ILO brief1ILO briefMay 2020COVID-19 crisis and the informal economyImmediate responses and policy challengesXIntroductionAt the end of April 2020, the number of COVID-19infections had exceeded 2.8 million cases worldwide,with the death toll nearing 195,000, and 210 countries andterritories affected.1 As a result, a growing numberof nationwide or local initiatives have been taken toprevent the spread of the deadly virus.Pending the discovery of vaccines and treatments,physical distancing remains the only way to break thechain of transmission and protect large segments ofthe population. Full or partial lockdown measures aretherefore now being implemented all around the world,affecting more than 5 billion people. It is estimated thatthese measures bear a significant impact on 1.6 billioninformal workers, with women over-represented in themost hard-hit sectors.2Many women and men in the informal economy needto earn an income to feed themselves and their families,as most of them cannot rely on income replacement orsavings. Not working and staying home means losingtheir jobs and their livelihoods. “To die from hunger orfrom the virus” is the all-too-real dilemma faced by manyinformal economy workers. Unfortunately, we are talkingof many workers. In 2020, over 2 billion workers3 areearning their livelihoods in the informal economy. Thisis 62 per cent of all those working worldwide. Informalemployment represents 90 per cent of total employmentin low-income countries, 67 per cent in middle-incomecountries and 18 per cent in high-income countries.4Women are more exposed to informality in low- andlower-middle income countries, and are often in morevulnerable situations than their male counterparts.Similar observation applies to informal enterprises,which account for eight out of every ten enterprisesin the world. These are mainly unregistered small-scaleunits, often employing ten or fewer undeclared andlow-skilled workers, including unpaid family workers,mainly women, who labour in precarious conditions,without social protection or health and safety measuresat the workplace. They have low productivity, lowrates of savings and investment, and negligible capitalaccumulation, which make them particularly vulnerableto economic shocks, and are often excluded fromCOVID-19 crisis-related short-term financial assistanceprogrammes for businesses.This policy brief focuses on the immediate responsesthat countries can take to address the consequencesof the Covid-19 pandemic on the informal economyat its early stages, while pointing to areas that willneed sustained investment in the future in order toensure well-being and decent work for workers andeconomic undertakings in the informal economy.This brief will be followed by another on mid- tolong-term responses, once the rapid propagationphase of the virus has passed.51 Johns Hopkins University Center for Systems Science Engineering, rd/index.html#/bda7594740fd40299423467b48e9ecf6.2 ILO Monitor: COVID-19 and the world of work (third edition).3 In order to simplify the text and in line with statistical practices, the term “workers” is used here to refer to all people in employment: employees, independentworkers with or without employees and contributing family workers.4 For complete statistics, see ILO: Women and Men in the Informal Economy: A Statistical Picture (third edition, Geneva 2018)5 The Transition from the Informal to the Formal Economy Recommendation, 2015 (No. 204) and the Employment and Decent Work for Peace and ResilienceRecommendation, 2017 (No. 205) will be of particular relevance in that context.
