Asia’s Faulty Safety Net: Millions of Workers Pushed into Informal Employment

By Karen Emmons

CLOTHING THE WORLD Bangladeshi weavers work in a factory in the village of Rupganj Thana, on the outskirts of Dhaka. As its biggest export industry, the garment trade underpins Bangladesh’s economy.
Photo by AFP

When Sureeporn Panturee’s electronics employer cut out her overtime pay in early 2009, her family decided she would be better off selling secondhand clothes in a Bangkok street stall, even in hard rain or hot sun.

“I hoped I would get better money if I personally did the selling,” she says. Ms. Panturee used to spend her days in an airconditioned assembly line. It was how she and her husband could pay their truck installments and take care of their parents. With overtime, she made up to $350 a month—more than her husband earned.

The 3,000-employee company stopped paying overtime to cope with the decline in export orders, she explains. That slashed Ms. Panturee’s salary by half. Her salary, combined with that of her husband, was not enough to cover their monthly needs—even though they live with his parents.

She has been selling used clothes since January while looking for another job. She is one of millions of workers across Asia leaving the formal sector for informal and unprotected work in order to survive the global economic downturn.

“It will be difficult to find a new job because so many are now jobless. Plus, so many have just graduated,” she says on her first day selling clothes in a new location at an upscale Bangkok shopping mall, which began offering hall space every Thursday evening in March to unemployed people to sell whatever they can in what is dubbed “The 2nd Hand Club.”

People Can’t Afford to be Unemployed

Ms. Panturee’s new job may indeed take a while to materialize, according to economists monitoring the international financial crisis and its impact on Asia.

“Job recovery will take longer than economic recovery in countries that are export-dependent,” explains Gyorgy Sziraczki, a senior economist with the International Labour Organisation (ILO). “The Asia–Pacific region has probably the greatest reliance on exports.”

As economic growth in Asia began to decelerate throughout 2008, Mr. Sziraczki and colleagues observed freezes on recruitment and cuts on working time and benefits. They have been keeping an eye on the “downward pressure on wages,” worried about the implications for the future.

When those attempts to save jobs weren’t sufficient, the ILO began monitoring the large-scale job losses that followed in some sectors. But the economists noticed that unemployment was not increasing as much as would be expected.

With considerable experience studying the Asian workforce, Mr. Sziraczki knew that “people can’t afford to be unemployed” because of weak social protection systems and high levels of poverty in most of developing Asia. Investigating further, he could see a considerable shift to the rural sector and to informal and vulnerable employment.

In the People’s Republic of China (PRC), job losses from large-scale factory closures, combined with an industrial restructuring to higher value-added production, pushed more than 20 million workers back into the countryside looking for scarce work, according to an ILO paper that Mr. Sziraczki and his colleagues prepared for a forum in Shanghai.

Thailand’s fourth-quarter 2008 employment figures showed a contraction of wage employees by more than 100,000. But compared to the previous year, the number of own-account and contributing family workers increased by “an astounding” 800,000, reports the ILO paper on labor market impacts and policies for recovery in Asia.

In Indonesia, around 63% of the labor force’s 109 million people now work in the informal sector, it was reported during a recent gathering of Asia-Pacific workers’ organizations at the Asian Development Bank (ADB).

More Than One Billion Vulnerable Workers

Out of necessity, people are making a beeline for whatever work they can find—subcontract work, domestic work, street vending, selling petrol or cigarettes, or day labor.

Even before the crisis, many workforces were competing against “casual” or temporary work, which is also part of the informal sector. Some are home-based activities or small workshops that pay lower than regular factory work. Sometimes workers—women, low-income, or male migrants—work alongside factory workers but under different terms of employment.

The ILO estimates that 1.1 billion Asian workers—62.2% of all workers in the region—were in vulnerable employment in 2007. They had no job security, low wages most likely, no recourse for labor violations, and no benefits. Given the large economic shock that is occurring, ILO economists worry that the number of people in vulnerable employment could increase by “an alarming” 52 million in 2009, an increase of 4.7% since 2007.

Women, many analysts are quick to point out, make up the largest share of vulnerable employment throughout the region.

UNPROTECTED Child workers remove pebbles from liquid clay in a ceramics factory in Khurja, a small town in the Indian state of Uttar Pradesh.
Photo by Photononstop

Asia’s Social Safety Net

The informal economy has become a social safety net for many workers. When no unemployment benefits are to be drawn, then becoming a roadside vendor, pedicab driver, or day laborer takes its place. Though this is a widespread survival technique, some workers laid off from good-paying regular employment are humiliated by moving into the informal sector.

“Anybody who works in informal service positions is not considered in a good light by Cambodian society, which devalues the rights and morality of Cambodian women who take up these kinds of jobs,” Am Sam Ath, a technical supervisor for Licadho, a human rights organization, told the Phnom Penh Post in March.

Although new informal vendors like Ms. Panturee are finding a growing market as the financial crisis forces shoppers to spend less money, others are facing a shrinking market, especially in areas affected by tourism. An ILO rapid assessment of the Cambodia situation, published in March, reports that drivers of the tuk-tuk (motorized rickshaw) have experienced a decline of up to 87% in their daily earnings since mid-2008. The same report notes that per capita income has declined among subsistence farmers, and wages were depressed for workers in business farming.

To compound the problem, the ranks of informal workers likely will continue to swell. “Massive employment shifts are still to come,” warns the ILO’s Mr. Sziraczki. The ILO projects that the number of unemployed in Asia could see an “unprecedented increase” in the near future.

Impact on Workers’ Lives

Women, youth, and migrants are among the most affected by the workforce shifts. Women had a greater portion of the export factory jobs before the crisis. Youth and migrants tend to be the first to be let go and the most affected by shrinking job opportunities.

Informal sector work comes with it no security. For some women, it has the risk of sexual abuse as well. The move out of formal employment, with its varying forms of protection depending on the country, could give rise to “working poverty.” People in extreme working poverty are employed but live in households where the family survives on less than $1.25 per person per day. According to ADB’s Asian Development Outlook 2009, the number of people living below that threshold could rise by 62.3 million in Asia in 2009.

“The big question is: how will people survive?” asks Mr. Sziraczki.

He believes government training schemes can play a critical role, but many retrenched workers who turn to the informal sector have no access to them. Conditional cash transfers tied to school enrollment of children or medical checkups and rural employment guarantee schemes, such as those in India that provide 100 days of work at a minimum wage per year per family, would also help workers and their families from falling deeper into poverty.

Job creation needs to consider the preponderance of female workers “bearing the disproportionate impact of job losses,”argues Bethan Emmett, a policy advisor to Oxfam Great Britain, in a report on women and the global crisis. Government responses, she writes, “are inadequate or targeted overwhelmingly at male employment,” with stimulus packages largely in construction and infrastructure sectors.

“Governments need to ensure that their responses to the crisis counter not just the deflationary trend of global markets but also the tendency to undermine women’s labor rights,” says Ms. Emmett.

ADB and the ILO are collaborating on a study that will assess the impact of the crisis on workers’ lives in the production supply chain in several countries, including the electronics sector in the Philippines’ export processing zones, furniture production in the PRC, the garment sector in Cambodia, and car accessory production in Thailand.

Until investment in social protection programs in Asia increases, analysts say, people will stitch together their own social safety net—on street corners, in market stalls, with pedicabs, and however else they can to survive. •

Karen Emmons is a Bangkok-based journalist who has contributed to the International Herald Tribune and other publications.