Impacts of the COVID-19 crisis on employment: (potential) solutions for informal/ self-employed workers

The webinar Impacts of the COVID-19 crisis on employment: (potential) solutions for informal and self-employed workers was the 6th event of the Social protection responses to COVID-19 webinar series and took place on April 21, 2020. It was co-organized by Women in Informal Employment: Globalizing and Organizing (WIEGO), the International Labour Organization (ILO),  the International Policy Centre for Inclusive Growth (IPC-IG), the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) and Australia’s Department of Foreign Affairs and Trade, (DFAT).

The webinar aimed to:

a) elaborate on how different groups of informal and self-employed workers are being impacted by the crisis, as well as their specific needs (now and in future), and

b) introduce and discuss different social protection responses tailored to these groups, including their main challenges and drawbacks – also given the need of governments to act as fast but also as precise as possible to avoid the negative consequences of this unprecedented crisis.

Moreover, examples of how coalitions of workers in the informal economy are being involved in the discussions about the extension of social protection were presented and discussed. 

The event was moderated by Christina Behrendt, Head of the Social Policy Unit of ILO. She was joined by Laura Alfers, Director of the Social Protection Programme at WIEGO, and Carmen Roca, WIEGO’s Lima Focal City Coordinator as presenters. Portia Kekana, Market Access and Strategic Partnerships Director of the South African Department of Small Business Development joined the webinar as discussant.

You can watch the recording here and see the presentation here.

 

Setting the scene: How the COVID-19 crisis hit the informal world of work

Christina Behrendt gave a brief introduction to the topic and the specific questions to frame the webinar and set the scene for presentations and discussion. She pointed out that the COVID-19 crisis represents the most severe crisis since World War II and employment losses are rising rapidly around the world. The ILO estimates that the crisis will reduce employment to the extent of approximately 230 million fulltime work equivalents (based on a 40-hours work week) (for more detailed information, facts and figures please have a look at the ILO Monitor: COVID-19 and the world of work. Second edition. Updated estimates and analysis). Yet, even though the crisis is affecting almost everyone in the world of work, it is affecting people in different ways: Whereas many formal sector employees can continue working (partly) from home during lock-down and other containment measures, this is most of the time no (or only a very limited) option for workers in the informal economy. Consequently, they have no means available for income replacement and are facing rapidly deteriorating livelihoods, increased poverty and food insecurity for them and their families.

The slide below presented by Christina shows the dimension of this problem in different country contexts. For example, in India, where more than 90% of the workforce are employed in the informal economy the government imposed very strict lock-down measures. This is resulting in wide-ranging negative socio-economic consequences for most of India’s estimated 1.3 billion inhabitants.

Christina also highlighted that the ongoing COVID-19 crisis is even widening already existing gaps in social protection, as a high degree of informality is usually also related to low coverage of social protection programmes and systems: workers in the informal economy and their families are often not or only inadequately protected against various risks across the life cycle and are now the ones that face this crisis without any form of social protection to compensate their loss of income.

 

The menu of options to respond to the particular challenges faced by workers in the informal economy during the crisis and beyond

Christina turned back to the framework presented by Valentina Barca in the second webinar of the COVID-19 series and gave an overview of potential options for SP-responses for workers in the informal economy during this crisis. She emphasized that for governments in low and middle-income countries registration, enrolment and outreach is particularly challenging for informal and self-employed workers who are not categorized as poor. The reason for this is that they are usually not registered under existing schemes and mechanisms (in contrast to workers in the formal economy usually registered in social security schemes, as well as the poor population already registered for social assistance). Therefore, many countries face big difficulties at the moment to rapidly put in place meaningful measures addressing the specific situation of workers in the informal economy during this crisis. Potential options are shown on the right side of the slide presented below. One critical point here is to engage with the informal and self-employed workers themselves and ensure that they are going to be involved in the design of solutions. This will be addressed in more detail by the panellists of this webinar.

To further stimulate the discussion, Christina raised some additional questions for the webinar:

• How can well-designed short-term measures implemented in the wake of COVID-19 contribute to more equitable and sustainable solutions in future?
• How to ensure that social protection responses now being implemented are anchored in a rights-based framework and do not leave anyone behind?
• What can be lessons learnt for the future with regard to social protection systems, including floors?

 

The economic impact of COVID-19 on informal and self-employed workers in the global south…

Laura Alfers began her presentation by pointing out that the way public health regulations implemented as a reaction to COVID-19 are impacting informal and self-employed workers in the global south (e.g. street vendors, domestic workers, home-based workers or waste pickers) differ according to the type of occupation in which they are working. However, by reaching out to and interviewing their constituent members – many of them representing informal workers of particularly vulnerable occupations dominated by female workers – WIEGO could identify some commonalities, such as:

• the inability to access markets as movements are barred and work in public space is banned (e.g. small farmers in India are not allowed to enter cities),
• decreased demand (e.g. drop in tourism decreases the demand for craft products in Thailand or layoffs of domestic workers as fear of infection grows),
• increased costs of inputs (e.g. transportation for newspaper sellers in Peru is rising) and
• increased care burden as schools and childcare facilities are closed – especially affecting women workers.

