13 Nov A 1% increase in productivity in the formal sector is associated with lower informality: 2.5% among self-employed workers and 1.7% among salaried workers
While participating in the OECD Ministerial Meeting on Productivity and Informality recently held in Lima, the Executive Secretary of the Comisión Nacional de Evaluación y Productividad (CNEP), Rodrigo Krell, warned that “productivity growth in itself is one of the most effective policies against informality. In Chile, a 1% increase in formal-sector productivity is associated with a 2.5 % reduction in self-employed informality and a 1.7% reduction among salaried workers.”
He pointed out that “differences in productivity and conditions among informal firms are key factors: they show that public-policy design to reduce informality must adapt to that heterogeneity, and incorporate targeting, sequencing and complementarity criteria (…). A one-size-fits-all approach, applied to everyone with the same tools, ends up being ineffective and short-lived,” he added.
In Chile, labour informality affects about a quarter of workers —approximately 2.5 million people— while at the enterprise level, there are around 1.2 million firms in that situation, most of which are sole-proprietor businesses.
Thursday, 13 November 2025. Speaking at the “Reunión Ministerial sobre Productividad e Informalidad”, recently held in Lima and organized by the OECD Global Forum on Productivity, the Ministry of Economy and Finance of Peru (MEF) and the Inter‑American Development Bank (IDB), the Executive Secretary of CNEP, Rodrigo Krell, delved into the need to rethink strategies toward informality in Latin America and to approach the phenomenon from a multidimensional viewpoint.
As part of the panel “Informality and Productivity – Breaking the Low-Growth Trap”, he stated that “in Chile labor informality affects about one quarter of workers —around 2.5 million people— most of whom work in one of 1.2 million informal enterprises.”
He specified that the growth of productivity itself is one of the most effective policies against informality, noting that in Chile, a 1% increase in formal-sector productivity is linked to a 2.5% drop in self-employed informality and a 1.7% drop among salaried employees. “In other words, productivity growth creates the space for formalization,” he said.
Regarding a firm’s decision to remain informal, he explained that it does not depend solely on its productivity level, but also on the balance between the costs of formalization, the risk of inspection, and the benefits that formalization offers. On this, he specified that in Chile the combination of these factors —productivity, costs, risks and benefits— gives rise to three types of informal firms: “the first, representing about 60 %, corresponds to very low-productivity activities, mostly precarious self-employment which, if forced to formalize, would cease operations; a second group, making up roughly 35 %, consists of viable businesses that choose to stay informal because it is more profitable in weak-inspection contexts —the segment known as the ‘opportunists’—; and a third, accounting for between 5 % and 6 %, includes productive firms that face constraints from excessive or poorly designed regulation,” he detailed.
He warned that differences in productivity and conditions among informal firms are key factors: “they show that the design of public policy to reduce informality must adapt to that heterogeneity, and consider targeting, sequencing and complementarity criteria,” he emphasized.
With respect to targeting, he explained that this principle is based on recognizing that informal firms are diverse in productivity, size, and capacity, so policies must be adapted to each reality: “a single approach, applied equally to all with the same tools, ends up being ineffective and short-lived,” he stressed.
Regarding sequencing, he noted that “this involves applying the measures in an order that generates sustainable results: strengthening productivity first —through training, innovation or access to finance— before or alongside targeted inspection, so that firms have the necessary conditions to formalize, can generate real impact. This approach not only seeks to coordinate timing, but to build the economic and institutional foundations that make law enforcement effective and socially sustainable”.
On the principle of complementarity, he emphasized that it entails ensuring coherence among economic, labor, and regulatory policies so that they reinforce one another. “We need public policies that draw people into formal employment rather than punish informality, and in this regard, flexibility can be a relevant element,” he explained.
Institutional role of CNEP
In the framework of this gathering —which brought together state ministers, economists and representatives of international organizations, including the President of Peru, José Enrique Jerí Oré; the Minister of Economy and Finance, Denisse Miralles; and the Secretary-General of the OECD, Mathias Cormann— Rodrigo Krell also referred to the trajectory and institutional role of CNEP over its ten years of existence.
He stated that the CNEP was created at a time when growth, driven for years by investment associated with the copper boom, was beginning to lose momentum, and productivity had shown almost a decade of stagnation.
“For countries like Chile, which have already implemented macro and structural reforms but are beginning to experience diminishing returns, a Productivity Commission can play a positive role (…). In this sense, an entity like ours can help keep the reformist momentum alive by providing an independent space with sound technical foundations for policy debate. Our greatest asset is credibility. When evidence is perceived as impartial, it can circulate beyond political ideologies. Independence is not just an ethical principle; it is what makes the institution useful,” he concluded.