Informal Workers: Why Their Inclusion and Protection are Crucial to the Future of Work

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Informal Workers: Why Their Inclusion and Protection are Crucial to the Future of Work
Mega Irena
Head, Labour and Civil Service Division ASEAN Socio-Cultural Community Department
9 May 2022
Labour and Future of Work

The region’s informal economic sector is as vast as it is invisible. For many years, ASEAN has been collaborating to uncover and address the work risks and vulnerabilities associated with the informality of this sector, often considered the backbone of ASEAN’s economies. The goal is to provide decent work for millions of informal workers who labour tirelessly but are often unprotected.

ASEAN is the fifth-largest economy globally, with its combined GDP reaching 3 trillion US dollars in 2020. This GDP is mainly anchored in the services sector (50.6 per cent), manufacturing (35.8 per cent) and agriculture (10.5 per cent). The agriculture sector contributes the most to informal employment in six ASEAN Member States, followed by services and then industry, with variations by country (ASEAN Key Figures, 2021).

Informal employment is also prevalent in the nonagriculture informal economy. Essentially, this is a sector where economic activities are either not covered or insufficiently covered by formal arrangements as they are unregistered under national legislation. Those are usually small household businesses with own-account workers or possibly with the support of family workers or paid workers who are engaged casually. In the informal economy, employers have unclear responsibilities in regard to covering social security and certain employment benefits of the workers.

According to ILO’s estimation, two billion people make their living in the informal economy. There are about 244 million of them in the ASEAN region. This rate is generally higher for women, those with lower education levels, and those living in the rural areas. Platform workers, such as drivers of ride- hailing online services, also belong to that group, although they work for registered and recognised entities. In this digital era, platform work has expanded quickly, and more people favour it as a primary or secondary source of income. However, these workers are not considered employees in a traditional understanding and, consequently, The ASEAN Issue 21 2022 are not given adequate social protection.

Informal work arrangements often lead to vulnerabilities of workers that are aggravated in times of an economic slowdown. The ASEAN Rapid Assessment: The Impact of COVID-19 on Livelihoods across ASEAN conducted in 2020 noted that informal workers had been adversely affected by the pandemic, especially those in the hardhit sectors, including tourism. With slow tourism in the past two years, informal workers in this sector have become highly vulnerable. Those without alternative sources of income fell into poverty. In addition, women have suffered disproportionate income losses as they are predominant in the hardest- hit sectors. Therefore, strengthening social protection is one of the highest priorities in the ASEAN Comprehensive Recovery Framework (ACRF).

In addition, women have suffered disproportionate income losses as they are predominant in the hardest-hit sectors. Therefore, strengthening social protection is one of the highest priorities in the ASEAN Comprehensive Recovery Framework (ACRF).

Member States acknowledge their high reliance on the informal economy and the need to alleviate its decent work deficit. Accordingly, ASEAN leaders agreed to take multi-pronged measures as cemented in the Vientiane Declaration on Transition from Informal Employment to Formal Employment towards Decent Work Promotion in ASEAN. Regional actions have been taken by the ASEAN sectoral body on labour since.

One of the key milestones is establishing the ASEAN informal employment database (https://data. The segregated data showcase the multi-dimensional patterns of informal employment in ASEAN to support better policy responses. Despite some technical shortcomings, such as different definitions and data collection frequency, Member States pressed on with the database construction in 2019. The findings and recommendations of the Regional Study on Informal Employment Statistics to Support Decent Work Promotion in ASEAN laid the foundation for building the database.

Simultaneously, a regional study was conducted together with the International Labour Organization (ILO) to look into existing gaps and opportunities for extending social security to workers in informal employment. The study, Extension of Social security to Workers in Informal Employment in the ASEAN Region, reported that only a minority of the population is covered comprehensively by social protection systems. Moreover, public expenditure on social protection in ASEAN is below the average level in the Asia Pacific region. Limited contributory capacity and low business registration are the primary challenges that hinder wide coverage of social protection. The study, therefore, recommended for policy coherence of business registration, labour legislation, and tax policies to enable the transition towards formal employment.

Acknowledging the rapid growth of platform work, the study on Managing Technology’s Implications for Work, Workers, and Employment Relationships in ASEAN recommended universal coverage of social protection, which is unrelated to employment status. As universality requires sufficient resources, tax policies were recommended for adaptation to capture more revenue from the digital platforms. Certainly, one should take this recommendation and still be mindful that the ASEAN Member States are also keen to support start-ups so they can be globally competitive and attractive.

As ASEAN is gearing up for the future of work, we should not lose sight of the fact that the massive number of informal workers in the region may not necessarily deflate in the future. Instead, it may increase amidst the digitalisation of ASEAN economies. Boosted by technological advancement and the growing popularity of e-commerce in the ASEAN region, there is no doubt platform work will continue to increase and become instrumental to the region’s economic growth.

It is evident that the ASEAN Member States need to adjust their labour laws quickly to protect the rights of informal workers, including those in the platform economy. The COVID-19 pandemic has taught us a lesson on the importance of putting in place inclusive pandemic recovery programmes that provide informal workers, especially women, access to medical care and social assistance without discrimination due to their employment status. Recovery plans should be able to trigger necessary changes in social protection systems that leave no informal worker behind.

The formalisation of employment and universal coverage of social protection are seen to be the two main paths towards decent work that are being explored by many developing countries regionally and globally. Whichever path they take, Member States have ample opportunities to shape the region’s future of work that is resilient, inclusive, and sustainable.