Although Lewis does not use the term informal sector, it seems clear that for him it would be identified with a sector where the marginal product of labor was close to zero.

The 1970s saw a flurry of analyses and publications. For economists, the paper by Harris and Todaro (1970) is seminal from a conceptual point of view. Although the term formality was not used in the paper, it starts by saying that a key feature of the model is a “politically determined urban minimum wage at levels substantially higher than agricultural earnings.” Thus implicit in the formulation is a sector which comes under the purview of state regulations which underpin a statutory minimum wage. The point for Harris and Todaro (1970), however, is that this wage is not market clearing. Workers who are displaced then end up getting very low earnings in the urban sector—the “informal” sector. It is this sector which absorbs the excess, it is the sector which adjusts, and this is the mindset that informs at least some of the policy discourse on regulations today. Of course there is also rural-urban migration in the Harris-Todaro model, and we will take this up in the next section.

It is generally recognized that the term “informal sector” was introduced to the literature by the anthropologist Keith Hart (1973), as he described economic activity in an urban slum in Accra, Ghana: “The main message of the paper (Hart, 1973) was that Accra’s poor were not ‘unemployed’. They worked, often casually, for erratic and generally low returns; but they were definitely working... Following Weber, I argued that the ability to stabilize economic activity within a bureaucratic form made returns more calculable and regular for the workers as well as their bosses. That stability was in turn guaranteed by the State’s laws, which only extended so far into the depths of Ghana’s economy. ‘Formal’ incomes came from regulated economic activities and ‘informal’ incomes, both legal and illegal, lay beyond the scope of regulation. I did not identify the informal economy with a place or a class or even whole persons. Everyone in Accra, but especially the inhabitants of the slum where I lived, tried to combine the two sources of income. Informal opportunities ranged from market gardening and brewing through every kind of trade to gambling, theft and political corruption.” (Hart, 2006) Hart’s conceptualization was echoed by the ILO (1972) and subsequent attempts to systematize the definition of informal activity for national statistical purposes followed very much the notion that entities recognized by the law were formal, those not so recognized were informal. Thus ILO (1993, para 5) provides the following definition: “They [informal enterprises] are private unincorporated enterprises....., i.e. enterprises owned by individuals or households that are not constituted as separate legal entities independently of their owners, and for which no complete accounts are available that would permit a financial separation of the production activities of the enterprise from the other activities of its owner(s).” Since the 1990s, however, there have been moves to broaden the concept of informality from an enterprise based perspective as given above in ILO (1993), to a worker based perspective, focused on whether or not the worker receives certain mandated protections and benefits from the employer. The distinction is made between the informal sector and the informal economy, the former on an enterprise based definition, the latter on a worker based definition, so as to: “...extend the focus to include not only enterprises that are not legally regulated but also employment relationships that are not legally regulated or protected. In brief, the new definition of 4