Keith Hart gave the social sciences one of their most widely used concepts and then spent much of his later career objecting to what had been done with it. His paper on urban income opportunities in Ghana, published in 1973, introduced the term informal sector — the phrase that now organises labour statistics, development policy and a vast literature on work in the global South. Its argument was simple and subversive: the urban poor of Accra were not unemployed, they were working, and the reason official statistics could not see their work was that the statistics were built to count only wage employment.
Hart's distinction was between formal income opportunities, meaning enumerated wage employment on regular contracts within recognised enterprises and the state, and informal ones, meaning the whole range of self-employed and casual income-generating activity that escapes enumeration. His second claim mattered even more than the first. Informal activity was not a residue awaiting absorption into the modern sector as growth proceeded; it was a durable structural feature of the urban economy, connected to formal activity at every point, and likely to expand rather than disappear.
Life and intellectual formation
Hart, born in Manchester in 1943, read classics at Cambridge before turning to social anthropology, and carried out doctoral fieldwork in the late 1960s in Nima, a migrant slum on the edge of Accra, among Frafra people who had come south from northern Ghana. He subsequently taught at Cambridge, where he directed the African studies centre, and later at Manchester and Goldsmiths, working on West African agriculture, on the anthropology of money, and on what he came to call the human economy.
The intellectual context of the 1973 paper explains the concept's shape. Development economics was then dominated by dual-economy models in which a traditional or subsistence sector would shed surplus labour to a modern industrial one, and urban poverty was accordingly read as unemployment, a temporary condition of people not yet absorbed. Hart's fieldwork contradicted this at first hand: the people he lived among were intensely economically active, moving between several occupations within a single week, but almost none of their activity appeared in official employment data.
The informal sector in Accra
Hart catalogued the income opportunities open to the urban poor and organised them into categories. Formal opportunities comprised public and private sector wage employment and the transfers attached to it. Informal opportunities were far more varied, and he divided them into legitimate and illegitimate activity — a distinction usually forgotten when the concept is summarised.
Legitimate informal activity included farming and market gardening within the city, building work and artisanal manufacture; distribution through petty trade, hawking and street vending; services such as transport, repair, laundry, brokerage, tailoring and food preparation; and private transfer payments — borrowing, begging, and the gifts and remittances circulating within kin networks. Illegitimate activity included receiving stolen goods, usury, racketeering and protection, gambling, smuggling, prostitution, petty theft and confidence tricks, along with the corruption of officials. Hart's point in including these was analytical rather than moralising: they are income opportunities governed by the same logic of unenumerated, unprotected earning.
Two further observations recur. First, occupational multiplicity — individuals and households combine several income sources at once, so occupation is a poor unit of analysis and the household's portfolio a better one. Second, informal earning is not uniformly low-return: some informal enterprises accumulate, so the sector is internally stratified, and treating it as a homogeneous mass of poverty is a mistake.
Institutionalisation and Hart's reservations
The concept was taken up with extraordinary speed by the International Labour Organisation, whose 1972 employment mission report on Kenya used the informal sector as a central organising category, and from there it entered the vocabulary of national statistical systems, development banks and government ministries. It became a thing to be measured, mapped, licensed, upgraded and eventually formalised.
Hart's later reflections on this process are pointed, and three objections stand out. First, he had proposed a distinction between forms of income-generating activity observed in one city, not a division of an economy into two sectors; the ILO turned a descriptive contrast into a bounded statistical entity, and once the informal sector existed as a sector it could be given a size, a share and a policy. Second, the dichotomy misleads because the two are aspects of a single economy rather than separate spheres: formal firms subcontract to informal producers, informal credit finances formal consumption, and the same person may hold formal and informal work at once. Third — his most original point — what the terms really capture is the presence or absence of bureaucratic form. The formal is whatever is regulated, registered and recorded by state and corporate bureaucracies; the informal is defined only negatively, by what those bureaucracies fail or decline to capture. On this reading the informal is not outside the formal but produced by it, and it appears in wealthy economies too, in tax avoidance, offshore finance and unregulated digital platforms.
Money and the human economy
Hart's later work extends the same instinct to money. In The Memory Bank (2000) he argued that money is best understood not as a commodity or a mere medium of exchange but as a system of memory and account — a means by which societies record obligation and connect individuals to a wider social whole — and drew attention to money's duality as both state-issued token and interpersonal credit.
