Prioritize informal workers in economic recovery

by Louise Maureen Simeon (The Philippine Star), 16 Aug 2021

MANILA, Philippines — The government should move to include informal workers hard hit by the pandemic in its efforts to recover from the health crisis, a unit of the Asian Development Bank said.

Tokyo-based Asian Development Bank Institute (ADBI), the multilateral lender’s think tank, said the informal labor sector has been the most affected since the pandemic began last year as lockdown measures led to severe job and earning losses.

The International Labor Organization defines the informal economy as consisting of independent, self-employed small-scale producers and distributors of goods and services.

Unfortunately, workers in this sector are not covered by labor laws and regulations. In fact, two out of five workers in the country are less likely to have formal work arrangements and access to social protection and are more at risk during a crisis.

The most common informal employment activities include temporary construction workers, daily agricultural laborers, domestic cleaners, small vendors, and tour guides, among others.

“In the informal sector, this pandemic has either paralyzed economic activities, endangered livelihoods or failed to protect individuals, endangering lives and, hence, calling for the next response in casting a social safety net,” ADBI said.

“It is very difficult for the government to reach out to vulnerable groups because most of them are in the informal sector, about which, by definition, the government has little knowledge,” it said.

Globally, the informal sector employs over 62 percent of the world’s population.

For lower-middle income countries like the Philippines, the total informal sector employment is 85 percent of the population. Of that, 80 percent has been impacted by the COVID-19 pandemic.

ADBI emphasized that it is relatively easier to enter and leave the sector, especially for those who possess low levels of education, training, and other economic resources.

“Nevertheless, employees in the informal sector in developing countries have been outside the purview of labor laws, insurance, pension, retirement benefits, and social protection schemes,” ABDI said.

“Wages and returns have generally been low and experienced large variability. Combined with a lack of endowments and savings, individuals in the informal sector have been socially vulnerable and facing the constant challenges of exploitation, health shocks, and retirement issues,” it said.

As job losses eventually lead to poverty, ADBI argued that poverty could even worsen as the pandemic’s end is nowhere near in sight and recovery is proving to be diverse across countries.

In the developing world, the think tank said the livelihood of informal-sector households, especially those headed by females, are being endangered by the pandemic.

To ensure that the informal sector will benefit from a sustained and equitable recovery, ADBI emphasized that it is imperative for governments to design and invest in transparent, efficient, and well-targeted public safety nets and insurance systems.

“Governments should value informal livelihoods by protecting them and including them in economic development plans at both the national and local levels,” ADBI said.

“Public distribution networks should be made more resilient to shocks, and food supply chains need to be more responsive to match varying demand,” it said.

It added that countries should take advantage of the increasing use of digital technology to ensure financial inclusion for all, especially for the informal sector.