I LO briefCOVID-19 crisis and the informal economy: Immediate responses and policy challenges21 COVID-19: The devastating impact of a health and economiccrisis on those operating in the informal economyX1.1 The impact of lockdown andother containment measuresfor example, as street and market vendors, domesticworkers or home delivery workers. For many, their homeis their workplace, with the conditions described above.ILO estimates show that, assuming a situation withoutany alternative income sources, lost labour incomewill result in an increase in relative poverty for informalworkers and their families of more than 21 percentagepoints in upper-middle-income countries, almost52 points in high-income countries and 56 points inlower- and low-income countries.6 This includes workersin sectors such as accommodation and food services,manufacturing, the wholesale and retail trade and manymore, including over 500 million farmers that wereproducing for the urban market. Because those in theinformal economy need to work, lockdowns and othercontainment measures are a source of social tensionand transgressive practices and behaviour, whichare endangering governments’ efforts to protectthe population and fight the pandemic.7The overwhelming majority of workers in the informaleconomy have higher exposure to occupational healthand safety risks, no appropriate protection, and anincreased likelihood that they will suffer from illness,accident or death. COVID-19 adds to these risks. If theyfall sick, most workers, including migrants9, do nothave guaranteed access to medical care and no incomesecurity through sickness or employment injury benefits.If they are unable to access health care, the virus willspread more widely, with fatal consequences. If theycan access health care, many will incur out-of-pocketcosts that will force them to go into debt or to sell theirproductive assets, plunging them into deeper poverty.Before the crisis, 100 million people fell into povertyannually as a result of catastrophic health expenses.10And for many, particularly in rural areas, health-careservices are not available.Further, logistical challenges within supply chains,particularly cross-border and domestic restrictionsof movement, may lead to disruptions in food supply,undermining informal workers’ food security.8 Informalfood markets play an essential role in ensuring foodsecurity in many countries, both as a source of food anda place for smallholder farmers to sell their products,and their closure will lead to increased food insecurityand poverty.1.2 Health risks and shocksThe specific risks associated with COVID-19 exacerbatethe main vulnerabilities of poor workers in the informaleconomy. In urban areas, even if they stay at home, theseworkers and their families remain exposed to the virusbecause of overcrowded and unsanitary living conditionsthat make physical distancing nearly impossible. Lack ofaccess to running water not only limits the possibilities forhand-washing, it often forces women to line up for water,thereby endangering themselves and their community.Informal economy workers, particularly in rural areas,are poorly informed about the virus, its symptoms andpreventive measures such as physical distancing. If theycontinue working, they usually have no access to personalprotective equipment (PPE) and hand-washing stations.Physical distancing is difficult to apply by those working,1.3 Damage to the economic fabricRestrictions on the movement of people and the suddenstoppage or severe downscaling of economic activitiesto contain the propagation of COVID-19 are havinga strong impact on informal enterprises and are likelyto have the following consequences.1. A n immediate loss of revenue for informal economicunits.Given that they have no savings or other financialcushion, most owners of informal enterprises may haveno choice but to use their negligible business capital forconsumption. As a result, they may be forced to closetheir informal business temporarily or permanently,leading to job losses and a surge in poverty. Loss ofincome and deepening poverty, in turn, could triggera sharp rise in child labour and lower school enrolmentrates, especially for young girls.2. A n expansion of the informal economy following thefinancial collapse and permanent closure of formalmicro 11, small and medium-sized enterprises (MSMEs),triggering an unprecedented surge in unemploymentand underemployment.The crisis is likely to have long-lasting effects on theeconomy, with the recovery expected to be slow6 ILO Monitor, op. cit., note 2.7 Jobs for Peace and Resilience: A response to COVID-19 in fragile contexts (draft) (ILO, Geneva, 2020)8 ILO: COVID-19 and the impact on agriculture and food security, ILO Sectoral Brief (Geneva, 17 April 2020).9 ILO 2020. Protecting migrant workers during the COVID-19 pandemic: Recommendations for Policy-makers and Constituents.10 World Health Organization and the International Bank for Reconstruction and Development/World Bank: Tracking Universal Health Coverage: 2017 GlobalMonitoring Report (WHO and World Bank, Geneva and Washington D.C., 2017)11 Includes own-account workers (independent workers without employees).
