A “New Deal” for Informal Workers in Asia

IMF Blog, April 30, 2020

Source details

Full or partial lockdowns to curb the spread of COVID-19 are having crippling effects on businesses and workers across Asia.
Informal workers are particularly vulnerable to dramatic collapses of income and loss of livelihoods.
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.

Informal workers in the Asia-Pacific region account for nearly 60 percent of nonfarm employment.
Informality shares range from around 20 percent in Japan to over 80 percent in Myanmar and Cambodia.
Informal workers include:
- wage workers without social protection or other formal insurance arrangements in both informal and formal sector enterprises;
- the self-employed, such as street vendors and their contributing family members;
- daily laborers.
Informal workers are twice as likely as formal workers to belong to poor households.
Coverage and adequacy of transfer programs to combat the COVID-19 shock remain an issue for many poor households.

Expanding existing social assistance programs:
- Vietnam: expanding coverage to more people.
- Bangladesh: increasing benefit amounts.
- Nepal and India: ramped up in-kind and cash transfers for poor households and informal sector laborers.
- Indonesia: increased utility subsidies for poor households.
Introducing new transfers:
- Thailand: cash transfer of US$153 for three months for up to 10 million farmers and 16 million workers not covered by the social security program using cash-less digital payment platforms (Promptpay).
- Vietnam: using information from tax and utility bills to provide a new cash transfer for informal households and the self-employed who had to temporarily shutter businesses.
Establishing public works programs:
- Philippines: emergency employment for informal sector workers to support some basic medical services in quarantined areas.
Preserving livelihoods through employment retention:
- Malaysia: special grants for microenterprises hiring less than 5 workers.

Getting the basics right:
- Use international assistance and internal financing to mount an effective public health response, shoring up public health infrastructures and expanding coverage.
- Correct deficiencies in clean water and sanitation.
Setting up more expansive and inclusive safety nets:
- Use citizen identification systems and digital technologies (for example, India’s biometric Aadhar system) so social protection programs can reach the people most at risk more quickly and efficiently, with the ability to scale up in times of crisis.
- The temptation to introduce universal cash transfers by “giving money to everybody” should be tempered by the goal of ensuring adequate support for the most vulnerable at a reasonable fiscal cost.
Investing in digital capacity and bandwidth:
- Expand availability of digital platforms for education and financial services to ensure greater and more equitable access.
Addressing pervasive informality:
- Implement comprehensive measures to improve the business environment, remove onerous legal and regulatory obstacles (especially for startups), and rationalize the tax system.
- Aim to bring informal workers into basic social safety nets while enhancing their productivity; specific policies will depend on country circumstances.

Source: A “New Deal” for Informal Workers in Asia — Era Dabla-Norris, April 30, 2020