General Purpose Technologies (GPTs) are characterised by their ability to transform entire economies, providing a baseline for new innovations and serving as an input for social, economic, cultural, and other processes. GPTs like computers and the internet have changed how we understand and form communities, allowing us to stay connected across great distances. The invention of electricity led to the creation of entirely new economic industries, such as the global entertainment industry, the home appliances industry, among others. The printing press changed how we store and transmit information, which led to mass literacy and knowledge being democratised.
Perhaps the most critical impact of GPTs is that they change the way we live and work. The domestication of plants and animals meant that human beings no longer needed to hunt and gather their food, ushering in the agricultural revolution. The invention of the steam engine and the power loom meant that human beings no longer needed to spend hours manually working machines and making clothing, ushering in the industrial revolution.
Now, the creation of Artificial Intelligence (AI) might mark our full transition into the information revolution. AI will transform the global economy, and perhaps no facet of human life will be more impacted than labour: AI impacts close to 40% of global employment, and advanced economies are expected to experience these effects in about 60% of their jobs. AI not only automates routine work, but can also carry out tasks previously carried out by workers in high skilled jobs.
While the exposure of higher skilled jobs to disruption by AI is a big risk, these jobs tend to be formal, and as such, governments and other organisations can offer these workers protections. This is not the case with informal work, which employs over 61% of workers globally (that is, two billion people), and a high concentration of this work (93%) being based in Africa, South and South-East, Latin America and the Caribbean (the Global South).
What is Informal Work?
At the heart of this article are three concepts, closely intertwined but worth differentiating: the informal sector, informal work, and the informal economy.
The informal sector is made up of unincorporated businesses owned by households, such as those that provide self-employment as well as those that employ others alongside the business owner(s). These businesses tend to be small and unregistered. Smallholder farmers, street vendors, market traders, neighbourhood shop owners, and craftspeople such as masons and plumbers tend to be part of the informal sector in the Global South.
Informal work, also referred to as informal employment, is all gainful employment that is unregistered, unregulated or unprotected by existing legal or regulatory frameworks, as well as non-remunerative work done for an income generating enterprise. It includes both self-employment and wage employment. Informal workers do not have the safety nets of their formal counterparts, such as secure employment contracts, workers’ benefits, social protection or workers’ representation. Such work includes seasonal farm work, construction day labour, motorcycle and rickshaw operation (boda bodas and tuk tuks in East Africa, for example), domestic work, among others.
The information revolution has also created new types of informal work. Online microtask workers (on platforms such as Remotask), platform-based gig workers (such as Uber and Bolt drivers, and UberEats and Jumia riders), freelancers on unregulated platforms (such as Fiverr and Upwork), click farm workers, among others tend to be informal workers in many parts of the Global South.
What counts as formal or informal work might vary from country to country depending on the widely accepted form of employment for the job in question. Informal work is characterised by limited legal protections, non-payment of income tax (which governments rely on to provide social security benefits), absence of formal contracts, and minimal social security benefits and protections.
Finally, the informal economy is a blend of both these perspectives. The International Labour Organization (ILO) defines it as “all economic activities by workers and economic units that are – in law or in practice – not covered or insufficiently covered by formal arrangements.”
Informal workers operate outside labour laws and tend to get paid in cash, meaning that government records fail to document them, and they are harder to regulate and protect than formal workers.
Informal Work and the Rise of AI: Who Is Affected and How?
AI is already changing how informal workers carry out their jobs, and is poised to have an even bigger impact as it becomes more agentic.
Harvesting robots and automated sorting machines, for example, will reduce demand for manual labour in farming operations, with McKinsey noting that in emerging economies like China, Mexico, and Turkey, the agricultural automation potential ranges from 10% to 45%. Smallholder farmers can also leverage AI-powered satellite imagery and soil analysis to optimise crop yields, but these technologies are often inaccessible to them due to lack of digital literacy and/or infrastructure.
AI technologies will be particularly disruptive to informal workers in the retail sector, transforming customer relations, inventory management, and market access. AI-powered shopping websites change how people buy things and pull customers away from informal retailers. Research shows that when e-commerce platforms enter new markets in developing countries, informal retailers typically experience revenue decline within the first year as consumer spending shifts to digital channels.
Experts predict that by 2033, robots could take over up to 39% of housekeeping and caregiving work. AI already affects platform-based gig workers through algorithmic wage discrimination, with companies like Uber and Amazon using opaque algorithms to pay workers different amounts for the same work. These companies collect detailed data on workers’ behaviours and preferences, which then enables them to personalise wages and incentivise desired actions, which leads to unpredictable and variable pay for workers.
All this is on top of AI models relying on millions of low-paid workers for tasks like data labelling and content moderation, which are an essential step when training machine learning systems. For example, OpenAI signed three contracts with Sama in 2021 worth $200,000, requiring gig workers to read and label 150 to 250 text passages in each nine-hour shift. Kenyan informal workers earned only $1.32 to $2 per hour for this difficult and often traumatic job, with little access to mental health support.
Job Displacement: How AI Automation Is Replacing Traditional Informal Work Roles
Job displacement is what happens when workers involuntarily lose their jobs because of structural economic changes, such as those brought about by GPTs. Unlike layoffs, displaced workers usually face difficulty finding similar employment because their previous roles are now obsolete. AI-driven automation and digital transformation are increasingly displacing workers by replacing routine tasks with machines and software.
Job displacement differs from regular unemployment because it results from long-term shifts in the economy, not temporary downturns. Unlike cyclical unemployment, displaced workers usually require retraining or a career change to regain employment. It’s worth specifying that displacement doesn’t necessarily mean total job elimination: it could also involve downward wage pressure as AI handles higher-value tasks while humans are relegated to lower-paid supporting roles.
AI will displace informal workers by automating many low-skill, repetitive tasks that currently need human effort, such as vending, domestic work, and transport services. AI-powered platforms could also drive down wages and reduce job stability by introducing algorithmic decision-making that prioritises efficiency over worker welfare. In the Global South, where informal work is the main source of employment, AI-driven job displacement will likely exacerbate economic inequality and social instability.
Job displacement hits informal workers harder than formal workers because they don’t have safety nets such as severance pay, unemployment benefits, and help finding new work. They must immediately find new income sources to survive, which leads to many informal workers taking even worse jobs and/or falling deeper into poverty. Displaced informal workers in rural areas may also migrate to urban areas in search of new opportunities, which tends to overwhelm already strained urban areas in the Global South.
As AI continues to reshape informal work, policymakers, researchers, and labour advocates must act urgently to ensure that these advancements create fair opportunities rather than deepen economic exploitation. Part 2 of this article will explore hidden labour behind the AI boom, whether AI will deepen or reduce the exploitation of informal workers, and offer policy recommendations to policymakers in the Global South on how to best navigate this transition.To learn more about the impact of AI on labour, check out the ILO Observatory on Artificial Intelligence and Work in the Digital Economy and the Institute for the Future of Work. To collaborate, share feedback, share your research, or any other research you think I should read, please reach out to me at brenda [at] ushiriki [dot] com or comment below. I look forward to hearing from you.
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