I LO briefCOVID-19 crisis and the informal economy: Immediate responses and policy challengesand uneven. In the absence of income replacement,especially in low- and lower-middle income countrieswhere social protection systems are weak andcoverage is low, many people could resort to making aliving as informal microbusiness owners, own-accountworkersor informal employees. Some formal MSMEs could bealso pushed into informality.3. T he uneven impact of the crisis in different sectors12may trigger large-scale restructuring of economicactivities. This could in turn cause a reallocationof informal (and formal) labour towards lessseverely affected economic sectors or sectors withX3consumption demand that might recover relativelyfaster. The restructuring of production activities andsupply chains could lead to frictional unemploymentor further expansion of the informal economy.Once restrictions are lifted, there is still uncertaintythat they could be reinstated if the number of cases ofinfection starts rising again. Such uncertainty mightlead to precautionary saving by consumers and lowinvestment by firms. The combined effect may bedamaging to the economic fabric, resulting in lowerdemand, production and employment levels, and afurther contraction of the formal economy, which is likelyin turn to result in the growth of the informal economy.2 Applying immediate responsesImmediate responses cannot separate health andeconomic impact and must follow a multi-track strategythat combines the following lines of action:XR educing the exposure of workers and their familiesto the virus and the risks of contagion;X Ensuring those infected have access to health care;XP roviding income and food support to individuals andtheir families, to compensate the loss of, or reductionin, economic activity;XR educing and preventing the damage to theeconomic fabric and preserving employment.Existing international labour standards provide a strongfoundation on which to build key immediate responsesto the COVID-19 crisis.13 These immediate responsesare aligned with the overall ILO policy framework forcoping with the COVID-19 pandemic in the world ofwork. The framework has four interconnected pillars:Pillar 1 – Stimulating the economy and employment(at the macro and sectoral level); Pillar 2 – Supportingenterprises, jobs and incomes (at the meso level); Pillar3 – Protecting workers in the workplace (micro level); andPillar 4 – Relying on social dialogue for solutions (crosscutting). The action lines described in sections 2.3, 2.4and 2.5 below relate mostly to Pillars 3 and 2. The actionlines described in sections 2.5 and 2.6 relate mostly toPillars 1 and 2. Pillar 4 cuts across the overall design andimplementation of all measures.2.1 General considerationsX I nformal workers and enterprises are not registered,which makes it difficult for public authorities toidentify and reach disadvantaged groups in theinformal economy, and makes those operating in theinformal economy fearful of the public authorities.In addition, the informal economy presents a highlevel of heterogeneity; policy interventions musttherefore be tailored to the diverse characteristics,circumstances and needs of the workers andeconomic units concerned.XT he design and implementation of effective andequitable responses requires the involvementof key players in the labour market, in particulargovernments and the most representativeworkers’ and employers’ organizations.14 Informaleconomy workers and enterprises should have thepossibility to express their views and defend theirinterests, notably through their membership-basedorganizations, on policy measures that will affectthem directly. Their inclusion at an early stage of thedesign process will also enhance the effectivenessof such measures. Given the role of representativeworkers’ and employers’ organizations in socialdialogue institutions and processes, it is evenmore important in the current context that theseorganizations further strengthen their relationshipswith organizations, workers and enterprises in theinformal economy. This will foster social dialogue thatis inclusive and more responsive to the specific needsof informal economy operators.15XT he COVID-19 pandemic is not affecting all countrieswith the same intensity, at the same time. Nobodyknows exactly how the virus will spread in regionsand countries. But all countries are at risk and needto be prepared to address its health, economic and12 See also ILO’s series of sectoral briefs, which provide a preliminary assessment of the impact of COVID-19 on specific social and economic sectorsand industries.13 (coronavirus). FAQ. Key provisions of international labour standards relevant to the evolving COVID-19 outbreak, ILO NORMES, 23 March 201914 The Employment and Decent Work for Peace and Resilience Recommendation, 2017 (No. 205) emphasizes, in particular, the importance of social dialoguein responding to crisis situations and the vital role of employers’ and workers’ organizations in crisis response, taking into account the Freedom of Associationand Protection of the Right to Organize Convention, 1948 (No. 87) and the Right to Organize and Collective Bargaining Convention, 1949 (No. 98).15 ILO: Transition to formality: the critical role of social dialogue, Dialogue in Brief, Issue No. 1, March 2017.
