COVID-19 could bring about a 'new deal' for millions of Asia's informal workers

COVID-19 lockdowns have revealed the vulnerability of those informally employed, who lack any social insurance.

In the Asia-Pacific region, informal workers account for nearly 60% of non-farm employment, higher than in other parts of the world.

As a result, policy measures need to be put in place to help these workers, not just during the pandemic, but beyond it.

Full or partial lockdowns to curb the spread of COVID-19 are having crippling effects on businesses and workers across Asia, as elsewhere. Among the most vulnerable of the workers are the ones working in part-time and temporary jobs without social insurance, and in sectors of the economy that are neither taxed, nor regulated by any form of government.

COVID-19 could bring about a 'new deal' for millions of Asia's informal workers

Effective policy responses must reach informal workers and their families quickly to prevent them from falling (deeper) into poverty.

Informal workers account for a large share of the workforce in many countries in the region but typically have no access to sick leave or unemployment benefits. Their access to health benefits is often precarious. And, for many of them, savings are either nonexistent or extremely limited.

Many workers, especially the self-employed and daily wage earners, live hand-to-mouth. If they cannot work for extended periods of time, their family’s income is at risk. Protecting their earnings—whether by increasing unemployment benefits, reducing income taxes, or extending paid sick leave—and reaching them through transfers, is nearly impossible.

Time is everything. Effective policy responses must reach informal workers and their families quickly to prevent them from falling (deeper) into poverty and to protect their livelihoods. Even with their budgetary and capacity limitations, countries in the region are implementing measures to help the most vulnerable. But given the size of the economic shock, much more is needed.

Pervasive informality in the region

Informal workers in the Asia-Pacific region account for nearly 60 percent of nonfarm employment, higher than in Latin America and Eastern Europe, and ranging from around 20 percent in Japan to over 80 percent in Myanmar and Cambodia. This includes workers with very different characteristics in terms of employment status, income, and sector of activities. It includes wage workers without social protection or other formal insurance arrangements in both informal and formal sector enterprises, and the self-employed, such as street vendors and their contributing family members, as well as daily laborers.

Informal workers are twice as likely as formal workers to belong to poor households. While some of these poor households are beneficiaries of transfer programs, coverage and adequacy of benefits to combat the COVID-19 shock remain an issue.

Informal workers make up big proportion of the workforce in poorer countries.

Policy responses

As countries across the region cast wide emergency safety nets, a broad patchwork of old and new policy solutions is emerging.

Expanding existing social assistance programs. Temporary expansion of existing programs has meant expanding coverage to more people (e.g., Vietnam) and increasing benefit amounts (e.g., Bangladesh). Nepal and India have ramped up in-kind and cash transfers for poor households and informal sector laborers, while Indonesia has increased utility subsidies for poor households.
Introducing new transfers. Thailand introduced a cash transfer of US$153 for three months for up to 10 million farmers and 16 million workers not covered by the…

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