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Covid-19 kills informal jobs in developing economies – leading macroeconomic influencers

07 Apr 2021 (Last Updated April 7th, 2021 08:10)

Some economists believe that the coronavirus pandemic has rewritten the rules of informal labour.

Economists believe that the coronavirus pandemic has rewritten the rules of informal labour, undermining options people relied on in the past downturns. This is likely to directly impact the recovery of poorer nations, leaving many workers in distress in the future.

Colin Williams

Colin Williams, a professor of public policy at the Sheffield University Management School, UK, shared an article on how the Covid-19 pandemic has shattered major lifelines for millions of people employed in poorer developing economies. Jobs such as driving taxis, selling food on the street, and other jobs are not available for many people in a post-Covid economy.

Breadwinners in a northern Thai city of Chiang Mai, have stated that they are earning one-tenth of what they were earning prior to the coronavirus pandemic. They claim that foot traffic has reduced, and people do not want to spend. Street vendors maintain that the 2008-09 financial crisis was less impactful, as traffic stayed brisk, and they had options to earn additional income.

According to Barclays, Thailand is expected to reach only 2.7% growth this year as people struggle to reinstate their lost incomes.

Experts opine that informal underground-economy jobs are typical fixtures of the developing world, and it engages almost 90% or more of the labour force in many countries. Therefore, the irregular ad-hoc jobs, without formal salaries and fixed hours, are more important during economic downturns as induced by the pandemic. These help in filling in gaps in countries with limited social safety nets.

Dina D Pomeranz

Dina D Pomeranz, economist and assistant professor of applied economics at the University of Zurich, retweeted an article on how a year ago, economists had published a kind of Covid-19 economic policy manifesto that has stood the test of time, and calls for more generosity by governments than for the magic of markets.

As large parts of the world economy have been put on hold by government fiat because of the Covid-19 health crisis, experts argue that the state should generously support not only labour but also capital costs, and the latter through corona loans. In addition, the exact criteria for reimbursement of these loans can be determined based on the sectors’ severity of lockdown-induced income losses.

This temporary state of Covid-induced economic coma has caused the collapse of sales in many industries, with most companies being unable to pay wages and other fixed costs. Therefore, the real challenge for the government is to avoid a severe recession or bankruptcies in the fight to stop the virus spread.

Experts, however, do not advocate 100% compensation despite agreeing that the state should bear the bulk of the coronavirus costs for workers and companies. The primary reason for this is that full wage replacement, for instance, would eliminate the incentive to search for jobs that have been expanding during the lockdown, such as in healthcare and logistics.

Diane Coyle

Professor Diane Coyle, Bennett Professor of Public Policy at the University of Cambridge, retweeted an article on economists taking on the urgency to derive strategies to generate a more inclusive and sustainable recovery from the Covid-19 crisis, and on how economics must build back better.

Experts believe that economists’ efforts will not materialise if the profession itself is not more inclusive in terms of gender, national origin, ethnicity, intellectual methods, and assumptions.

Economists such as Arvind Subramanian Johns Hopkins University’s Devesh Kapur believe that the growing use of one tool during the pandemic, randomised controlled trials, excludes not only ideas but also people, thereby intensifying the Global South’s underrepresentation among development economists.