A New Deal for Informal Workers

An Informal worker in Hargeisa Somaliland where the sector is main employer

Somalilandsun: In the early 1930s, US President Franklin D. Roosevelt introduced the New Deal in an attempt to combat the effects of the Great Depression. The program had three main pillars: relief (for the unemployed), recovery (of the economy and job creation), and reform (through new regulations and social-welfare programs).

The COVID-19 crisis presents an opportunity for another New Deal – one that recognizes, protects, and supports informal workers, who comprise 61% of the global workforce but have no health insurance, paid sick leave, or pensions. Most of these workers produce essential goods such as food, milk, clothing, shoes, and housing, or provide crucial services like health care, childcare, eldercare, cleaning, delivery, transport, waste management, and food distribution.

The indispensable nature of these jobs, which the pandemic has highlighted, calls for a strategy with the same three pillars that FDR championed – relief, recovery, and reform – but all aimed at helping informal workers. Yet, many aspects of governments’ current COVID-19 recovery measures threaten informal workers.

In early 2020, the International Labor Organization predicted that the COVID-19 pandemic and associated lockdowns would destroy or undermine the livelihoods of 80% of the global informal workforce, or 1.6 billion workers. Similarly, a study of 12 cities around the world by Women in Informal Employment: Globalizing and Organizing (WIEGO) found that 70% of informal workers surveyed had zero earnings during peak lockdowns. Many therefore had to reduce expenditures, deplete savings, mortgage or sell assets, and go deeper into debt, handicapping their economic recovery prospects.

The WIEGO study also found that governments’ COVID-19 relief responses have been weak and uneven, reflecting pre-existing fault lines in social policies and social protection. One home-based worker in Pleven, Bulgaria, pointed out that the government had proposed many relief measures, but not for the informal economy. “One of the main conditionalities (for relief) is paid social-security contributions,” she said. “Many of our members [of HomeNet Eastern Europe] do not pay. That’s why we didn’t receive any support.” Likewise, the secretary of the Kpone Landfill Waste Pickers Association in Accra, Ghana, said that “we have not received any support from the government.”

Governments tend to favor corporations and formal enterprises over the informal economy when lifting or easing restrictions. But why should shopping malls be allowed to reopen when street markets are not? Why should restaurants, but not street vendors, be allowed to use sidewalks and parking bays to serve food? Worse, many governments are using the COVID-19 crisis as a pretext to arrest informal workers, evict them from streets, landfills, and public spaces, and destroy their equipment. Policymakers are also pushing through measures intended to suppress informal workers and the activities that provide their livelihoods.

Moreover, there is growing evidence that governments’ pandemic relief funds and stimulus packages are being captured by economic elites – not by the unemployed or small-business owners for whom they were intended, much less the informal workers at the base of the economic pyramid. In the United States, big corporations took federal payroll loans meant for small businesses. In India, large firms successfully lobbied to increase the investment threshold for medium-size companies so that they could take advantage of loans intended for micro, small, and medium-size enterprises.

A World Bank study published in February 2020, just as the pandemic arrived, found that as much as one-sixth of foreign aid intended for the world’s poorest countries was flowing into bank accounts in wealthy tax havens. But international financial institutions and national governments believe that supporting the private corporate sector is critical to economic recovery, and have thus provided firms with billions of dollars to help them continue to operate and sustain jobs during the crisis.

The international community needs to recognize that the private and public sectors combined account for less than half of all jobs globally and just under 20% of economic units. Why not pump relief and recovery funds into the broad base of the economic pyramid rather than the tip – and build a just recovery from below?

The world is facing an existential crisis that poses fundamental questions about whether to put people and nature ahead of owners of capital and technology, and whether to protect the rights of the disadvantaged or the interests of the political and economic elite. This is a defining moment: will the global community follow the worldwide call for social and economic justice?

A New Deal for informal workers is vital in order to challenge the racial and economic injustices exposed and exacerbated by the COVID-19 crisis. It must confront the dominant narratives that stigmatize informal workers as a problem. And it should start with two fundamental commitments that do not require significant financial resources, but rather a change in mindset.

The first is to do no harm. Governments should stop harassing, evicting, and expropriating informal workers whose very lives have been threatened during the crisis. As informal workers around the world lamented during the height of the COVID-19 lockdowns: “We will die of hunger, not the virus.”

The second commitment should be “nothing about us without us.” Governments should regard informal workers as legitimate economic actors and invite their leaders to the table when discussing and planning relief, recovery, and reforms.

If all national leaders and intergovernmental agencies honor these commitments, the world can overcome the COVID-19 crisis in a way that ensures a better, more just future for all.

Marty Chen

The author Marty Chen is Senior Adviser at Women in Informal Employment: Globalizing and Organizing (WIEGO) and Lecturer in Public Policy at Harvard University’s John F. Kennedy School of Government.

Copyright: Project Syndicate, 2021.