The aims of the study to understand developments in the Informal and Formal Sector. This study discusses about the development of the informal and formal sectors a theoretical review of the informal and formal sectors, the concept of the informal sector the development of the informal and formal sectors. The informal and formal sectors have been running with their respective growth. The informal sector is a buffer against the transformation of unbalanced labor structures. Included as external factors are: First, that the institutions that support modern formal economic activities. Second, the wage level gap. Discrimination in the level of wages, both by informal institutions, the bureaucracy and the environment of formal economic actors themselves also perpetuates the separation of the two sectors. Third, related to technical-political issues, where political actors do not pay attention to and understand the rapid development of modernization.