Informality in Georgia is not a transition-era residue. It is a structural feature of how the economy functions.
According to Geostat data and ILO estimates, approximately 37 percent of all employment in Georgia falls into the informal category — meaning workers without employment contracts, without social insurance contributions, without access to the labour protections formally guaranteed under the Labour Code. This figure, which has fluctuated between 35 and 40 percent for the past decade, represents one of the highest informality rates among the Eastern Partnership countries and a persistent structural feature of the Georgian labour market.
The informal sector in Georgia is not concentrated in a single corner of the economy. It spans agriculture — where informality is near-universal, reaching approximately 85 percent of agricultural workers — through domestic service, construction, small retail, and elements of the hospitality and care sectors. It exists in Tbilisi’s visible economy as well as in the invisible rural labour markets of Guria and Racha. What these contexts share is not geography or sector, but a common set of conditions: employers who benefit from avoiding payroll taxes and social contributions, workers who lack the bargaining power or information to demand formal status, and an inspection regime with insufficient reach to enforce compliance.
The consequences of informality are asymmetric and cumulative. For the individual worker, informality means no sick pay, no guaranteed minimum wage protections, no unemployment benefit eligibility, no pension contributions, and no recourse through formal dispute resolution mechanisms when employment is terminated. For the Georgian state, informality represents a chronic revenue shortfall — the Social Security Service and the Revenue Service both estimate that informality-driven tax gaps run to hundreds of millions of lari annually. For the economy as a whole, the informal sector suppresses productivity: informal firms do not invest in workforce development, do not access formal credit at competitive rates, and do not participate in export markets that require compliance documentation.
The ILO’s Recommendation R204 on the Transition from the Informal to the Formal Economy, adopted in 2015, provides a comprehensive framework for addressing informality. It emphasises that formalisation requires simultaneous action on incentives for employers, simplification of registration procedures, extension of social protection, and targeted labour inspection. Georgia has adopted elements of this approach — the 2019 Labour Code amendments, the strengthening of the Labour Inspection Service in 2020 — but implementation has been gradual and monitoring weak.
One underanalysed dimension of Georgian informality is its relationship to the pension system. Workers without employment contracts do not accumulate pension contributions under the mandatory funded pension scheme introduced in 2019. This means that the 37 percent of the workforce currently informal is building no formal pension entitlement. The social cost of this gap will not materialise on government balance sheets for two or three decades — but it is accumulating now, every month, in every informal workplace.
GILS Position: The Georgian Institute of Labour Studies views the persistence of high informality as a governance failure as much as an economic one. The tools to reduce informality exist in Georgian law; the question is enforcement capacity and political priority.
GILS recommends three specific interventions. First, the Labour Inspection Service should develop a sector-specific compliance strategy, beginning with domestic service and construction — two high-informality sectors where inspection is currently rare and where the costs to workers of informal status are severe. Second, the government should introduce a simplified registration regime for small employers in agriculture and domestic service, reducing the administrative burden of formalisation for both parties. Third, the funded pension system should be reviewed to identify mechanisms for including currently informal workers — potentially through voluntary contribution pathways or formalisation incentives tied to pension rights.
Georgia’s EU candidacy process creates institutional pressure to address informality: the EU’s Social Chapter of the Association Agreement explicitly requires Georgia to pursue formalisation. The Decent Work Country Programme 2024–2026 identifies informality reduction as a cross-cutting priority. The policy will exists, in treaty form. The governance capacity to implement it is what now needs to be built.
Informality in Georgia is not a problem that economic growth alone will solve. It is a structural feature, and structural features require structural responses.
Read the full GILS analysis: https://labour.edu.ge/informal-economy-georgia/