Definitions of Bolivia's informal sector varied in the late 1980s but generally included the nonprofessional, self-employed, unpaid family workers, domestic servants, and businesses with five or fewer employees. Although primarily associated with La Paz, the informal sector also included a rural component and an illegal component linked to the coca industry. The urban and legal informal sector was estimated to contribute about 12 percent of GDP and employ as much as 60 percent of the labor force in the mid-1980s. Most analysts believed that the sector increased in the late 1980s because of public sector layoffs and the depressed mining industry.
The informal sector was characterized by ease of entry, the family nature of work, the informal uses of credit, and the evasion of certain government regulations, especially regarding the sale of smuggled goods. Two household surveys of La Paz in the 1980s found that the income of small proprietors in the informal sector averaged as much as twelve times the minimum wage (which was equivalent to US$425 per month in 1988); the income of the self-employed, who made up about half of the informal sector, was twice the minimum wage. By contrast, salaried workers, unpaid family workers, and domestic servants typically made only onehalf of the minimum wage. Workers in the informal sector, however, generally endured the recession of the 1980s better than their formal sector counterparts, and there was a trend toward a convergence of incomes.
The most lucrative informal activity was in transportation, usually unregistered buses or taxis. Other informal services included laundry, mechanical repair, electrical services, black market currency transactions, and money lending. The most common activities were makeshift family grocery stores and the sale of food, clothing, and smuggled consumer items. Seamstresses, weavers, carpenters, and butchers performed the bulk of informal industrial work. The government's VAT was in part aimed at netting more revenues from small producers who remained outside government regulation.
Data as of December 1989