tradable sector employment in the production and demand sides, and in the classification of economic agents.<sup>15</sup> Indeed significant changes did occur in the labor market and distribution of labor force across the different income groups during the implementation of the stabilization program. These changes were marked by growing informal sector activities and employment (both skilled and unskilled), compensating the declining level of public sector employment.<sup>16</sup> Public sector employment (essentially public administration and excluding public enterprises), which accounted for over 6.1% of total labor force, and over 41% of formal sector employment in 1992 declined to less than 4.5% of total labor force by 1997, accounting for about 36% of total formal sector employment. At the same time, informal sector employment, which was already high, increased even further, from 85.2 to about 88%. However, given the skill mix of the labor force engaged in informal sector activities, the extremely high rate of informal sector employment may be viewed as a disguised form of unemployment, especially in the absence of alternative employment opportunities in the formal sector. In any case, informal sector employment is quite high, even by developing countries standards. In Latin American countries where informal sector employment also grew in importance during the 1980s and 1990s, it accounted for 50% of total employment at its peak in 1992. Similarly in Kenya and Ghana where informal sector employment followed a similar path in the 1990s, it accounted for about 60% and 45% of total labor force, respectively (Horton et al. [1994], Agénor [1996]).<sup>17</sup> Informal sector employment in Cameroon has a number of other characteristic features, including self-employment, limited proportion of hired labor, heterogeneity of labor force, and ease of entry. The relative ease of entry partly reflects ongoing wage flexibility and low employment security. This has a number of consequences on the structure and composition of labor force in that sector. Indeed, with the hiring freeze in effect in the formal public sector, and given the limited opportunities and alternative for formal employment, especially in a context of declining investment in the formal private sector, graduating students, skilled workers entering the labor market, and rural-to-urban migrant workers were primarily absorbed by the informal sector, which became even more heterogeneous. However, the apparent heterogeneity of labor in the informal sector, which has both skilled and unskilled workers, is not reflected in the wage structure. Hence we do not make a distinction between the different sub-categories of labor in the informal sector (on the basis of workers’ skills) in the construction of the financial SAM.

The persistence of informal-formal wage differentials, illustrated by a large bias in the headcount index between these two income groups, and despite the large cut in public sector wages and growing size of skilled labor engaged in informal sector activities is worth noting.

> 15Labor market segmentation may also be induced by government’s intervention in the form of minimum wages and trade unions, which may prevent equalizing wages across sectors (Agénor [2000]). However, wages are highly flexible in Cameroon, despite the minimum wage legislation and trade unions have limited impact in wage-setting decisions, as their influence has declined significantly over time.

> 16 Informal sector workers refer to self-employed who are engaged in small-scale labor-intensive activities such as tailoring, trading, food preparation, and trading. These workers are often regarded as unemployed as they cannot be included in national employment statistics, but they are often highly productive and make a significant contribution to national income.

> 17 With informal sector employment accounting for about 90 percent of total labor force, Bangladesh is one of the countries which comes close to Cameroon, for further details see Devarajan, Ghanem and Thierfelder [1999].

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