Pandemic recession and employment crisis

The Covid-19 crisis is unique in several regards. It has created ‘pandemic recession’ as this is both a public health and economic crisis. During previous economic crises, the informal economy was “a cushion to fall back on” for formal workers who lost their jobs. In contrast, this crisis has reduced job opportunities and a disproportionately negative impact on informal workers and their livelihoods.

The pandemic and lockdowns/restrictions already have had severely negative impacts on informal workers, their livelihood activities and their households and created a situation of no work, no income, no food. There is growing evidence – and recognition – that the pandemic and lockdowns or restrictions have had a disproportionate impact on informal workers compared to formal workers, there is limited understanding of the degree to which – and the ways in which – the crisis impacted different groups of informal workers.

In case of Bangladesh, some studies observed that work stopped for many workers of both genders in the sectors hit hardest by the crisis, such as hotel and food services, wholesale and retail trade, and labour-intensive manufacturing. The group that was least able to work, domestic workers, was predominantly female. Among small business owners, a higher percentage of women (16 per cent) than men (10 per cent) became unemployed. Among unskilled labourers, a higher percentage of women (31 per cent) than men (20 per cent) became unemployed. Overall, by mid-2020, across occupations, a higher percentage of women remained unemployed; and a higher percentage of men than women who lost work had found alternate employment.

In late April 2020, the ILO estimated that 1.6 billion people were employed in the informal economy in the world. As many as 80 per cent of the global informal workforce and nearly half of the total global workforce – could see their livelihoods destroyed due to the decline in work, working hours and earnings brought on by lockdowns or other restrictions to curb the spread of Covid-19. The ILO estimated that, during the first month of the crisis, informal workers globally experienced a 60 per cent drop in income: more than an 80 per cent decline in Africa and the Americas, 70 per cent in Europe and Central Asia, and 22 per cent in Asia and the Pacific, reflecting the phased spread of the virus across these regions (Ibid: 1-2). Since then, a growing body of studies on the impact of the COVID-19 crisis on informal workers has confirmed the ILO prediction.

The global research-policy-action network - the Women in Informal Employment: Globalizing and Organizing (WIEGO) recent working Papers feature on the impact of the COVID-19 crisis on informal workers in 11 cities across 5 regions of the world (Asia, Africa, Latin America, North America and Eastern Europe) on different sectors of informal workers. The findings from the WIEGO-led 11-city study confirm, first and foremost, that the impact of the crisis on the ability of informal workers to work was substantial. In April 2020, during peak lockdowns or restrictions, 74 per cent of informal workers were not able to work. By mid-2020, when the lockdowns or restrictions had been eased to some degree, 21 per cent of informal workers were still not able to work; and the average days of work per week and earnings of those able to work were lower than in February 2020 (pre-Covid-19).

In Bangladesh, studies find the identical impact on informal sector of Covid-19. A joint study by the Power and Participation Research Centre (PPRC) and the BRAC Institute of Governance and Development (BIGD) estimated the impact of the pandemic and lockdowns on the main source of household income, household income levels and food security in 7,236 households in April and in mid-2020, compared to February 2020 (pre-Covid-19). The study found a drastic decline in economic activities in April, especially in the urban areas, which had improved considerably by mid-2020, after the strict lockdown had been eased,

although not to pre-Covid-19 levels. Overall, by mid-2020, 76 per cent of both rural and urban households were able to resume their main pre-Covid-19 source of work, 7 per cent had shifted to another line of work and 17 per cent were not able to work.

Other studies find that the degree or scale of impact in Bangladesh varied between formal and informal employment and, within informal employment, by “occupation”. Those households that depended mainly on formal work – factory work or salaried jobs – suffered the least impact on employment in the main source of household income (between 16 and 18 per cent). Domestic workers suffered the sharpest decline in employment: over half (54 per cent) remained unemployed in mid-2020, while unskilled labourers suffered a 20 per cent increase in unemployment. The majority of those who changed occupations found work as unskilled labourers, generally earning less than they did in their pre-Covid-19 occupation. Thousands of expatriate workers returned from abroad also join the unemployed workers and a part of them joined partial agricultural work with their family and created hidden unemployment.

In Bangladesh domestic workers, are predominantly female. Among the other groups of workers, there were significant differences between women and men. Among small business owners, a higher percentage of women (16 per cent) than men (10 per cent) became unemployed. And, among unskilled labourers, a higher percentage of women (31 per cent) than men (20 per cent) became unemployed. Overall, by mid-2020, across occupations, a higher percentage of women remained unemployed; and a higher percentage of men than women who lost work had found alternate employment.

The Bangladesh scenario suggests that there was “significant recovery of economic activity” but only “a moderate recovery of incomes” by mid-2020 after a dramatic decline in April. There was a significant difference between the income recoveries of households whose main source of income was formal work – factory work and salaried jobs – and households whose main source of income was other (mainly informal) occupations. For example, the income of households, which depended primarily on the earnings of factory workers and salaried jobholders, had recovered to 84 per cent and 82 per cent,

respectively, whereas the income of households which relied primarily on the income of transport workers and unskilled labourers had recovered to around 52 per cent.

In order to recovery of economies particularly in developing countries like Bangladesh, firstly, the situation in formal sector should be duly recognised and immediate steps should be taken to protect and support those workers and their livelihoods. Bangladesh government has financial constraints regarding offering stimulus cash support to the informal workers or their employers. The distribution channels also have many challenges and may divert to undeserving people.

Some donor agencies have already allocated funds for the scheme of credit guarantee scheme for MSMEs both in formal and informal sectors. The policy of Bangladesh Bank and attitude of commercial banks have many challenges to overcome regarding these programmes. They require a change in mind-set and political will to recognize the crisis and probable solution. There should a recognition that informal workers and their livelihood activities represent the broad base of the economy producing essential goods and services not only for low-income customers but also for the general public and for the formal economy.

The writer is a legal economist. He can be contacted at [email protected]