37% of Georgia’s Workers Are Informally Employed: Who They Are, Where They Work, and Why Informality Persists

GILS Research Team

Editor: Prof. Giorgi Pkhakadze, MD, MPH, PhD

Georgian Institute of Labour Studies · GILS Analysis

23 September 2026

According to the ILO’s most recent analysis of Georgian Labour Force Survey data, 37.1% of employed people in Georgia worked informally in 2022. The profile that emerges is not the one usually assumed: informality in Georgia is more common among men than women, among older workers than prime-age workers, and in micro-enterprises, agriculture and construction. This analysis argues that the persistence of informality reflects the design of Georgia’s own institutions as much as the structure of its economy — and that this is good news, because institutions can be changed.

1. Introduction

Informal employment — work that is not subject to labour legislation, social protection or income taxation — is a defining feature of labour markets in middle-income countries. The ILO estimates that 58.2% of the world’s employed population works informally, ranging from 15.9% in high-income countries to 89% in low-income countries (ILO, 2023, cited in Pignatti, 2026). Georgia’s rate of around 37% is therefore below the global average, but the ILO and the World Bank both note that it is higher than would be predicted from the country’s income level (World Bank, 2022, cited in Pignatti, 2026).

This analysis asks two questions. Who works informally in Georgia, and why does informality persist despite sustained economic growth? We argue that the answer lies in three interacting factors — the sectoral structure of employment, the small scale of most firms, and institutional design features that make formality unattractive — and that the third factor is the one most directly within the control of policymakers.

2. Data and Definitions

This analysis draws principally on ILO Working Paper 159 (Pignatti, 2026), which analyses Geostat Labour Force Survey microdata for 2021 and 2022 using ILO definitions. Under these definitions, informal employment can occur in three types of economic unit: the informal sector (unregistered enterprises), the formal sector (registered enterprises employing workers informally), and the household sector (households employing domestic workers or producing for own use).

Two features of the data matter for interpretation. First, Georgia adopted the ILO’s 2013 statistical definitions of employment from 2021, which created a break in the series; figures from 2021 onward are not directly comparable with earlier years. Second, the paper notes that data on informal employment are unavailable in Georgia’s Labour Force Survey after 2022. The 37% figure is therefore the most recent rigorous estimate available.

3. Findings

3.1 Scale and location

Source: Pignatti (2026), Table 1, based on Geostat Labour Force Survey.

Roughly 10% of all employment in Georgia is informal work inside registered, formal-sector enterprises. This matters for policy: a substantial part of informality is not hidden in an unregistered shadow economy, but occurs within firms that are already visible to the tax and labour authorities.

3.2 Sector and firm size

Informality is concentrated in a small number of sectors. Agriculture is almost entirely informal. Construction is highly informal among men (67.3%). By contrast, public administration, education and health — sectors where public employment dominates — are almost entirely formal. Because men are concentrated in agriculture, construction and transport, and women in education, trade and health, sectoral structure largely explains why men are more often informal than women.

Firm size is an equally strong predictor. Nearly three-quarters of workers in firms with one to four workers are informal, compared with 7% in firms of 50 or more. In the regression analysis reported by Pignatti (2026), the sex gap in informality disappears once sector and occupation are controlled for, while age and higher education remain significant predictors.

3.3 Who informal workers are

The relationship between informality and age is U-shaped: almost all employed teenagers work informally, the rate falls to about 21% around age 25, and then rises gradually, reaching 40–50% among people in their fifties. Education is strongly protective: around 80% of workers with primary education are informal, compared with less than 20% of those with tertiary education (Pignatti, 2026).

Informality also takes different forms for men and women. Among male informal workers, 56.9% are classified as employers — typically running small unregistered businesses. Among female informal workers, 30.7% are contributing family workers, often unpaid. Domestic work in households is almost exclusively female and entirely informal.

3.4 Earnings and working conditions

Source: Pignatti (2026), Tables 4 and 5. Earnings data are missing for 71.6% of informal workers, so earnings comparisons should be read with caution.

Informal workers earn less, work more often at weekends, and in most cases do not know the type or duration of their contract. More than half (55%) rely on some non-labour income source, compared with 33% of formal workers — principally support from family members. Informality, in other words, shifts the cost of low and insecure earnings onto households.

4. Discussion: Why Informality Persists

Argument 1: Structure matters, but it is not destiny

The sectoral and firm-size patterns are consistent with a structural explanation: as long as one in three employed men works in agriculture or construction, and most firms are very small, informality will remain high. The standard development path — a shift from agriculture to manufacturing and services, and growth of firms — would reduce it over time. This explanation is correct as far as it goes. But it cannot explain why Georgia’s informality is higher than its income level predicts, nor why the rate barely moved between 2021 and 2022 despite rapid economic growth.

Argument 2: Georgian institutions make formality unattractive

The more distinctive explanation lies in institutional design. Pignatti (2026), drawing on consultations with Georgian employers’ and workers’ organisations, identifies several features that reduce the incentive to formalise:

Weak benefits attached to formal work. Georgia has no unemployment insurance for people who lose a formal job, and maternity and paternity benefits have low coverage. If formal employment brings few protections, workers have little reason to demand it.

Fear of losing social assistance. Social assistance targets households outside formal employment. Social partners reported that some people prefer informal work plus assistance to formal work at low wages.

Preferential tax regimes and thresholds. The World Bank found evidence that firms strategically report revenues around tax thresholds (World Bank, 2022, cited in Pignatti, 2026).

Debt enforcement. Social partners noted that people with outstanding bank debts avoid formal employment because debt repayments would be deducted directly from their salaries.

These are not features of Georgia’s economic structure. They are policy choices — and they can be changed.

Counter-argument: stricter enforcement is the answer

A common response to informality is to increase inspections and penalties. Enforcement has a role, particularly for informal employment inside formal-sector firms. But the evidence suggests it cannot be the main instrument in Georgia. Most informal employment is in micro-enterprises and agriculture, where enforcement is costly and the businesses concerned may not survive the full costs of formality. Pignatti (2026) also reports that international evidence does not find a causal link between strict employment protection legislation and informality; rather, well-designed labour laws can support formalisation. The priority should therefore be to make formality worth having, and enforcement should support that, not replace it.

Counter-argument: informality is a choice workers want

Some workers in Georgia report choosing informal work for its flexibility, particularly to combine work with family responsibilities (Pignatti, 2026). This should be taken seriously. But it points to a solution, not an argument for inaction: if formal employment offered flexible arrangements such as regulated part-time work, many workers could have both flexibility and protection.

5. Limitations

The analysis relies on 2021–2022 data because more recent informality data are not published. Earnings information is missing for most informal workers, especially those in the informal sector, so wage comparisons are indicative. The identification of institutional drivers draws partly on stakeholder consultations rather than causal estimates.

6. Conclusion

Close to four in ten employed people in Georgia work informally. They are concentrated in agriculture, construction and micro-enterprises; they earn less, work more often at weekends, rarely have written contracts and depend more on family support. Economic structure explains part of this picture. But the persistence of informality above the level predicted by Georgia’s income also reflects institutions that offer formal workers few benefits, penalise formality through social assistance and debt rules, and allow tax thresholds to be gamed. Georgia can shift the balance by making formal employment worth having.

GILS analyses are prepared with AI-assisted drafting. All figures and claims are verified against the cited primary sources and reviewed under the responsibility of the Editor.

This analysis is also published in GMJ News — Work & Health, the news service of the Georgian Medical Journal.