Access to public transport and labor informality

The bulk of formal jobs in developing countries are in central, high-income urban areas, while informal employment is concentrated in lower-income peripheral areas. This center-periphery division is reinforced by a suboptimal and skewed provision of urban public transport. For instance, in Bogotá, Colombia, thousands of low-income workers, most of them informal, are concentrated in the poor, southern part of the city. Traveling just 2–3 kilometers can take an average of 60 minutes. Meanwhile, traveling the same distance in the richer and less densely populated northern area of the city takes only 35 minutes [1]. Commuting is also financially more costly for the poor. The poorest residents of Bogotá spend more than 20% of their income on transport, whereas the richest spend only 5% [1]. Under these circumstances, can more equitable transport provision be a way to reduce labor informality?

In many large urban areas in the developing world today, a large segment of the lower-income population faces higher commuting costs, longer commuting distances, and longer commuting times for the same distance traveled. This situation has resulted from a history of transport infrastructure deficits, prioritization of cars over other transport modes, and, in some cases, lack of awareness of the benefits of more diverse and equitable transport provision. For example, on an average day in São Paulo, Brazil, the wealthiest residents take almost twice the number of trips as the poorest residents, who are mostly informal workers (see Illustration). The difference reflects a low mobility index (ratio of the number of individual trips to the total number of people in each income class) for individual transport modes (for example, by car), which is not offset by a higher mobility index for collective transport modes (for example, buses and subways).

Although there are many potential channels through which constrained transport accessibility could lead to more informality, not much evidence is available on the job-related costs of insufficient, deficient, and skewed public transport. Informal workers tend to be concentrated in areas of deficient public transport. In general, informal workers face more precarious working conditions than formal workers: they may receive lower compensation, do not contribute (or have access) to the pension system, have no record of job experience or opportunities for advancement, are not eligible for subsidies and leave (maternity, sickness, vacation), and have difficulty getting credit. For the economy at large, the existence of informal employment implies losses in tax revenues and productivity, as well as a heavy burden of social protection costs [2].

As is clear from the analysis presented here, the empirical evidence on the effect of transport policies on job outcomes for developing countries is fairly scarce [11], [12]. This is surprising, as it is precisely cities in developing countries that face the most pressing mobility issues and that have the highest levels of segregation between low- and high-income workers. A focus on the channels through which constrained accessibility may result in higher informality may be particularly fruitful for informing the design of appropriate policies, as different channels may require very different approaches. New studies can take advantage of an extensive literature on the existence and persistence of informal sectors in developing countries and on the socio-economic impacts of transport infrastructure.

It is unclear to what extent these findings on the impact of improved accessibility for the US and Europe can be directly extended to developing countries. In US metropolitan areas, residential density decreases with distance, formal jobs have moved to the suburbs, and in some instances racial and ethnic minorities have been moved into planned social housing projects far from job centers. In contrast, peripheral areas of large cities in developing countries are the locus of dense informal housing settlements, with a predominance of informal employment and low availability of formal jobs. An obvious concern is how the different spatial structure of cities in developing and developed countries affects the predictions of the spatial mismatch literature. Are there additional mechanisms at work in developing countries because of the prevalence of informal employment?

Both the theoretical and the empirical evidence on the effect of transport expansion have focused on cases that assume a monocentric urban form—urban areas in which most jobs are concentrated within a single center. The effects clearly depend on the level of centralization of low-skilled formal employment. This urban structure seems to correspond to that of many large cities in developing countries; however, it is relevant to consider how the existence of alternative structures with multiple job sub-centers can affect the relationship between job accessibility and informality.

The role of cars in determining job outcomes also becomes relevant if new job sub-centers arise in areas with low public transport accessibility. Although there is a rich literature on polycentric cities and car accessibility for developed countries, the evidence for developing countries is still thin. Future research could consider the determinants of job decentralization in cities in developing countries, the relationship of evolving urban forms and public transport provision, and policies for moving jobs closer to workers that best reflect the role of polycentrism and choice of transport mode.

The empirical evidence on the effect of transport subsidies targeted to low-income groups is very narrow for Europe and the US and virtually nonexistent for developing countries. Knowing more is important, as these subsidies are likely to be part of broader equity policies. In Bogotá, for instance, a transport subsidy targeted to the poor has been implemented since 2014, but its effects on social outcomes are still unknown [10]. It would also be interesting to know how the impact of the subsidy evolves over time, and how it fares compared with other transport policies focused on expanding the urban transport network and improving the quality of transport services.

Along these lines, more evidence is needed on the mediating effect of transport access on policies that seek to move workers closer to jobs, such as residential mobility subsidies. Recent studies indicate the importance of considering job accessibility in programs to reduce residential segregation. In particular, in developing countries, residential mobility vouchers can be made conditional on relocating closer to suitable formal jobs [12], taking into account the location patterns of new low-skilled jobs and transport options.

Furthermore, studies of transport policies have focused on the effect of transport access on unemployment but have failed to consider that workers may find employment in the informal sector. Unemployed and informal workers may have different sensitivities to changes in the cost of accessibility, particularly where informal employment is an attractive alternative to formal employment. Evaluations of transport policies in local communities should also consider the size and composition of the local informal sector. More evidence is needed on the transport choices of informal workers in different areas of cities. It would be particularly relevant to know to what extent, both qualitatively and quantitatively, improved access would motivate different types of informal workers to switch to formal jobs located far from their residence.

There are also limitations to the current evidence for developing countries. The quasi-experimental and experimental evidence is preliminary [8], [9] and cannot be generalized to other cities or time periods and fails to account for possible feedback or general equilibrium effects. Theoretical work identifies plausible channels through which changes in accessibility can affect informality, but these have not been subject to empirical research.

Finally, how transport infrastructure affects employment choices where informal jobs are an option requires more study. There is a body of literature on transport and equity in developed countries that suggests the importance of considering the impact of transport infrastructure projects on socio-economic outcomes related to inequality [13]. Similar studies of the effects of transport projects on inequality and segregation are needed for developing countries, particularly through their direct and indirect effects on the employment choices of lower income workers.

Difficulty getting to areas with concentrations of formal jobs because of gaps in public transport may be partly responsible for the existence and persistence of informal employment in cities in developing countries. The possible channels connecting public transport to job accessibility and informality include a preference for home- or neighborhood-based informal occupations over formal jobs because of high commuting costs to the areas where formal employment is concentrated, less information about formal job opportunities because of difficult access, and discrimination by employers based on place of residency.

Although more evidence is needed on the extent of the problem and the precise channels through which it occurs, enough is known to suggest that the impact of public transport infrastructure projects on job choices should be considered within a wider agenda of more equitable transport systems. Because low-income workers are particularly dependent on public transport, better access to public transport can reduce inequality by improving labor market outcomes. Transport policies should focus on expanding the public transport network in an effective and strategic way, so that all commuters are ensured at least a minimum level of transport provision and quality standards. Defining such a strategy is particularly important in cities experiencing large public transport project delays and tight budgetary constraints. If there is indeed a connection between inadequate access to formal jobs and higher levels of informality, other policy interventions may be needed to take into account any possible intended or unintended effects of these policies on the incentives to work informally. Examples include residential vouchers and transport subsidies that take into account the location patterns of new low-skilled jobs and transport options.

The author thanks an anonymous referee and the IZA World of Labor editors for many helpful suggestions on earlier drafts. Previous work of the author contains a larger number of background references for the material presented here and has been used intensively in all major parts of this article [8], [10]. Financial support from a Marie Curie Intra European Fellowship (PEIF-GA-2013-627114) within the 7th European Community Framework Programme is gratefully acknowledged.