy and migration in advanced economies are two major political issues. This paper connects them through a study of the concrete experiences of workers, and the firms employing them, in the exemplary case of the clothing and catering sectors in a British city. This experience illustrates, notably through wages as low as 2 [pounds sterling] per hour, how people live through the tensions of economic pressures for cheap labor and political attempts to regulate its use. Illegal migration was a key reason for the survival of these firms, in supplying cheap and flexible labor. It was not, however, organized in any way by the firms, and they disliked it in principle while having little option but to employ illegals. Workers largely had to accept their lot. An approach to managing the issue through encouragement, rather than strict enforcement, is suggested.

Introduction

In 2003, we carried out research on behalf of the DTI into the use of illegal immigrant workers by Asian-owned firms in Birmingham and the West Midlands (Ram et al 2002a). Using trusted intermediaries, we were able to conduct twenty in-depth interviews with undocumented workers and a further twenty with their employers. Ten cases were drawn from the clothing sector, and ten from catering (embracing mainly curry houses and similar low-price restaurants). In the following employers are denoted by E and then a code number, and workers by W.

Though far too small a sample to support statistical generalizations, the qualitative case history approach enables us to unravel complexities and nuances likely to be missed by standard quantitative procedures. In this paper, this material is used to address some key debates on immigrants in the informal economy. Our suspicion is that, because much of the most prominent work in this field is heavily weighted towards top-ranking world cities (Light 2000, 2004, Sassen 1991, 1996), it is not entirely representative of what happens in the (actually much more extensive) rest of the world. While it goes without saying that we are not in a position to speak for the non-metropolitan world in its entirety, nevertheless the view from a second-ranking center of a region of drastic de-industrialization is perhaps sufficient to suggest certain correctives. Specifically we shall question prevailing notions of the informal economy itself, the role of immigrant firms and workers within it and its connections with the on-going process of illegal immigration.

The Informal Economy

Formerly taken to be a typically Third World phenomenon, the informal economy is now recognized as a widespread and indeed necessary component of advanced capitalism which, far from a moribund archaism, has actually increased in importance during post-industrialization (Williams and Windebank 1995). Given that its very existence is predicated upon its official non-existence, it is hardly surprising that definitions and labels are many and various, with the word "informal" frequently replaced by "underground", "subterranean", "irregular", "hidden", "clandestine", "black", "shadow" and many others, each seeking to convey its own nuance (Williams 2004). For our own purposes, we are broadly content with the early definition of the informal economy offered by Portes and Sassen-Koob (1987, 30), as activities which "escape normal record-keeping". Such an approach warns against any unconditional tendency to equate informality with illegality. While in practice the former certainly is apt to slide into the latter, informal firms per se should simply be seen as those who eschew the formal contractual exchanges taken to be part and parcel of operating in an advanced economy. The modus operandi of the small firm commonly avoids or minimizes the use of institutions like banks and other commercial credit providers, job centers for worker recruitment and advertising for custom. Instead business resources are drummed up on the Gemeinschaftlich basis of face-to-face personalized relationships of trust: capital from free loans or pooled resources with family and friends; labor through family, neighborhood and occupational grape vines; customers through word-of-mouth recommendation and reputation.

Here it is worth emphasizing that, despite the frequent emphasis on ethnic minority firms as exceptionally predisposed to informality (Light 2004, Sassen 1996), such practices are not ethnic-specific but universal, with native white English small operators virtually as likely as Asians to employ them (Jones et al 1994). A true historical as opposed to a culturally exceptionalist perspective confirms that informality is the very essence of the small firm per se, a time-honored set of practices designed to minimize cost, risk, inconvenience and paperwork (Scase and Goffee 1982). Moreover, much entrepreneurial informality is entirely legitimate, consisting of nothing more than a harmless refusal to conform to the textbook rules of economic life. Irrespective of their owner's ethnicity, it is likely that a substantial proportion of such firms operate entirely within the bounds of legality.

In practice, however, the mere avoidance of bothersome obstacles tends to set the scene for outright evasion of the laws governing business life. Often indeed "the difference between informal economic activities and criminal activities is not easy to make" (Kloosterman et al 1998, 256). In particular the informal labor process is highly subject to regulatory evasion, with casual hiring and an absence of written contracts merging seamlessly into cash-in-hand payments for tax avoidance purposes and, sometimes, bogus claims on social security and welfare benefits (McDonald 1994). Since such workforces are officially non-recorded, there is no compulsion on employers to comply with government legislation on minimum wages, working hours and health and safety. Moreover, the prevailing invisibility also sets the scene for the use of undocumented immigrant workers.

Significantly Kloosterman et al (1998) also point out that the lurch into illegality can occur unwittingly in the complex regulatory regimes now characteristic of advanced economies, where many small firm owners simply cannot hope to know all the rules. According to Freeman and Ogelman (2000), one of the reasons that immigrant-origin entrepreneurs are over-represented within the regulation-flouting informal economy is that they are "less familiar with the institutional framework in which they must operate". Accustomed to a much less regulated environment in their countries of origin, they continue to apply these standards in their present milieu. On this oft-asserted connection between immigrants and informality, Light (2000, 162) is adamant that immigrant-origin entrepreneurs and workers are "drastically over-represented" in the informal economy, an emphasis that can also be inferred from Sassen (1991, 1996). Yet, while this may arguably be the case at the level of world cities such as Los Angeles, it does not necessarily apply elsewhere and, on the basis of evidence from a range of European countries and localities, Williams (2004, 14) is equally adamant that "There is no strong correlation between ethnicity and participation the informal economy". In the light of this, the Birmingham Asian informal economy should properly be regarded as a small, specialized segment of a highly diverse and wide-ranging spectrum of activities.

Despite this, however, we acknowledge that historical logic provides good grounds for making a link between immigration and informality. It is now widely established that the post-industrial emergence of a new cash-rich time-poor upper-middle and middle class has generated a very substantial rise in demand for an expanding range of consumer goods and services (Sassen 1991). At the same time, however, much of this demand feeds upon prices that are too low to support a living wage for producers. It is this mismatch which creates the space for the informal economy, where production costs can be cut to the bone via the evasion of regulations. Given its sub-normal returns for producers, the informal economy is the natural milieu for immigrant workers--and indeed entrepreneurs--whose material expectations can be assumed to be lower than those of non-immigrants. Given also the stringent controls now in force in most advanced capitalist nations, many of these workers must enter by clandestine routes (See Staring 2000 on illegal immigration as a purely legal construct), the irresistible force of labor demand triumphing over every political and legal barrier erected in its path. Indeed, Light (2000, 2004) argues that we have now reached a stage where demand for migrant labor has become largely saturated but migration itself continues as a self-propelling force, with migrants using established "beaten paths" and the shelter of their own established ethnic communities to ease their entry (Staring 2000). Apparently, migration has become its own irresistible force irrespective of any economic logic, a new turn which is greeted by Werbner (1999, 571) as "an assertion of the agency of migrants", rejecting the deterministic view of them as passive pawns at the mercy of structural forces. As we shall see in the following sections, this and various other confident assertions need to be qualified in the light of detailed study of the concrete experiences and actual behavior of informal firms and their workers in a world where messy ambiguities often prevail over clear-cut categories.

Informal Practices on the Ground

From the outset, it is evident that our twenty responding Asian-owned firms completely fail to support any hard and fast distinction between formality and informality. Though Light (2004) draws a sharp line between completely law-abiding immigrant firms and those of whom "governments do not have official knowledge" (2004, 389), our own firms appear to be operating in a far less binary world...