Dynamics of Urban Informal Labor Supply in the United States

This study provides the first panel data estimates of informal work in the US and explores relationships between informal- and regular-sector participation among urban parents of young children.

I examine determinants of informal-sector participation in five waves of data from the Fragile Families and Child Wellbeing Study using probit, pooled Tobit, and fixed effects OLS models.

Approximately 53 percent of urban fathers and 32 percent of urban mothers with young children pursue informal work over a nine-year period. Informal work most often occurs in conjunction with regular work. Workers who work in both sectors in the same year are more likely to be non-minority race, higher education (mothers only), own credit cards, and work in skilled white- or blue-collar occupations. Workers who ever participate in only the informal sector are more likely to be younger, to have health limitations, and to have never worked in the regular sector. Informal participation spells are shorter than regular-sector participation spells and are associated with changes in regular-sector participation and occupation but not most other life events.

Consistent with past work, informal work among parents of young children is widespread across socioeconomic groups. Transitions in and out of the informal sector are strongly related to changes in regular-sector employment and occupation. The results suggest that regular-sector participation provides access to informal work opportunities.