How COVID-19 upended informal workers worldwide
ABOUT half of the wage earners in Colombia found themselves in the informal economy last year—working unregulated jobs with flexibility, but also, minimal social protection. Yet although rates have steadily declined, informality has remained a weakness. “Before the pandemic, we were in a fragile situation, economically,” says Mauricio Quiñones Domínguez, a Medellín-based economist.
Then COVID-19 hit. The hard-hit country, previously strapped with one of the highest unemployment rates in Latin America, has seen joblessness soar to an unprecedented 21.2% (It now hovers around 16%, although ‘real’ unemployment could be higher.) Informality is expected to follow, reversing years’ worth of effort to formalize more sectors.
“That fragility has only gotten worse,” adds Domínguez. “The prediction is that the informality will increase, because fundamentally we don’t have a policy for welfare strong enough to support this kind of work, which is massive.”
The diverse range of informal workers—from vendors to couriers—was ill-prepared for a prolonged public health crisis. Women and poorer populations are overrepresented. Nearly half has about three months of savings, compared to seven percent of formal workers. And notable differences lie in mental and physical well-being.
But this phenomenon isn’t limited to Colombia. The United Nations reports an estimated 1 billion informal workers are nearing poverty after the COVID-19 outbreak. And while countries chart recovery strategies, investment thus far has largely targeted formal employees, overlooking a growing critical mass.
Before the pandemic, Domínguez and others at PEAK Urban—an international research initiative based at the University of Oxford—had studied various ways informal sectors interact in cities. Now facing an existential crisis, their work sheds new light on how these sectors are coping, and what can be done to ensure their livelihoods aren’t forgotten.
Nobukhosi Ngwenya, a PEAK researcher in Cape Town, South Africa, was investigating informal settlements when lockdown started. Like elsewhere, a moratorium on evictions was announced, providing cursory relief. But that didn’t stop harm from ensuing.
“The occupiers who were employed have lost their income, heightening food insecurity both for them and their extended family,” says Ngwenya. “It also impacted spaza shop [informal convenience shops] owners as clients decreased.” And although residents may consider traders essential, many were unable to get permits during lockdown.
As in Colombia, informal traders in Cape Town (predominantly women) did not qualify for substantial government aid due to prerequisites, like tax clearance and bank statements. Ngwenya argues that social grants must find their way to them, but targeted delivery is difficult. “We have an idea, but we actually do not know what, for example, the demand for housing is and the nature of that demand,” she says.
In India, a short window before March’s national lockdown began sent informal workers reeling. Bhawani Buswala, an Oxford-based PEAK researcher, heard from e-rickshaw drivers in Delhi operating outside regulatory frameworks. “In May, the Delhi government announced a 5000 INR (£50) one-time financial assistance to e-rickshaw drivers,” says Buswala. “But many found it difficult to avail this assistance.”
Loans on batteries accrued interest, costing six times the assistance, which dried up months ago. Ridership collapsed and has not yet recovered. For one driver, Buswala says the combined impact will be long-lasting. “The city has started to unlock,” he said. “But his e-rickshaw is chained up, the battery is long dead, and the debt is becoming heavy.”
While a discussion around measures like universal basic income has accelerated worldwide, researchers argue the outbreak should alert policymakers to the precariousness of informality and spurn them into addressing root causes.
Data could certainly help. The pandemic has encouraged financial inclusivity, for example, as payments went virtual, generating huge new swaths of information to analyse. In another, Domínguez used Google Maps Street View to plot informal storefronts. “When we talk about informality, we focus on the person and self, but there are also informal businesses with no regulation that affect payment,” he says.
But there are two persistent challenges, says Juan Carlos Duque, a Medellín-based PEAK researcher. The first is optimizing distribution. “We have the economic resources to help, but the system we have in place to distribute them is a mess,” he adds.
The second is changing perceptions: informality can exist as an innovative labor pool available to marginalized populations, and formality shouldn’t equate to bureaucracy. “For many informal workers, formal means more problems: taxes, responsibilities, paperwork,” Duque adds. “If that thinking doesn’t change, then transitioning will be difficult.”
Due to its nature, Duque says informality is stigmatized. (Think “shadow economy” or “black market.”) But this misconception, buttressed by deficient data, leads governments to overlook what has long been an essential piece in the global economic puzzle. A better understanding in the devastating wake of COVID-19 could help build back a stronger safety net.
“We have to depoliticize the decision-making process,” Duque stressed. “If you put science in that, it’ll be much easier to show the reasons why you can make some decisions—and also the connections you cannot see in other ways.” – Thomson Reuters Foundation.
- John Surico is a journalist and urban planning researcher. Focusing on cities and how they’re changing, his work can be found in The New York Times, Bloomberg CityLab, and other publications. He is a research fellow at Center for an Urban Future, a leading think tank in New York City.