Investments aligned with this Strategic Goal aim to improve job security and stability for people who work under precarious conditions, including contractors, casual workers, and the self-employed, as well as those in the informal sector, and especially for those facing additional disadvantages as a result of factors such as gender, ethnicity, race, or citizenship. Improvements include more regularized employment, more predictable hours, and access to benefits, while balancing companies’ need for flexibility based on fluctuations in demand, an important determinant of resilience to economic shocks.

What

Dimensions of Impact: WHAT

Investors interested in deploying this strategy should consider the scale of the addressable problem, what positive outcomes might be, and how important the change would be to the people (or planet) experiencing it.

Key questions in this dimension include:

What problem does the investment aim to address? For the target stakeholders experiencing the problem, how important is this change?

Workers in non-standard forms of employment or under insecure or informal labor arrangements face various challenges, including higher income volatility, lack of voice and representation, lower hourly wages, risks to occupational health and safety, and lack of social security benefits (1). Workers under precarious employment are faced with the short-term nature of their employment contracts (for example, seasonality or self-employment), which employers may terminate on short notice, and such precarious workers are vulnerable to lower earnings and worse working conditions (2). On-call workers can also present disadvantages for employers, as they may have limited integration into company culture, higher turnover, lower quality of work, and less motivation (3).

Informal employment represents a significant part of the economy and labor market in many countries. For example, in Latin America, the share of informal employment varies by country between 45% and 83%; in developing countries in general, informality accounts for a large share of production in certain sectors, contributing 40–50% of GDP (4,5). In both developed and developing economies in recent years, the so-called ‘gig’ or platform economy has grown exponentially in size and importance (6). An ILO study found that platform workers are less likely to have social protections (health coverage, pension, unemployment, work injury, disability benefits) and that many (1 in 5) live in a financially precarious situation (7). Nevertheless, the gig economy may offer new employment opportunities, can be more flexible for those who have other responsibilities, and may be more inclusive of workers who could face discrimination in other forms of employment (8).

Investments aiming to improve job security and stability can drive impact by:

  • catalyzing new waged employment opportunities in formal enterprises;
  • supporting business models that favor permanent over temporary working arrangements;
  • addressing issues related to non-standard and precarious forms of employment that adversely affect already disadvantaged groups;
  • encouraging the formalization of sectors and supply chains (for example, by bundling financial services with training on formalization); and
  • ensuring the fair treatment of contract, informal, and platform workers (in terms of social benefits, notice periods, workers’ voice, fixing fair wages, and minimum working hours per day or week).

Target stakeholders can then experience the following commonly sought outcomes, among others:

  • Improved terms of employment (conditions, rights, responsibilities, and duties)
  • Improved predictability of pay

What is the scale of the problem?

Around two billion workers worldwide (61% of those employed) are employed informally and are therefore significantly less likely to have security and stability, especially in terms of enjoying the benefits of social protection systems (9). Of those workers, some 935 million are own-account workers occupied in elementary activities due to the lack of jobs in the formal sector; in general, informal workers are more likely to live in conditions of poverty (10). Of those workers considered in wage salaried employment (53% of the total), 40% are in informal employment, affecting their job security and stability (11). Many workers in the formal economy under nonstandard forms of employment also face precarious working conditions.

Who

Dimensions of Impact: WHO

Investors interested in deploying this strategy should consider whom they want to target, as almost every strategy has a host of potential beneficiaries. While some investors may target women of color living in a particular rural area, others may set targets more broadly, e.g., women. Investors interested in targeting particular populations should focus on strategies that have been shown to benefit those populations.

Key questions in this dimension include:

Who (people, planet, or both) is helped through investments aligned with this Strategic Goal?

Workers in precarious employment are target stakeholders of this strategic goal. A large proportion of workers face precarious working conditions as a result of the informal nature of their work or nonstandard form of employment. Most vulnerable to those conditions are the following categories.