From this grew the human economy programme, set out in a 2010 volume: an approach to economic life that begins from what people actually do to sustain livelihoods, treats markets as one institution among many alongside households, cooperatives, associations and states, and insists economies be judged by their contribution to human wellbeing rather than by aggregate output. His textbook with Chris Hann places this within the tradition running through Marx, Mauss and Polanyi. The continuity with the Accra research is direct: the object is the actual economic practice of ordinary people, described before it is classified.
Relevance to India
No country illustrates Hart's argument better. Roughly nine in ten Indian workers are in informal employment, and the great majority of enterprises are unregistered — a proportion that has not fallen with decades of growth, which is precisely the refutation of the transitional-stage assumption. India also displays what Hart later emphasised: informality inside the formal sector itself, in contract and casual workers in registered factories, outsourced services and home-based production tied to organised-sector supply chains, so that the boundary is a legal artefact rather than an economic frontier.
Indian scholarship has both used and pressed beyond him. Jan Breman's work on footloose labour in Gujarat shows circulating casual workers moving between agriculture, brick kilns, construction and the city, and argues that the sectoral metaphor obscures a single labour market segmented by power. The National Commission for Enterprises in the Unorganised Sector shifted the emphasis from enterprise type to the absence of employment security and social protection — the move that underlies current usage of informalisation as a process rather than informality as a place.
Criticisms
Beyond Hart's own reservations, the concept has drawn criticism from several directions. Marxist scholars, including those writing on India, argue that the formal-informal language obscures class relations: what looks like self-employment is often disguised wage labour under piece rates and advances, and describing petty producers as entrepreneurs romanticises dependency. Others object that the residual definition lumps together a prosperous trader, a home-based garment worker and a bonded brick-kiln labourer, whose situations have almost nothing in common. Policy critics note that it has been used in opposite directions — by market liberals to celebrate enterprise strangled by regulation, by labour advocates to demand protection — which suggests it carries little analytical direction of its own. Feminist scholars point out that the original framing missed unpaid domestic and care work, and that women are concentrated in the least visible and worst-remunerated informal categories.
Legacy
Despite all this, the informal sector remains one of the most consequential concepts the social sciences have produced, because it made visible the work of the majority of the world's labourers. Its lineage runs into the literature on informalisation, precarious work and the precariat, into statistical definitions of informal employment, and into the Indian debate on social security for unorganised workers. Hart's own trajectory — from coining a category to insisting that it names the limits of bureaucratic vision rather than a real sector — is the most instructive part of the story.
For the UPSC answer
Attribute the term precisely: Hart coined the informal sector in his 1973 study of urban income opportunities in Accra, distinguishing enumerated wage employment from a wide range of unenumerated self-employed activity, both legitimate and illegitimate. Then make the two arguments that carry marks — that informal work is a durable structural feature rather than a transitional stage, which India's persistently informal workforce demonstrates, and that the dichotomy itself is questionable because the informal is defined negatively by what state bureaucracy fails to record. Note that Hart himself disowned the ILO's conversion of his distinction into a measurable sector, an unusual point to be able to cite. Bring in Breman on footloose labour and the unorganised-sector commission's shift towards insecurity and absent social protection, and close with the Marxist criticism that self-employment often disguises wage labour and that the sectoral language conceals class relations.
References & further reading
- Hart, Keith (1973). Informal Income Opportunities and Urban Employment in Ghana. Journal of Modern African Studies, 11(1).
- International Labour Office (1972). Employment, Incomes and Equality: A Strategy for Increasing Productive Employment in Kenya. Geneva: ILO.
- Hart, Keith (1982). The Political Economy of West African Agriculture. Cambridge: Cambridge University Press.
- Hart, Keith (2000). The Memory Bank: Money in an Unequal World. London: Profile Books.
- Hart, Keith, Laville, Jean-Louis and Cattani, Antonio David (eds) (2010). The Human Economy: A Citizen's Guide. Cambridge: Polity Press.
- Hann, Chris and Hart, Keith (2011). Economic Anthropology: History, Ethnography, Critique. Cambridge: Polity Press.