As governments around the world continue to grapple with the economic and health impacts of the coronavirus pandemic, policymakers in emerging markets have been seeking effective ways to support their informal sectors. In response to the growing crisis, the World Economic Forum (WEF) has called for a 'new deal' aimed at protecting informal workers.

Informal workers are those who work in jobs that are not registered with local authorities or covered by formal working arrangements. Although they usually fall outside the tax net, such workers are often not eligible for basic social security, nor protected by basic employment rights.

Globally speaking, there are an estimated 2bn informal workers across a range of occupations and industries. Although they make up 62% of all workers worldwide, according to the UN’s International Labour Organisation (ILO), they are highly concentrated in emerging markets.

For example, while the proportion of informal workers in high-income countries is just 18%, this figure rises to 67% for middle-income countries and 90% for low-income economies.

In addition, the ILO estimates that informal enterprises account for eight of every 10 businesses in the world, many of which are small-scale family or community operations.

Economic impacts

While these workers experience a higher risk of vulnerability at the best of times, the pandemic has placed even more strain on those who operate within the informal economy.

Typical workplaces for informal workers – among them markets and shops – were closed for extended periods this year as part of efforts to contain the spread of the virus.

In a report released in early May, the ILO said that 1.6bn out of the world's 2bn informal workers had been significantly affected by coronavirus-related lockdown measures, with women overrepresented in the hardest-hit sectors.

While governments around the world have since implemented significant stimulus packages to combat the impact of the virus and related lockdowns, the fact that workers and businesses within the informal sector are not registered with authorities means that many have not received state support in some countries.

As a result of the disruption to business and lack of government assistance, it is estimated that relative poverty for informal workers will increase by 56% in low-income countries.

Given these economic pressures, the ILO said that the situation was forcing people into making desperate decisions, and choose whether “to die from hunger or from the virus”.

Elsewhere, the disruption caused to informal economies has undermined food supply to many vulnerable communities, along with damaging the livelihoods of millions of farmers worldwide.

Economic responses

While the unregistered nature of informal workers complicates state efforts to provide assistance, the sheer size of informal economies, especially within emerging markets (https://oxfordbusinessgroup.com/news/%E2%80%98sleeping-giant%E2%80%99-heart-png%E2%80%99s- economy), has nevertheless seen governments seek to provide support to the sector throughout the pandemic.

In  Nigeria  (https://oxfordbusinessgroup.com/news/digital-solutions-offer-hope-nigeria-it-begins-phased- easing-covid-19-lockdown), for example, the informal sector is estimated to account for around 80% of employment and 65% of GDP (http://oxfordbusinessgroup.com/news/digital-solutions-offer-hope-nigeria- it-begins-phased-easing-covid-19-lockdown), while informal workers make up around 80% of the total workforce in Indonesia, Myanmar and Cambodia.

In neighbouring Vietnam the government has expanded existing social assistance programmes to include many within the informal sector, while Bangladesh has increased the value of benefits available to those who are eligible for assistance.
In terms of financial support, Nepal and India have increased in-kind and cash transfers to poor households and informal sector labourers, and Indonesia has extended utility subsidies for low-income families.

Thai authorities introduced a three-month strategy whereby 10m farmers and 16m workers not covered by social security programmes were transferred $153 each month through digital payment platforms.

With a view to supporting businesses as well as workers, Malaysia has launched special grants for micro- enterprises with fewer than five employees (https://oxfordbusinessgroup.com/news/malaysias-leading- role-meeting-global-demand-medical-gloves-amid-covid-19-pandemic), amid concerns that the economic recession could force many formal micro-, small and medium-sized enterprises to close – thereby expanding the informal sector.

A ‘new deal’ for informal workers

Such initiatives align broadly with a call from the WEF to develop a post-pandemic ‘new deal’ for Asia – home to the world's largest informal labour force – that includes stronger protections for informal workers.

As part of its plan, the WEF has emphasised the need for the expansion of health care coverage and public health infrastructure, including in the provision of clean water and sanitation facilities; an improvement and expansion in social support and safety nets; and increased investment in digital capacity and bandwidth, with digital platforms for education and financial services seen as key to providing economic security for low-income households.

While the global implementation of such a plan will require considerable political will, it is essential to guaranteeing the wellbeing of the world's most vulnerable workers.

Courtesy: Oxford Business Group