  • Women: Worldwide, 740 million women are in informal employment, and a higher proportion of women than of men are informally employed in lower- and lower-middle-income countries. Women in the informal economy often have vulnerable forms of employment, such as home-based or contributing family work (12). Investments in companies that promote this goal should include a gender lens to make sure women specifically benefit from employment security and stability.
  • Youth: Young people are disproportionately represented among workers engaged in temporary employment, on-call work, disguised self-employment, and part-time work (13). In OECD countries, the proportion of youth (younger than 25 years) in temporary employment is 25.7%, compared to 9.8% of those between 25 and 54 years old (14). Investments can facilitate better education and career opportunities for youth and foster transitions from temporary to permanent arrangements.
  • People with Disabilities: The proportion of people with disabilities participating in employment is much smaller (36%) than those without disabilities (60%), and, in most countries, people with disabilities tend towards vulnerable employment or less paid compared to persons without disabilities (15). Investors can engage with investees to make policies and workforces inclusive of people with disabilities, including career-progression opportunities and access to social security benefits.
  • Individuals From Deprived Communities and Disadvantaged or Marginalized Groups, Including People From Historically Marginalized Races, Ethnicities, and Religious Groups, Incarcerated Populations, and the LGBTQI Community: Tribal and indigenous communities, for example, exhibit higher-than-average rates of informal employment (16). The informal economy tends to employ the poor and vulnerable, who disproportionately tend to be individuals from deprived communities (17). Investments that aim to improve workers’ security and stability can support companies to offer opportunities or solutions for such workers to access formal social benefits and that tackle challenges related to the precariousness of employment.
  • Migrant Workers: Migration status is associated with higher chances of working in the informal economy, as well as with non-standard forms of employment (18). Migrants particularly risk so-called “hyper-precarious” work at the bottom end of labor markets, including potentially forced labor (19).

The following are intermediate target stakeholders for this Strategic Goal.

  • Employers, if transitioned to formalized enterprises, can gain access to finance, business development services, and technologies, as well as access to other markets, reduced exposure to government fines, and participation in public procurement (20). For Micro, Small, and Medium-Sized Enterprises (MSMEs), investments can support workforce formalization and prioritize direct employee engagement. Investors can encourage mediators between individuals seeking employment and employers, such as employment agencies and recruiting consultants, to play a positive role in formalization, service provision, and improved working conditions, particularly for vulnerable professions like domestic workers (21). For Governments, in general, formalization would improve measurement of GDP and other national statistics, increase tax collections, and enhance national productivity and economic growth (22). Such improvements would be especially important in developing countries (23).

What are the geographic attributes of those who are affected?

Most employment in Africa is in the informal sector (85.8%), unlike in Europe and Central Asia, where just one in four employees are informal (24). In general, in developed countries, 18.3% of workers are in informal employment. In developing and emerging countries outside Africa (in the Americas, the Arab States, and Asia and the Pacific), the share varies from 53.8% to 71.4% (24). Women are more exposed than men to informal employment in more than 90% of sub-Saharan African countries, 89% of countries in Southern Asia, and almost 75% of Latin American countries (25). In terms of temporary status for those who are engaged in formal employment, according to OECD (2018) estimates, in some countries, like Colombia and Chile, around 28% of wage and salaried workers have temporary work arrangements. By contrast, in EU countries, this same figure stands around 14%.

Contribution

Dimensions of Impact: CONTRIBUTION

Investors considering investing in a company or portfolio aligned with this strategy should consider whether the effect they want to have compares to what is likely to happen anyway. Is the investment's contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How much and Who?

Key questions in this dimension include:

How can investments in line with this Strategic Goal contribute to outcomes, and are these investments’ effects likely better, worse, or neutral than what would happen otherwise

Organizations can consider contribution at two levels — at the enterprise level and at the investor level. At the enterprise level, contribution is “the extent to which the enterprise contributed to an outcome by considering what would have otherwise happened in absence of their activities (i.e. a counterfactual scenario).” To learn more about methods for assessing counterfactuals, see the Impact Management Project.

At the investor level, organizations investing in projects that increase pathways towards job security and stability can contribute toward solutions as follows.

