Question

Which of the following is a reason why informal economies can be dysfunctional for workers?

1) Lack of job security
2) Limited access to social protection
3) Low wages
4) All of the above

Answer 1

Informal economies tend to be dysfunctional for workers due to a lack of job security, limited access to social protection, and low wages. This results in high uncertainty, vulnerability to economic downturns, and fewer opportunities for financial stability.

Step-by-step explanation:

Lack of job security, limited access to social protection, and low wages are key reasons why informal economies can be dysfunctional for workers. Informal economies often do not provide workers with stable employment, leading to a high degree of uncertainty regarding their income and employment continuity.

Moreover, being outside the formal sector generally implies that workers do not benefit from labor laws, social security, health insurance, or pensions. As a result, these workers are particularly vulnerable to economic downturns and personal emergencies. Low wages are another significant disadvantage of informal employment, as informal jobs typically pay less than formal ones and do not provide opportunities for financial growth or savings. Furthermore, with the absence of union representation, workers' wages and working conditions are not negotiated to protect their interests. Therefore, all of the options mentioned are valid reasons contributing to the dysfunctionality for workers in the informal economy.