The Fate of Informal Workers Amid COVID-19

  • Whatsapp
Nadhia Maulita Dewi
banner 468x60

By: Nadhia Maulita Dewi*

As of 1 July 2020, the Government of Indonesia has reported 57,770 persons with confirmed COVID-19, there have been 2,934 deaths related to COVID-19 reported, and 25,595 patients have recovered from the disease. The COVID-19 pandemic poses significant unprecedented challenges for Indonesia, which has the potential to leave a lasting impact on the social, economic, and political spheres of the country. The socio-economic effects of COVID-19 in Indonesia currently are massive and multi-sectoral, which is threatening to affect the lives of many. In just a few months, the global pandemic COVID-19 has affected workers in a profound way, leaving massive layoffs, pay cuts, and a decline in working hours in its wake. Strict social distancing and lockdown measures around Indonesia have halted daily activities, presenting a threat to the livelihoods of billions of workers who rely on their daily earnings in the informal sector.

According to the International Labour Organisation (ILO), the Indonesia workforce is estimating nearly 60 percent of the workforce is informal (70 million workers), mostly employed in the agriculture and construction industries. Of these informal workers, approximately eight million are employed in the digital sector and rely on mobile apps to find freelance or ‘gig work.’ Unregistered, unregulated, and unprotected by secure employment contracts and social safety nets, informal workers are some of the most vulnerable in the labour market. Informal workers have been disproportionately affected by the crisis due to the absence of labour regulation and state recognition. Based on Statistical data from the Social Security Agency for Worker’s Welfare (Badan Penyelenggara Jaminan Sosial Ketenagakerjaan) indicated that as of September 2019, only 4 to 5 million informal workers nationwide have independently signed up for non-employee scheme, which only covers accidental, death and old age, and does not protect against lost income.

Read More

The informal sector is often associated with poverty in developing countries, and it is important to note that not everyone who is poor work in the informal sector, nor everyone who works in the informal sector is poor. Based on data collected through the Loka Data in 2019, the number of formal workers was 55,272,968 people, while for the informal sector workers were 74,093,224 people, which when presented in 2019 informal workers with 57.27% and formal workers with 42,73% Informal workers live hand to mouth, lacking unemployment benefits and social protection. Often do not have access to healthcare and of particular importance during this pandemic the means or important to work from home.

This essay will discuss how the pandemic, COVID-19 is affecting informal workers in Indonesia and show the cause to society. Firstly, the essay will identify the condition of Indonesia amidst COVID-19. Secondly, the essay will focus on the critical terms in informal workers in Indonesia and the status amidst the pandemic. Finally, I will use my reflection of the current situation; both short-term and long-term solutions will be considered.
The International labour Organization (ILO) estimated that those working in the informal sector and reliant on daily wages would be among the hardest hit during the pandemic. Without any alternative income sources, relative poverty levels among informal workers and their families may increase up to 56% points in lower-middle-income and low-income countries.

Right now, Indonesia is in the midst of the pandemic; the livelihoods of informal workers are being affected in one way or another. Some self-employed workers are facing a loss of income, while salaried informal workers such as construction workers and domestic workers face the possibility of being asked to stop coming to work with the risk of receiving little to no compensation for their termination.

Based on the World Food Programme, the majority of the bottom 40% population work in the informal sector and in sectors estimated to be highly moderately impacted by the pandemic. In 2019, about 64% of this group were informal workers and mostly employed in agriculture (42%), followed by trade and automotive (14%), and manufacturing (12%). Roughly 24% were poor, and nearly 40% had no health insurance. Most of them (70%) had access to proper hand-washing facilities, while 20% had a living space less than 8m2 per person. Reduced income may cause those living in rented housing (6%) to lose their shelter. Concerning social protection, about 24% lived in households receiving PKH (conditional cash transfer program for health and education or Program Keluarga Harapan).

