"To improve access to economic opportunities and achieve more inclusive growth, policy makers will need to reduce the costs and burdens of entering the formal economy. Changing labor regulations can make it less expensive for employers to hire workers formally. More straightforward rules for establishing and operating a business will encourage entrepreneurs to start businesses on a formal basis. Enforcing the rules fairly and consistently means that firms share not only the responsibilities but also the benefits of operating formally. Simpler tax regulations and stronger administration will complement these reforms. At the same time, workers in the informal sector will need help in acquiring the skills demanded by the formal sector".
IMF's Masood Ahmed on how to bring the informal sector in the fold. The policy suggestions seem fairly sensible and quite obvious. The clear problem for many governments, including our own, is that to tackle informality requires sacrificing today (e.g. through lowering taxes, reducing fees) for larger benefits tomorrow. Governments who are long term minded therefore always do better at tackling informality. The citizens may not always give them that long.