Keith Hart named it in 1972, but it was the oldest economy on earth.
In 1972, the British anthropologist Keith Hart introduced the term informal sector in a paper on urban employment in Ghana.1 Hart had observed that most people in Accra earned their living through activities that did not appear in any official economic statistics. They were not unemployed. They were working outside the categories that economists measured.
The same year, the International Labour Organization published a report on employment in Kenya that adopted Hart's terminology, bringing informal sector into policy language.2
The concept challenged a fundamental assumption of development economics: that modernization would gradually absorb everyone into formal employment. Instead, the informal economy was growing alongside the formal one in many countries. By ILO estimates in the early twenty-first century, roughly sixty percent of the world's employed population worked informally.3
Hernando de Soto's The Other Path (1989) reframed informality not as a failure but as a rational response to overregulation and the high costs of operating legally in developing economies.4
The ILO broadened the term from informal sector to informal economy in 2002 to include informal employment relationships within formal enterprises, not only street vendors and small workshops.5