… and key policy implications to reduce the negative socio-economic consequences

WIEGO has therefore drawn the following key policy implications:

• Informal and self-employed workers are not homogenous and therefore tailor-made solutions are necessary to address their different needs during and after the crisis.
• Social protection is a vital tool for the survival of informal and self-employed workers during the crisis.
• As the impacts of the crisis will also negatively affect informal and self-employed workers on a long-term basis there is a need to think about long-term social protection interventions beyond immediate crisis response.
• Social protection and livelihood support must be seen together, implying that informal livelihoods should not be destroyed due to social protection measures implemented. People need to have a perspective to earn an income once lock-downs and other restrictions are going to be lifted. To illustrate this, Laura mentioned an example from Colombia where waste pickers were offered a cash grant if they stay at home but refused to take it because they were afraid that private companies would take over their role.

By referring to the weekly updates of the Social Protection and Jobs Responses to COVID-19, published on a weekly basis by the World Bank, the presenter pointed out that informal and self-employed workers have never got that much attention before - with dedicated social protection measures - as they are getting now during the COVID-19 crisis. Many governments are now, for the first time, trying to reach the so-called “missing middle” – also with non-contributory forms of social protection. Laura gave a short overview of different options (including country examples) as well as their advantages and disadvantages to reach out to informal and self-employed workers. These options are shown in the slide below.

Key messages and take-aways from WIEGO

To conclude her presentation, Laura gave some key messages and take-aways. She stated that the best way to reach informal workers now is through the more universal approaches, such as the universal income grant or targeting out approaches (see slide above) - even though state financial resources are quite tight at the moment. There is a need for governments to think creatively how to finance these options. In this regard, she mentioned that the Government of South Africa is considering to use the surplus from the unemployment insurance to finance social protection responses for informal workers. Moreover, she concluded that it is essential to include organizations representing informal workers when designing potential social protection schemes for these groups and involve them in the implementation. One final point the presenter mentioned is that it is crucial to enable choice in how beneficiaries receive benefits.

Please also have a look at Laura’s blogpost: “Pandemic: Informal workers urgently need income replacement — and more protections”

 

A spotlight on Peru: Social Protection for the working poor in the COVID-19 context

Carmen Roca put a spotlight on the situation of independent workers in the wake of the COVID-19 crisis in Peru, especially in the capital city of Lima. After giving some background information on the country and the city, she shared with the audience that non-agricultural informal employment makes up 73% of the total workforce in Peru (and 57% in Lima respectively). She also gave an insight of the composition of the informal employment (see slide below).

How COVID-19 found Peru: a fragmented healthcare system

Carmen elaborated that one of the major problems in Peru during the COVID-19 crisis is the fragmented health care system that leaves many people unprotected with inadequate access to health services. In theory, households registered as poor in the System of Focalization of Households (Sistema de Focalización de Hogares) have free access to public health services through a subsidized health insurance scheme called Sistema Integral de Salud (SIS). Close to half of the non-agricultural informal workforce of Peru is covered by SIS. However, in practice, there are still major barriers for them to access health care: due to insufficient financing, the supply side does not meet the increased demand for health services generated by SIS. This results in long waiting periods, limited numbers of patients insured by SIS that can be attended per day and a lack of essential medicines. This situation is particularly worrying when a pandemic hits and pose severe questions about equal access to health facilities.

Social protection responses to tackle socioeconomic consequences for informal and self-employed workers in the COVID-19 context

A first measure taken by the government of Peru targeted households living in (extreme) poverty, according to the Sistema de Focalización de Hogares, was a one-time cash transfer of $110 per household. After several days - and due to a lot of pressure from representatives of independent workers representatives - the Peruvian government announced a cash grant of the same amount for informal and self-employed workers that are not considered poor, called Bono Trabajador Independiente. This is supposed to cover 780,000 households.

WIEGO’s suggestion to identify independent workers eligible for the Bono Trabajador Independiente…

To identify beneficiaries for this grant, WIEGO suggested using voluntary registries for independent workers under local tax offices. These are simplified registries for independent workers with a very low monthly tax rate of $6 (or no taxes for street vendors). Local governments have comprehensive lists of street and market vendors, newspaper vendors, shoe shiners, waste pickers etc. working in their area. These workers usually need to have a license to work in this area and also have to pay for it. However, the central government refused this suggestion because the data were not official in the sense that they are only collected and registered by local governments (with no official decree issued).

