Role of Informal Employment and Social Protection Access on Income Stability in the Context of Developing Economies – PLS-SEM Approach

Abstract

Developing economies continue to have a significant presence of informal employment (IE) and income instability (IS) is a major socioeconomic problem. The lack of access to formal employment and the limited coverage of social protection systems exacerbate income vulnerability. Therefore, this research seeks to investigate the influence of informal employment and social protection access (SPA) on income stability (IS) in developing countries. The study uses a deductive approach with a quantitative survey design. A sample of 99 people involved in informal employment and work activities was surveyed in particular developing countries. A questionnaire was constructed using a five-point Likert scale and Partial Least Squares Structural Equation Modeling (PLS-SEM) was used for the data analysis. We tested the direct effects of IE, SPA and IS. The study found IE has a negative impact on IS, whereas SPA has a positive impact on IS. And, IE negatively affects SPA, suggesting exclusion of informal workers from social protection systems. This study highlights that governments should broaden and extend inclusive social protection schemes for informal workers to improve income security. This will help reduce income instability and boost economic resilience in developing countries. The study adds to the existing research by bringing together Labor Market Segmentation Theory (LMS), Social Protection Theory (SPT), Vulnerability Theory and Resource-Based View (RBV). It offers empirical insights into the effects of IE and SPA on IS in developing countries.