In development economics, there is much theoretical and empirical support for the increasing preponderance of wage labor in a developing economy. The ILO divides the labor force into four categories: (1) employees are paid wages or salaries based on an explicit or implicit contract; (2) employers are self-employed and have engaged one or more employees; (3) own-account workers, alone or with one or more partners, are self-employed and have not engaged employees; and (4) contributing family workers are employed on an informal basis in an establishment operated by a relative living in the same household. Own-account workers in developing economies are associated with subsistence agriculture and other low value-added activities (such as petty trade), often providing low and irregular income. Contributing family work is often unpaid, though family workers are often compensated indirectly in the form of family income; it is particularly common among women in developing countries. The share of “vulnerable” employment is defined as the sum of contributing family workers and own-account workers divided by total employment. A high proportion of vulnerable workers is an indication of a large subsistence agricultural sector, lack of growth in the formal economy, and widespread poverty. Empirical research by the ILO confirms a positive relationship between the incidence of poverty and vulnerable employment.8 Poverty reduction is linked to an increase in employment and a reduction in vulnerable employment.

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