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Tourism Employment Issues: Examples from Indonesia

Davies (1979) argued that the formal and informal sectors not only comple-
mented each other but that each needed the other in order to exist and, in fact,
formed a symbiotic relationship. The informal sector depended on formal wages
and demand generated in the formal sector for a great proportion of its markets. It
also depended on the formal sector for supplies of certain inputs. Conversely, the
formal sector depended on the informal sector for low-cost labour and goods and
services (Davies, 1979). Castells and Portes (1989) argued that individual workers
may switch between both the formal and informal activities on a daily basis. In ref-
erence to Southeast Asia, McGee’s (1982) research supported the argument that the
two sectors (formal and informal) supported each other and did not necessarily
compete. The informal sector, which he found to be growing at a faster rate than the
formal sector, filled a niche left empty by the formal sector. Hope (1993) concurred
that, in some developing countries, the formal sector must conduct business with
the informal sector in order to acquire hard currency, basic goods and services, and
to take advantage of the informal sector’s efficient production techniques and
access to inputs. He argued that this linkage of formal with informal could result in
lucrative benefits for workers in the informal sector, a contrast to the widely-held
belief that the informal sector is a highly economically marginalized group. Con-
trasting with this view, Miles-Doan (1992) presented evidence from Jordan in
which she found that informal sector workers were often better off financially than
those employed within the formal sector. Chu (1992) found further evidence that
contradicted the ‘marginality thesis’,5 arguing that the income of some informal
sector workers was often higher than that of formal sector workers, the division
between large and small enterprises was often unclear, women, children and mi-
grants were not always over-represented in the informal sector and the same person
may be involved in both sectors simultaneously.
In contrast to traditional employment theory, which stated that the informal
sector would ‘disappear’ as a country achieved ‘development’, more modern views
assert that this dynamic sector should not be simplistically viewed as an economic
role that will vanish with the processes of modernization and urbanization.
Within tourism, as in other industries in developing countries,
the informal sector is a vigorous and notable
element and, thus, efforts should be made to better understand informal participa-
tion in tourism and its relationship to the formal sector. Within the informal sector
there is a growing differential in socioeconomic status among workers. Ebery and
Forbes (1985), for example, argued that some hawkers were acquiring a higher
status than some formal sector employees because their enterprise required skill,
initiative and some capital investment.
The ILO argued that understanding the informal sector provides a key to solving
the increasing problems of employment and inequality in developing countries.
The informal sector generally operates without legal recognition or protection and
has, therefore, been considered by governments to be economically and politically
marginalised (Wahnschafft, 1982; Sethuraman, 1992). According to Lewis’s neo-
classical labour absorption theory (Chu, 1992: 421), ‘the marginality thesis argues
that overpopulation and rapid migration to the cities have overwhelmed the modern
industry’s job creation capacity’. Informal sector employment has, thus, emerged as
a response by the jobless to cope with their situation and, therefore, informal work is
seen to be peripheral to ‘modern’ industrial production (Chu, 1992). Ebery and
Forbes (1985) challenged the traditional belief that the informal sector had an un-
limited capacity to absorb labour. In the case of fish distribution in Ujung Pandang,
Indonesia (an informal sector activity), the numbers involved in the trade have in-
creased slowly and are unlikely to increase at a rate faster than the population growth
rate. The informal sector is no longer seen as merely a receiving station for extra
labour but as a complementary alternative to the formal sector (Rachbini, 1991).

Tourism employment ‘formality’
The informal sector has generally been described in the employment literature as
a marginalized and relatively poor community: a community which barely
manages to make ends meet. These descriptions or characteristics of the informal
sector as a whole differ from the tourism informal sector.Onepossible reason for this
is that the tourism industry involves mainly wealthy consumers (even domestic
tourists and ‘backpackers’ are comparatively wealthy) and, thus, the informal
tourism workers fare better than other informal sector workerswhopredominantly
cater to the local poor. The demonstration effect associated with tourism in devel-
oping countries may also be a factor that distinguishes the tourism informal sector
from the general informal sector. Because the tourism informal sector workers are
exposed to foreign lifestyles, languages and materialism, they may be more in-
clined than the non-tourism informal sector to emulate foreigners, for example, by
obtaining higher levels of education or skill or to adopt their mannerisms (Cukier,
1996).
Tourism also creates opportunities for informal sector workers within the formal
sector.Manyjobs created by the tourism industry do not require a high skill level al-
though, as the industry matures in an area, the number of skilled and professional
jobs filled by the local population increases. Thus, particularly in the earlier stages
of tourism development, tourism in developing countries has the potential to gen-
erate direct benefits for a large proportion of the population. Employees in tourism
facilities (hotels, restaurants, shops) are drawn from these lower income groups,
since a large number of the jobs require a minimal skill level and, thus, minimal
prior training. Many of these jobs are filled by individuals previously making up
the informal sector (English, 1986). However, informal sector workers do not
always consider employment within the formal sector as a natural, or even desir-
able, progression. For example, in Nairobi, Winpenny (1978) found that a majority
of informal sector workers were content with their occupation and were not seeking
employment in the formal sector.


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