Informal Employment and Poverty of Urban and Rural Households in Iran

The lack of social security supports and labor market laws in informal employment has strengthened the expectation that poverty in a family in which the head of the household chooses informal employment is greater than in a family in which the head of the household works in the formal sector. Hence, this study attempts to investigate the effect of informal employment with other factors affecting household’s poverty. To this aim, by using the microdata plan of costs and incomes of urban and rural households in 2018, first, the poverty line was calculated based on 66% of the average annual household expenditures by provincial division for urban and rural areas; and poor households were identified as well. Then, according to the presented index in this study, heads of householdschr('39') employment types were formally and informally determined. In the primary data processing, a comparison between households with employed heads showed that the highest poverty rates were for households whose heads work in informal employment. Next, the estimation of the research model with the dependent variable limited to the basis of pseudo-panel data and random effects in logistic regression was performed in a separate format for 13248 urban households and 13115 rural households in 31 provinces. The results showed that the informal employment of the head of the households has a direct effect on the possibility of household poverty and the rate of influence in urban areas is higher than in rural areas. Furthermore, the head of the householdchr('39')s education, age, and gender have an indirect effect; and the square number of age and size of the household variables have a direct effect on the probability of household poverty. In such a way that the desired effect of education and age, and the undesired effect of the household dimension on the probability of household poverty in urban areas is greater than in rural areas.