Governments have introduced emergency measures to assist the informal sector, a key component in developing countries. Economist Cecilia Poggi and urban planner Irène Salenson (AFD) argue that this aid must go much further, however.
The Covid-19 crisis has led to a new development in emergency aid. In addition to the usual measures, some twenty countries have added initiatives specifically targeting the informal sector. Yet it is important to consider how public policies both now and in the future can protect informal jobs (undeclared workers within formal companies, or entrepreneurs and employees of informal companies), informal settlements (unplanned or unregulated) and their residents.
Covid-19: urgent measures to support the most vulnerable
Many developing countries have established specific one-off or three-month monetary assistance for vulnerable households. While coverage and amounts vary, the general aim is to guarantee food security for a few weeks and the aid is transferred to a bank account, sent via mobile payment, or withdrawn from a post office or kiosk.
Other types of aid are also emerging, including measures preventing evictions from formal and informal housing. These measures are crucial in protecting impoverished households. Argentina has also announced the suspension of evictions until September 30, 2020 and has frozen rent increases. In Bolivia, Mexico and Indonesia, the government is contributing to home loan repayments. In Burkina Faso, Senegal, Mauritania and Indonesia, the payment of water and electricity bills has been deferred until the end of the lockdown period.
Targeting those involved in the informal sector: a complex puzzle for governments
One of the major issues involved in implementing these measures is identifying the individuals who are in vulnerable situations. In some countries, recipients are identified “by inclusion”, in other words, through lists from previous social programs, as is the case in Peru. Some of these programs rely on lists from social registers (Brazil), health cards (Tunisia) or health insurance (Morocco).
In other countries, they are identified “by exclusion”, meaning that recipients are accepted if they are not included in other welfare programs or on tax registers, as in Colombia. Thailand, meanwhile, identified 9 million individuals not listed on the social security register via a digital platform in order to send them aid.
But the distribution of aid sometimes does without lists altogether: NGOs are targeting homeless people directly in Malaysia, and residents of informal settlements in India and Colombia (as seen in Bogotá).
The informal sector: the risks associated with emergency measures
Emergency measures are certainly welcome in the informal sector, which could be hit hardest by the Covid-19 crisis due to its economic model and precarious living conditions. However, they cannot replace long-term public policy aimed at supporting this sector. To accomplish this, there must be a special focus on the following points:
The risk of a shift towards volunteer-type protection resulting in exclusion Certain individuals are not identified by the emergency measures for lack of funds to be allocated or for lack of information, ID papers, or physical distance from distribution centers. Special attention must be given to the methods for registering informal workers.
Lack of relevance and increasing inequality In order to plan for future programs to support the informal sector, civil society and federations must be involved in the decision-making process and assessment of the existing initiatives. For example, they must assess the economic impacts of a program if it is offering amounts that are less than potential inflation or the needs of the population (as seen in Cambodia).
Forgetting the need for accountability for institutions. It is important to safeguard the principles of equality and non-discrimination, especially among vulnerable/informal groups, the right to information (without forgetting local languages), the right of appeal and of privacy (including the use of data).
Investment delays in public services For example, vaccination campaigns for other diseases have been stopped in order to focus on the crisis, yet emergency aid cannot replace the provision of basic services by public authorities, which are crucial in prevent epidemics. This includes healthcare infrastructure, access to water, sanitation, and waste management.
The informal sector: the risks associated with emergency measures
There must be a long-term vision for supporting the informal sector that extends beyond the Covid-19 crisis. Solutions that offer prevention against vulnerabilities in this sector feature five components:
1- Enhanced recognition of informal work and its role: some professions are highly vulnerable, whereas others are essential to the operation of the economy and services, such as waste pickers, home helpers, agricultural workers, and digital economy professions. These professions must be recognized by labor legislation and local regulations. The mobilization of the authorities and professional organizations is crucial in order to promote decent job conditions;
2- Avoid stigmatizing impoverished neighborhoods: the health risk argument, based on dense development, is often used to replace poorer neighborhoods with speculative residential developments for the upper classes, as is the case in Egypt, Brazil, Turkey and India. If public authorities cannot afford to provide social housing, they can work to improve living conditions in impoverished neighborhoods (infrastructure, basic services) and offer simplified development plans for new neighborhoods;
3- Promote public policies that protect informal workers: reforms aimed at implementing “no regret” public policies must be encouraged. Such reforms take long-term social costs into account and seek to minimize negative impacts in the future:
- healthcare policy: public health improves when preventive and promotional measures are implemented for all, including vulnerable groups;
- social protection policy: social security must be extended to informal workers, by defining specific arrangements for the contribution of individuals, or through associations. Room for maneuver does exist in public budgets, such as financing through progressive taxation, fighting against illicit financial flows, and capital taxation, among other solutions;
- economic development policy: we must support segments of the industries most affected by the crisis, which will be slow to recover, and often include informal entrepreneurship (as in the textile and tourism industries). Daily expense relief policies for the informal sector–such as tax reduction for market businesses and mobile payments–could provide some much-needed relief.
4- Improve data production and information sharing Risk-prevention and interventions require reliable data on the informal sector in order to identify users for the programs. This does not come without the challenges of producing official statistics. But there is still the risk of other epidemics arising in the future. The programs will be more effective if they rely on information campaigns that residents can make their own.
5- Improve coordination between the global, national, and local levels: the process of mobilizing funding to strengthen social protection systems and integrate them into crisis management programs must include innovative funding mechanisms for developing countries. Failure to do so will result in more unequal access among vulnerable groups, which cannot be required to make the same social security contributions as the middle classes. The members of the Social Protection Interagency Cooperation Board (SPIAC-B) are already working to coordinate all the stakeholders at every level.
Because beyond the current crisis, we must ensure that current innovations and proactive initiatives supporting the informal sector continue in both the medium and long term.
The opinions expressed on this blog are those of the authors and do not necessarily reflect the official position of their institutions or of AFD.