I LO briefCOVID-19 crisis and the informal economy: Immediate responses and policy challengessocial consequences. And in a pandemic such asthis, the responses of one country have an impacton all others. If one country cannot contain thevirus, others are susceptible to infection, or evenre-infection. As the United Nations Secretary-Generalsaid at the launch of a report on the socioeconomicimpact of COVID-19, “Let us remember that we areonly as strong as the weakest health system in ourinterconnected world.”162.2 Identifying the needs andpriorities of the groups in theinformal economy that are the mostvulnerable to the COVID-19 crisisConducting rapid assessments17 is one way to identifypriorities and determine the extent and nature of thedirect and indirect effects of COVID-19 on the informaleconomy, particularly as they relate to the mostvulnerable groups.18 The objective of rapid assessmentsis to:XG ive voice to the women and men in the informaleconomy and to their organizations so that crisisresponses take account of their situation; andXb etter understand the diversity of their situations,needs and perceptions, in order to guide thegovernment, the social partners, informal economyorganizations and other non-governmental supportinitiatives for the implementation of immediateand medium-term measures.2.3 Limiting exposure andthe risks of contagion, takingpreventive measuresIn countries in which a large part of the populationsecures its livelihood through the informal economy,lockdowns should be accompanied by effectivemeasures to:X c ommunicate through appropriate channels aboutthe virus, how it spreads, its health consequences,preventive measures, lockdown rules, and measuresto mitigate the impact on the incomes of workers andeconomic units in the informal economy;X c oordinate the implementation of lockdownmeasures with workers and economic units inthe informal economy, notably through theirorganizations, to expand the measures’ reach andthereby enhance understanding and effectiveness;Xu rgently extend coverage of social protectionschemes and other relief and economic assistance4packages to disadvantaged groups in the informaleconomy, and ensure timely delivery of qualityservices to the workers and businesses concerned;andX s upport authorized employment-generating activitiestaking into account health and safety rules.Measures should aim to minimize direct contaminationin workplaces, including by:X r aising awareness of the risks related to COVID-19and providing accessible information on preventivemeasures, safe workplace behaviour and symptomsin case of infection;Xd eveloping communication materials such aspamphlets, posters, videos, text messages and radiospots that can be easily understood and reach thosewho work in the informal economy;Xe nsuring physical distancing, disinfecting premises,identifying and equipping/re-organizing risk areas,notably when informal employment occurs in fixedpremises, and, when possible, adopting workingtime arrangements to avoid having everyone in theworkplace at the same time.Sector- and occupation-specific health guidelines shouldbe developed for, for example, street vendors, domesticworkers, home delivery workers, waste pickers andtaxi drivers. In consultation with workers and theirrepresentatives, PPE should be used by workers andprovided and maintained by the employer, at no costto the workers.Low-cost hand washing stations or hydroalcoholicsolutions should be made available where informalworkers operate. Steps should be taken to organizedaily screening of workers with symptoms and safetransportation to hospitals in an emergency.2.4 Ensuring that those who havebeen infected have effective andaffordable access to health careGuaranteeing effective and affordable access tohealth care for workers in the informal economy andtheir families is essential for addressing the COVID-19pandemic. It is especially important to:X l imit out-of-pocket payments to a minimum by rapidlyextending social health protection and adjustingexisting social protection schemes (e.g. waiving copayments or user fees if they exist); andXe nsure availability of quality health services, increasethe capacity and accessibility of health-care facilities,especially in rural areas, and remove other financial,geographical or administrative barriers.1916 See .17 Assessments are currently being conducted in many countries. For example, the ILO, together with the Institute for Applied International Studies, is conductingassessments of the impact of COVID-19 in Jordan, Lebanon and Iraq, focusing on refugee, migrant and national workers employed in the informal economy.18 ILO: Rapid assessment of the effects on the informal economy of Covid-19 and the preventive measures associated with it. A practical tool (2020, forthcoming).19 ILO: Social protection responses to the COVID-19 crisis: Country responses and policy considerations, Social Protection Spotlight (Geneva, 23 April 2020); WIEGO: Informal worker demands during COVID-19 crisis, 2020.