In comparison, nearly 19% received Rastra (rice in-kind, phased out in late 2019), and 17% received BPNT (e-voucher food assistance program, now called SEMBAKO). In targeting and delivering social assistance, the following needs to be taken into account: around 71% of those aged 15 years or older had access to mobile phones, 36% had access to the internet, and 22% owned a bank account. In terms of food security, 46% lived in households with food expenditures accounting for more than 65% of total expenditure: these are the households who would be at increased risk of reducing the quality or quantity of consumption under income shocks. This is particularly concerning as around 11% of the ‘bottom 40%’ are children less than five years. Reduction in quantity and quality of consumption can increase their risk of developing malnutrition.

Covering the informal workers, especially prioritizing those among the bottom 40% population and those without health insurance, under social protection programs would be critical to better protect them from the risk of falling into poverty and facing food insecurity. The Indonesia large-scale restrictions (Pembatasan Sosial Berskala Besar, or PSBB) have little to none work prospects for self-employed in the urban area. Like any other business, informal businesses set up by self-employed, such as street vendors, or people who owned kiosk, see a decrease in customers due to the pandemic. It goes the same to the online driver, that are self-employed who receive task-based income are facing shrink income. GARDA, an organization for the online driver, noted that drivers’ income has fallen by 50% – 80% because of the pandemic. The closures of businesses, along with restrictions on public space use and stay at home orders, have negative consequences on customer spending.

For the workers with no formal working arrangement, such as construction workers, shopkeepers, spa workers, or domestic workers, also concerns the threatened of terminated unilaterally by the employer leaves workers with little to no protection. Meanwhile, the informal working arrangements are not subject to the national labour legislation, social protection, or entitlement to certain employment benefits, such as advance notice of dismissal and severance pay. The receive employment benefit upon dismissal is up to the discretion of the employer.

The question that relevant to those problems is, then how do we can tackle those issues and reduce a deeper weakening due to the pandemic? The social assistance program seems to be the answer. Nevertheless, a program like this sometimes problematic than other instruments that are aimed at sustaining household consumptions.

The Indonesian government has responded to mitigate the worsening economy by issuing Presidential Regulation (Perpres) No. 54/2020 as a derivative of Laws and Regulations (Perppu) No. 1/2020, which has been ratified as Law No. 1/2020 this May 2020. The fiscal stimulus of IDR 405.1 trillion has been allocated to encourage improvements in several sectors, including health (IDR 75 trillion), industry support (IDR 70.1 trillion), social safety nets (IDR 10 trillion), and economic recovery programs (IDR 150 trillion).

The social assistance program seems to be the right instrument because it can sustain or minimize deeper contraction in Indonesia’s economic growth performance. Of the IDR 110 trillion allocated to social safety nets, IDR 65 trillion was earmarked for additional social safety nets such as PKH (Program Keluarga Harapan), food packages (Sembako), pre-employment cards (Kartu Pra Kerja), electricity tariff waivers and discounts, and housing incentives for low-income communities, IDR 25 trillion for reserves to meet basic needs and market operations, and IDR 19 trillion for adjustments to the education budget for handling COVID-19. Specifically, for the social assistance program, the government also allocated IDR 3.42 trillion for basic food assistance and IDR 16.2 trillion for cash assistance (Bantual Langsung Tunai).

However, the allocation of funds amounting to IDR 19.62 trillion for the social assistance program during the pandemic period will be meaningless if the distribution is not on target. Problems can arise both from the data collection and the recipient of the social assistance program. During this pandemic, a handful of informal workers are lumped together with the poor and very poor for social assistance. Beneficiaries for social assistance in the form of in-kind and cash transfers make up the approximately 97 million poorest people, or 27 million poorest households, in a national database compiled by the Ministry of Social Affairs.

Due to the heterogeneity of the informal sector, many informal workers earned just enough before the pandemic not to be able to benefit from programs that target households with little to no earning potential. Some informal workers also own assets, which may exclude them from social assistance for the poor and very poor. It’s important to be noted that the economic crisis caused by COVID-19 has attracted several groups that were “not entitled” to get social assistance to be categorized as “entitled.” That’s why it’s crucial to updating the data in order to capture various community group significantly affected by the pandemic.