  • Signal that impact matters. Investors can proactively target investees with the potential to improve the stability and security of workers under precarious employment. Investors can also invest in solutions that provide pathways to greater stability and security, such as formalization through training.
  • Engage actively. Investors can use their expertise to engage proactively with investee management to improve the stability and security of direct employees and those in the investee’s supply chain, including through the regularization of the workforce. Technical Assistance can aim to maximize an investment’s impact by implementing, for example, HR policies, procurement policies and procedures, and non-discriminatory career advancement opportunities, including training and skills for those in more precarious positions. Investors and enterprises can also incentivize greater stability and security through terms of procurement and sales contracts.
  • Grow new or undersupplied capital markets. Enterprises in the informal economy usually struggle to access finance, which hinders their growth potential. One study showed that four in five informal companies use internal funds, family, and money lenders for financing (28). Financial institutions could offer formal financial services to those informal enterprises, together with incentives for formalization and improving stability and security of workers. Investors could provide financing to those businesses through those financial institutions, perhaps coupled with available government incentives for this purpose.
  • Provide flexible capital. Companies in the informal sector pose higher credit risk and therefore may require concessional capital or working capital to help bridge the costs to formalization.

How Much

Dimensions of Impact: HOW MUCH

Investors deploying capital into investments aligned with this strategy should think about how significant the investment's effect might be. What is likely to be the change's breadth, depth, and duration?

Key questions in this dimension include:

How many target stakeholders can experience the outcome through investments aligned with this Strategic Goal?

Investments in line with this Strategic Goal can benefit the approximately two billion informal workers worldwide, as well as other workers under non-standard forms of employment. Temporary employment (one form of non-standard employment) varies by specific region and sector. In Europe, temporary workers comprise from 2% of wage employees in Romania to 28% of wage employees in Poland; in other regions, this proportion can reach 70%, as in the case of Pakistan (26).

How much change can target stakeholders experience through investments aligned with this Strategic Goal?

The potential impact of investments in this Strategic Goal may vary according to the type of investee, geographic realities, and sector. An example of the impact of improved job security and stability is the following:

The ILO’s Microfinance for Decent Work research tested innovative approaches to fostering social impact through the delivery of financial and non-financial services to MFI clients. The program worked with one MFI in India (ESAF), which offered training on formalization and business development. An impact evaluation of the program showed a 70% increase in business registration with relevant authorities and a 15% increase in maintaining accounts books (27).

Risk

Dimensions of Impact: RISK

Key questions in this dimension include:

What impact risks do investments aligned with this Strategic Goal run? How can investments mitigate them?

The following are impact risk factors for investments in line with this Strategic Goal.

  • Endurance Risk: Investees may not see immediate positive changes in their business when improving workers’ job security and stability, which could lead them to stop implemented improvement measures. As these measures likely require allocation of funds, if a business goes through a difficult economic downturn, these new improvements may be at risk of cuts. Investors can mitigate these risks by supporting additional improvements in investees’ businesses to make them more resilient, helping to keep workers from absorbing economic shocks.
  • Execution Risk: Implementation of measures to improve job stability and security may not go as planned. For example, the investee may not allocate sufficient resources or may offer resources too late to affect target stakeholders. To mitigate this risk, investors can support investees through all steps of the process, from conception through to assessment and redirection.
  • External Risk: Lack of strong social and regulatory frameworks and policies that provide platforms for access to social benefits for those under precarious employment may be non-existent or poorly enforced in certain countries, or other context issues may hinder measures’ implementation. Other unexpected external risks include economic and health crises affecting investees and their employees, leaving them in more precarious conditions. Investors can mitigate these risks by supporting companies to provide longer-term contract arrangements, thereby improving workers’ stability and security. In addition, investors can also explore options, in collaboration with the company, to provide access to private insurance (such as health coverage) for workers, improving both their working conditions and resilience in times of crisis.
  • Participation Risk: Investees may not see the benefits of providing job stability and security for those in precarious conditions of employment, which they may view as an expense their competitors do not have. That is, there could be a perceived risk in being the first mover in implementing these benefits. There is also a risk that the designed intervention or additional benefits offered are not relevant for the target stakeholders. Investors can manage this risk by providing evidence of the benefits these improvements can bring, such as higher productivity, lower training costs, and fewer accidents, as well as demonstrating access to future financing from like-minded investors. Investors should also consult target stakeholders to assess the utility and relevance of projects and products.  