I LO briefCOVID-19 crisis and the informal economy: Immediate responses and policy challengesIn view of the health challenges facing many countries,measures to enhance access by informal workers andtheir families to affordable health care should not belimited to testing and treatment for coronavirus, butshould also cover the full range of communicable andnon-communicable diseases these workers and familiesare exposed to and that, in many cases, act as comorbidity factors.20Countries that had already invested in expanding socialhealth protection coverage have been able to respondmore rapidly and inclusively.21 However, in view of thescale of the challenge, the resources allocated may needto be scaled up further, including through internationalsupport. Guaranteeing effective access to affordablehealth care and ensuring at least a basic level of incomesecurity for those who are sick or (self-)quarantinedare essential means for safeguarding public health andlivelihoods.22 Workers in the informal economy usuallydo not have access to specific sickness benefits23, but it ispossible to extend or introduce new benefits to addressthis need.2.5 Providing income andfood support for individuals tocompensate for the loss of, orreduction in, economic activityThe repercussions of the COVID-19 pandemic call for rapidand effective measures to enhance income security forworkers in the informal economy, especially for womenwith young children – a group at highest risk of economichardship. Countries can use different mechanisms toextend income support to informal economy workers.24XC ountries that already have contributory and noncontributory social protection schemes can extendcoverage to those not yet covered, building onexisting administrative and delivery mechanisms.25They can raise benefit levels, advance the paymentof benefits and relax eligibility conditions. This canbe done through different programmes, includingunemployment benefits, universal pensions, childbenefits or social assistance programmes.26 Countriesthat invested in social insurance before the crisisare better prepared to provide urgent support forthose who lost their jobs, sometimes includingthose in the informal economy.27 They can evenuse unemployment protection schemes to supportjob retention through short-time work schemes,including for self-employed or domestic workers,regardless of whether they are informal or not,thereby facilitating a quick recovery.28XW here it is not possible to scale up existingprogrammes, other mechanisms need to be put inplace to offer the necessary income support. One-offpayments can be made to large categories of thepopulation, in some cases as a universal benefit paidto the entire resident population, or to those notprotected through other mechanisms. A sectoralapproach can be implemented that prioritizesworkers in occupations that are particularly affected.X I n some contexts, food support is necessary toprevent hunger among those most affected. In somecountries, governments have organized food supportfor vulnerable households and to safeguard nutritionin rural areas. This also helps support the agriculturalsector and ensure uninterrupted food production.Mobilizing the necessary resources, defining eligibilitycriteria, setting benefit levels, reaching out to individuals,registering eligible beneficiaries and delivering benefitspromptly, in the middle of a fast-moving crisis, is adaunting task. Digital technologies can be harnessedto identify and register workers and pay benefits, butalternative mechanisms need to be made available forthose who do not have access to technology.A crucial aspect of any such strategy is working withworkers’ and employers’ organizations, includingthose active in the informal economy, social solidarityorganizations and local government bodies. Their role iskey to designing and implementing emergency responsesand to reinforcing social protection systems andsupporting the transition to the formal economy.20 During the 2014–2015 outbreak of Ebola virus disease in West Africa, limited access to health-care services exacerbated mortality from HIV/AIDS, malariaand tuberculosis (see A.S. Parpia et al.: “Effects of Response to 2014-2015 Ebola Outbreak on Deaths from Malaria, HIV/AIDS, and Tuberculosis, West Africa”,in Emerging Infectious Diseases (2016, Vol. 22, No. 3, pp. 433–41)).21 For example, Thailand had enhanced financial protection under the Universal Coverage for Emergency Patients Policy, which applies to both nationalsand non-nationals.22 K. Lönnroth et al.: “Income security in times of ill health – the next frontier of the SDGs”, in British Medical Journal (forthcoming).23 ILO 2020. ‘Sickness Benefits during Sick Leave and Quarantine: Country Responses and Policy Considerations in the Context of COVID-19’. Geneva: International Labour Organization.24 An overview of the measures taken is available in the ILO COVID-19 Social Protection Monitor.25 ILO: Extending social security to workers in the informal economy: Lessons from international experience. A living document (Social Protection Department,Geneva, 2019).26 For example, in Peru the government has introduced an emergency cash benefit for independent workers (see 8-comunicado-01-bono-independiente).27 For example, domestic workers in South Africa and garment workers in Viet Nam are now covered by unemployment insurance. See C. Peyron Bistaand J. Carter: Unemployment Protection: A Training Package and Good Practices Guide: Experiences from ASEAN (ILO Regional Office for Asia and Pacific,Bangkok, 2017).28 These mechanisms are notably used in Europe to retain jobs (see Organisation for Economic Co-operation and Development: Supporting people and companies to deal with the Covid-19 virus: Options for an immediate employment and social-policy response (Paris, 2020).5
