In Argentina, it is estimated that about 48% of all work is informal or off-the-books work which is not reported to the government or properly taxed. This hurts the government's tax revenue and can allow violations of labor laws. Are there any strategies that governments can use to move informal work into the formal sphere?
There are a few ways any government can approach this. First, let's look at the circumstances in Argentina that cause this (this is a good source). A few are excessive regulation, an increase in privitization, and a lack of public confidence in the laws.
One solution is the classic crackdown on informal work by penalizing it, and investing money in uncovering it. This would disincentivize this because there would be consequences to working informally. Optimistically, this would result in a higher public confidence in the laws, but realistically, this would likely just cause this to go further underground, and incentivize more corruption, as the enforcers can be bribed, those who engage in it can be threatened, etc.
The second way the government could do this is by lowering taxes and removing red tape that make it difficult or expensive to formally hire someone. In the article cited, the textile industry keeps its employees informal to dodge regulation and payroll taxes. Lowering these would lower the disincentive to participating in the formal economy.