What are likely consequences of these impact risk factors?

The consequences of these risk factors range from compliance issues if labor regulations are not met, harming workers and raising reputational consequences for investors, to unrealized impact potential, leaving workers equally or more vulnerable than they were before.

Illustrative Investment

The Africa Agriculture Trade and Investment Fund (AATIF) extended a loan to a commercial soy, wheat, and maize farm in Zambia in 2011. The facility included covenants that required the company to increase their base of fixed-term staff, as the company had mainly relied on casual workers. The number of fixed-term workers increased from 46 (2010) to 138 (2015), following an intentional transformation of casual to fixed-term contract arrangements alongside additional improvements to working and living conditions for farm workers, including permanent housing and schooling for their children.

EdenTree, a responsible and sustainable investment manager, carefully selects investments that that are aligned with their values. They actively engage with companies on relevant topics, one of which is the issue of “zero-hours contracts” (ZHC), which are contracts that do not stipulate minimum number of hours to be worked. Although these may have certain beneficial aspects in specific cases, they do not guarantee workers any income security and stability, among other drawbacks. EdenTree engagement stresses the company’s duty to the community, and they do not include companies with business models that exploit workers using ZHC in their funds.

Novastar Ventures, a venture capital manager supporting entrepreneurs in East and West Africa, has invested in a gig work platform in Kenya called LYNK. The platform seeks to connect skilled workers to clients or businesses demanding high-quality services in a country where 80% of the working population is involved primarily in the informal economy. Through the platform, informal workers build their resumes and strengthen the quality of their work, increasing demand for their services and reliability of their pay. LYNK already has 1,000 active professionals and 3,000 clients that have requested services.

Draw on Evidence

This mapped evidence shows what outcomes and impacts this strategy can have, based on academic and field research.

NESTA: 3
The Impacts Of Formal Registration Of Businesses In Malawi

Campos, F, Goldstein, M and McKenzie, D, 2019. The impacts of formal registration of businesses in Malawi, 3ie Impact Evaluation Report 96. New Delhi: International Initiative for Impact Evaluation (3ie). Available at:
https://doi.org/10.23846/OW4IE96

NESTA: 3
Increasing schedule predictability in hourly jobs: Results from a randomized experiment in a US retail firm Lambert, S. J., Henly, J. R., Schoeny, M., & Jarpe, M. (2019). Increasing Schedule Predictability in Hourly Jobs: Results From a Randomized Experiment in a U.S. Retail Firm. Work and Occupations, 46(2), 176–226. https://doi.org/10.1177/0730888418823241
NESTA: 2
Can better working conditions improve the performance of SMEs?

Can better working conditions improve the performance of SMEs?: an international literature review /
Richard Croucher, Bianca Stumbitz, Ian Vickers, Michael Quinlan, Wendy Banfield, Michael Brookes, Thomas
Lange, Suzan Lewis, John Mcllroy, Lilian Miles, Daniel Ozarow, Marian Rizov, International Labour Office. –
Geneva: ILO, 2013

NESTA: 2
Good Gig, Bad Gig: Autonomy and Algorithmic Control in the Global Gig Economy Wood, A. J., Graham, M., Lehdonvirta, V., & Hjorth, I. (2019). Good Gig, Bad Gig: Autonomy and Algorithmic Control in the Global Gig Economy. Work, Employment and Society, 33(1), 56–75. https://doi.org/10.1177/0950017018785616
NESTA: 1
To what extent is social protection associated with better firm level performance?: A case study of SMEs in Indonesia

To what extent is social protection associated with better firm level performance? A case study of SMEs in
Indonesia. Torm, Nina. ILO, 2019

Each resource is assigned a rating of rigor according to the NESTA Standards of Evidence.

Define Metrics

Core Metrics

This starter set of core metrics — chosen from the IRIS catalog with the input of impact investors who work in this area — indicate performance toward objectives within this strategy. They can help with setting targets, tracking performance, and managing toward success.

Additional Metrics

While the above core metrics provide a starter set of measurements that can show outcomes of a portfolio targeted toward this goal, the additional metrics below — or others from the IRIS catalog — can provide more nuance and depth to understanding your impact.