I LO briefCOVID-19 crisis and the informal economy: Immediate responses and policy challenges2.6 Reducing and preventingthe damage to the economicfabric: maintainingemployment opportunitiesGovernments around the world have taken measures,including by adopting fiscal and monetary policies, tomitigate the pandemic’s impact on enterprises. Thosemeasures may, however, bypass informal enterprisessince they often fall out of the purview of governmentpolicies and programmes. A tailored and genderresponsive approach is needed to reach out to them.29A failure to do so could derail development trajectoriestowards reducing hunger, poverty, and decent workdeficits, leading to social instability. It could also derailcountries’ efforts to contain the spread of the pandemic.A variety of financial and monetary measures can betaken to support economic units in the informal economy.XF inancial support can take the form of grants, subsidizedloans, grace periods on outstanding loans and debtrescheduling aimed at overcoming liquidity crunches.XM easures to reduce operating costs, such as waiversor deferred payments for public services such aselectricity, water or rent, can also be introduced.XS ubsidies in the form of reduced rates for mobile callsand internet access, along with training, may enablesome units in the informal economy to experimentwith digital tools for business continuity and incomegeneration.However, identifying and reaching out to informalenterprises is a daunting task for governments. Selfidentification by owners, accompanied by an “entrylevel” registration by government and some degree ofverification, could be a viable conduit. MSMEs could beregistered using an existing statute (e.g. on individualmicro entrepreneurs) or by local municipalities, withsupport from community centres and other types ofsocial and solidarity organizations.It may be feasible to channel funds through banks,microfinance institutions and financial cooperativeswith clearly defined and officially announced criteriafor disclosure and enhanced transparency. This wouldimprove the plight of women informal entrepreneurs inX6particular. Where possible, distribution through ATMs ordigital government-to-person (G2P) payments could beused to facilitate cashless transactions that meet physicaldistancing requirements. For informal enterprises, suchpayments, if combined with an “entry level” registrationsystem and awareness-raising activities, could facilitate afuture transition to formality, especially if the incentivesare put in place to foster such transitions.With targeted financial support, training, adequatehygiene and PPE, and advice on how to reduce the riskof infection for employees and customers, informalenterprises and workers could be helped to scale uptheir production of goods and services that are deemedessential during the pandemic (such as food delivery).Such measures could ensure business continuity andprotection from loss of employment. For example, ifinformal enterprises received adequate financial supportand training, they could start producing affordable clothmasks and hydroalcoholic solution/soap that meet healthsafety requirements. They could provide services forthe daily cleaning and disinfection of stalls and markets,the spatial reconfiguration of marketplaces, or to setup an alternating sales system. They could also remainin business by reaching customers using ICT tools andplatforms and continue to operate using delivery appsfor home delivery.Tripartite and bipartite social dialogue should be thebedrock of policy responses. Employers’ and workers’organizations can play a critical role in delivering oradvocating for support services, such as access totechnologies, finance and business development services,and fostering linkages with formal enterprises as anincentive for formalization. To be even more effective,the measures should strengthen dialogue andcooperation between the tripartite partners and theorganizations representing those in the informaleconomy. Moreover, as governments themselves arefacing an unprecedented fiscal crisis, mobilizing thebudgetary resources needed to support informalenterprises would require sweeping budgetaryreallocations, the issuance of government bonds, orborrowing from multilateral organizations.Therefore,effective consultation with social partners is essentialto prevent possible negative impact of such actionson the overall economy.3 Building partnershipsThe United Nations framework for the immediatesocioeconomic responses to the COVID-19 crisis30 setsout an integrated support package aimed at protectingthe needs and rights of people affected by the pandemic.It focuses in particular on the most vulnerable countriesand on people who risk being left behind, and em
Further, logistical challenges within supply chains, particularly cross-border and domestic restrictions of movement, may lead to disruptions in food supply, undermining informal workers' food security. 8 Informal food markets play an essential role in ensuring food security in many countries, both as a source of food and