How does rural-urban migration increase informal employment?

Migrants without qualifications cannot find formal jobs, so they create their own work

Which is an advantage of the informal economy?

It provides income for people who would otherwise have none

Geo 2026: The informal economy and Mumbai

Millions of people earn a living without contracts, taxes or legal protection. This is the informal economy.

International GCSE · 4GE1 · Paper 2, Topic 4: 4.2
About 27 minutes

What it is and why it happens

The informal economy is jobs and businesses that operate without government regulation, taxation or protection. It is common in LICs and fast-growing cities.
Characteristics: unregistered and unregulated; low pay and no job security (no pensions or sick pay); cash-based and small-scale (street vendors, waste pickers, home businesses); labour-intensive.
Causes: high unemployment and too few formal jobs; rural-urban migration (migrants without qualifications take informal work); weak governance and corruption; low education levels.

Advantages and disadvantages

Advantages: provides income for the poor and reduces extreme poverty; encourages entrepreneurship; offers cheap goods and services to local people; needs little money to start.
Disadvantages: no tax for the government to spend on infrastructure and services; poor and sometimes dangerous working conditions with no workers' rights; pollution from unregulated industries; workers have no security if they are ill or injured.

Case study: Mumbai, India

Mumbai, India's largest city, has a huge informal economy, especially in Dharavi, one of the world's largest slums (about 2.1 km², with estimates of 700,000 to 1 million people).
Jobs include street vendors, domestic workers and waste pickers and recyclers; Dharavi also has leather, pottery and textile workshops.
Your revision notes estimate that up to 68% of people in Mumbai work in the informal sector. Dharavi's economy has been estimated at hundreds of millions to over a billion US dollars a year.

Explained step by step

Why does the informal economy grow in cities like Mumbai? Follow the chain.
1. People in rural areas are poor and leave for the city hoping for work (rural-urban migration).
2. The city grows faster than the number of formal jobs with contracts and tax.
3. Many migrants have low education and no qualifications, so they cannot get the formal jobs that exist.
4. They still need money to live, so they create their own work: selling food on the street, cleaning homes or collecting waste to recycle.
5. Weak governance means this work is rarely registered or taxed.
Example: in Dharavi, Mumbai, people work as street vendors, domestic workers and waste pickers, and run leather, pottery and textile workshops. Your notes estimate up to 68% of people in Mumbai work informally. This gives people an income, but they have no sick pay or pension and the city gets no tax from them.

Common mistakes and exam tips

Calling informal work 'crime': define it as work that is not registered, regulated or taxed.
Giving only disadvantages: a balanced answer also mentions income for the poor, entrepreneurship and cheap goods.
Forgetting the government's view: a key disadvantage is no tax revenue for roads, schools and hospitals.
Not naming the megacity: write 'Mumbai' and 'Dharavi' and name real jobs such as waste pickers and recyclers.
Quoting figures as facts: say 'your notes estimate up to 68%' rather than giving an exact number.

Why governments struggle to formalise informal work

Your notes end with an important point: the informal economy matters in fast-growing cities, but governments often struggle to integrate informal workers into the formal sector. Why?
Too many workers: in cities such as Mumbai, your notes estimate up to 68% of people work informally, far more than officials can register.
Costs of registering: licences, taxes and paperwork cost money that very poor workers cannot afford, so staying informal is cheaper.
Weak governance: your notes say poor enforcement and corruption encourage informal work.
Not enough formal jobs: even if workers wanted contracts, there are too few formal jobs for everyone arriving through rural-urban migration.
This links the causes of informal work to its impacts: because the workers stay unregistered, the government still collects no tax from them.

Worked example

Explain why the informal economy is large in cities such as Mumbai.

Many migrants arrive from rural areas looking for work.
There are not enough formal jobs, and many migrants lack qualifications.
So they create their own work, such as street vending or recycling, without registering it.

Answer: Rural-urban migration and a lack of formal jobs push people into informal work.

Key idea

The informal economy is unregulated, untaxed work: low pay, no security, cash-based. Causes: unemployment, rural-urban migration, weak governance, low education. It gives income and cheap goods but no tax revenue, poor conditions and pollution. Mumbai's Dharavi has a huge informal economy (vendors, domestic workers, recyclers).

Key words

Informal economy: Work that is not officially registered or taxed, such as street selling.
Rural-urban migration: The movement of people from the countryside to towns and cities.
Migration: The movement of people from one place to live in another.
Megacity: A city with more than 10 million people.

All GCSE and International GCSE Geography A key terms and definitions →

Common mistakes

Not “It gives the government tax revenue”. Informal work is not taxed.

Quick check

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Extra practice

2 more questions

Try each one, then tap to check.

Which is a feature of informal employment?
1. A pension and paid holidays
2. No contract, no tax and no sick pay
3. Work regulated by the government
4. A job in a large TNC factory
Show the answer
Answer: No contract, no tax and no sick pay
Informal work is unregistered, unregulated and untaxed, with no job security.
Why do many rural migrants to Mumbai end up in informal work?
1. They lack qualifications and there are too few formal jobs
2. They are all given government jobs
3. They bring factories with them
4. There are more formal jobs than people
Show the answer
Answer: They lack qualifications and there are too few formal jobs
Migrants without qualifications cannot get formal jobs, so they create their own work.

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Sources and references

Checked by the GCSE-ready editorial team, 23 October 2026. Last updated 2 October 2026. Spotted a mistake? Tell us and we will fix it.