The informal sector deserves more support not only because it is capable of being economically productive, but also because any assistance given to SSEs is likely to benefit poorer households more than similar support to the formal sector. Small-scale informal construction enterprises use more unskilled labour, fewer imports and less hard currency. As for the formal sector, it has been shown in Kenya that the labour-to-materials ratio is 45:55 for low-income housing, whereas it is 30:70 for high income housing. The lower unit cost of informal housing generate more employment per unit of expenditure than does formal sector housing, while producing six times as many dwelling units in the process.
It is estimated on evidence from research in Colombia, that the income multiplier for low-cost housing construction is about 2 ([ie] $2 of income created for every $1 invested in housing construction); and that about seven additional jobs are created for every $US 10,000 spent on housing construction. In the Republic of Korea, the income multiplier was also 2, but 14 jobs were created for that amount of money. Similar results can be obtained in India, Mexico and Pakistan. It should also be noted that increases in housing and infrastructural investment are likely to trigger an increase in investment in building-material manufacture, transport and marketing. Semi-skilled and unskilled labourers, benefiting from the first and second round increases in individual incomes would have little propensity for buying imported goods where local manufactures were available.
The backward linkages from the habitat sector (those which take place in other sectors before completion of the housing or infrastructure project) are also acknowledged to be higher than those in most other sector. The beneficial effect of multipliers seem to be inversely related to the cost of housing. Hence, governments which wish to increase employment among the poorer sections of the population through shelter investments, should invest in housing activities directed at the poor. Self-help housing and upgrading schemes are especially effective in using under-utilized labour.
2. Employment-rich human settlements development should be an integrated part of structural adjustment policies, and are a basic input for the production of any other goods, tradable or not.