…and the solution of the Peruvian government to identify beneficiaries: targeting out

The Peruvian government, therefore, decided to use a targeting out approach (see slide above) with the following criteria to select the beneficiary households for the Bono Trabajador Independiente:

• Not being a beneficiary household of other non-contributory social assistance programmes targeted at poor households, i.e. the Conditional Cash Transfer programme Juntos and the non-contributory social pension Pensión 65 (verified with data provided by the Ministry of Development and Social Inclusion)
• Not having a household member under public or private payroll (verified with data provided by the Ministry of Labour)
• Not having a household member earning more than $330 per month (verified with data provided by the tax office and supervisory of Banks)
• Not having a household member under a contract with the state (other than payroll) (verified with date provided by the Ministry of Finance)
• Household being located in a region of greater sanitary vulnerability already hit by COVID-19, mostly urban areas (verified with data provided by the Ministry of Health)

To receive the Bono Trabajador Independiente, applicants have to visit a website and enter their National Identification Number. By crosschecking the information mentioned above with the respective government management information systems, the system automatically verifies if the applicants are eligible or not. If eligible, applicants register their cell phones and get a code with which they could withdraw the money from an ATM or receive the payment at a local office of the Bank of Peru.

Carmen concluded by showing the current progress of the different schemes adopted by the Peruvian government as a response to the COVID-19 crisis (see slide below). The Bono Trabajador Independiente has been paid to approximately 50% of the envisioned 780,000 households so far.

 

Reflections from South Africa

Portia Kekana reflected on both presentations and stressed that the panellists have given a very good sense about challenges of informal and self-employed workers in the wake of COVID-19 We know that informal workers are considered most at risk to idiosyncratic as well as covariate shocks and are now impacted by this crisis at various levels. Therefore, different responses may be required.

As an example, she mentioned a female informal worker who now suffers a loss of income and at the same time is in an abusive relationship. For her, the current crisis presents an even bigger challenge. Due to lock-down restrictions, she has to stay at home – often in a household very congested due to a high number of family members and small spaces – and is thereby even further exposed to abusement.

The discussant further elaborated on the example of the Emergency Income Grant in Namibia, a once-off payment of N$ 750.00 in cash per qualifying person on the basis of having lost income or experienced difficult circumstances during the COVID-19 lockdown periods. All Namibians 18 – 59 years of age, employed or self-employed in the informal sector, and who have lost income during the lockdown period, as well as unemployed persons in this age bracket, qualify as beneficiaries. She shared with the audience that the Minister of Finance of South Africa announced that a Universal Basic Income Grant is an option currently being under consideration as a response to the crisis.

In this context, Portia poses the question if a Basic Income Grant (or more universal approaches in general) is the silver bullet during the crisis that we are facing or if different instruments should be designed and implemented for different target groups, given the complexity of the health and the economic calamities faced. The discussant also asked the panellists about opportunities that COVID-19 could present to extend social protection in the informal sector, also looking beyond the immediate crisis into the future.

The discussant pointed out that the agricultural economy could potentially grow due to COVID-19, as the demand for food production has been increasing as a reaction to the crisis, as well as for food security reasons. She posed the question if Peru (and possibly other countries) want to zoom into that industry and see if there are possibilities to shift the workforce from other industries towards the agricultural sector to protect their livelihoods.

By referring to the case of Peru, Portia raised the importance of data availability and the fact that many countries do not have effective information systems in place that enable us to know where informal workers are and how to reach them. This would be a precondition for targeted interventions for this population group in the wake of COVID-19 and beyond. It is not an option to exclude them simply because there is not enough information available. In this regard she also stressed that we should not forget about migrant workers, often working in the informal sector, who are mostly left out in responses to the crisis because they are not registered.

The discussant shared with the audience that even though the Government of South Africa has announced and started to implement a range of different policy responses to tackle negative socioeconomic consequences for the country’s population, there is currently a public outcry because people feel that the measures are not implemented fast enough. People who are most affected are most likely to suffer even longer-term consequences due to slow policy responses from the government. Therefore, she reiterated the importance of fast and accurate responses from governments, especially during emergencies. 

Portia concluded by stating that the presentations of the webinar provided key building blocks on how to use social protection in a more responsive and preventive way to better manoeuvre the impact of such shocks in future.

 

The webinar concluded with a rich Q&A session, accessible here. You can also join the Q&A discussion here. 

 

References

Gentilini, Ugo; Orton, Ian; Almenfi, Mohammed (2020). Social Protection and Jobs Responses to COVID-19: A Real-Time Review of Country Measures. Access here.

ILO (2020). ILO  Monitor: COVID-19 and the world of work. Second edition. Updated estimates and analysis. Access here.

 

This blog post is part of the Social protection responses to COVID-19 webinar series. The series is a joint effort initiated by the IPC-IG, GIZ on behalf of the German Federal Ministry of Economic Development and Cooperation (BMZ), and the Australia Government's Department of Foreign Affairs and Trade (DFAT) collaboration with the socialprotection.org platform, and in cooperation with partners from different organisations. Join our online community ''Social protection responses to COVID-10 [Task force]" to learn more about the initiative and future webinars.