For example informal workers such as online driver or street vendors, who are received inequality because they are still able to go out and work. It’s worth noting, when working hours decline for these informal workers, their livelihoods are becoming increasingly in danger. Without support, they are likely to fall into poverty during and after the pandemic. Coupled with the limited assistance provided by the government, informal workers having to depend on the goodwill of civil society organisations and grassroot initiatives. The social assistance should be covered not just 40% of low income groups but should be up to 50% and more of low income people.

As I already discuss before that 20% informal workers had a living space less than 8m2 per person. Reduced income may cause those living in rented housing (6%) to lose their shelter, and based on Wauran study, only 42% of urban informal workers own the house that they are currently living in, with the rest either renting a house or a room in a boarding house. There is a possibility that the local administrative office, who maintains the data of the poorest households and potential assistance beneficiaries are not documented the informal workers data because they keep on the move. Moreover, Jakarta have a large proportion of those working in
the urban informal sector that are immigrant who are seeking job in Jakarta, because of lack of employment opportunity in their hometown.

Nonetheless, the true extent of the COVID-19 repercussions on informal workers remains unknown due to the unavailability and lack of data, information that is crucial for planning and implementing appropriate policies that could meet their needs. However, there are some ways that can be done. The government must track and measure in which way and how vulnerable groups of workers are being impacted. This could be data collection and update between government stakeholders particularly in the district administration office such as Social Security Agency for Worker Welfare, or it can be an organisation who are supporting informal workers. The data collecting must nut included not only identification, work history or financial condition, but also be segregated based on the basis of occupation and working arrangement.

Working together with companies that their workers majority are informal workers, such as companies for online driver (Gojek or Grab) can be leveraged to complement conventional data collection methods. The government also can develop digital mechanism for data collection through website or other digital platform, so that the informal workers could use to voluntarily submit their information.

This data collecting can be used to targeting and implement supports of workers who are known to be vulnerable. The fact that some informal workers earn just enough not to be able to benefit from social assistance provided for the poor and very poor. This can make them very likely to fall into poverty as their income dwindles during the pandemic.
The data collecting also can be used to redeploy workers according to their experience and skills into new essential roles. In the Singapore, taxi and private-hire car drivers are redeployed to make grocery and food deliveries, while Singapore Airlines cabin crew are filling the manpower gaps for healthcare workers in the hospitals. Even tough some sectors or industries are disrupted, some like medical services, ecommerce and logistic are growing. Also some companies are changing their business models to include delivery service, by that it can be an opportunity for the informal workers to works at the available jobs or reskill them. The government can work together with private sector to adopting a technology that can meet the needs of the market during the COVID-19.

The other solution that can be suggested is, that the government of Indonesia needs to recognise informal workers in the governing law in order to be able to adequately protect them. It’s because the state recognition for informal workers in Indonesia is minimum. The governing Law on Manpower No.13 of 2003 does not recognise informal workers, including own-account workers or self-employed and workers without formal working arrangements, specifying workers as only those who possess a formal working relationship with an employer. By law, only the Government Regulation No. 44 of 2015 on the Organisation of Occupational Accident Insurance and Death Benefits, and the Ministry of Manpower Regulation No. 1 of 2016 on Procedures for the Organisation of Occupational Accident Insurance, Death and Old Age Benefits for Non-Employees, as well as its health equivalent, recognise informal workers. Both regulations define informal workers as those without a formal employment relationship with an employer, and expand on the provisions for the non-employee social protection scheme, which informal workers may enrol in and pay for independently.

Also, because currently there are multiple employment models that exist even within a particular occupation such as domestic work (hired and salaried by households), those who come in only for that day and are employed by the multiple employers and those who receive work through an agency platform, it needs a recognition for different types of informal workers by their working arrangements or employment relationship in order to clarify the obligation that each stakeholder has towards the worker in the law. From that information, the government can evaluate the reasons and factors affecting their work, assess their urgent basic needs, identify the safety nets that the different groups are using, and address the remaining gaps and weaknesses through regulation.

The conclusion from this essay that we can get is, that COVID-19 indirectly has impacted the informal workers in Indonesia. With the existence of social restriction, the problems facing informal workers is loss of income and uncertain work prospects. Eventough social assistance has been provided in some way or another by the government, there is no guarantee that all informal workers will be covered. This is due to the mobility and characteristic of informal workers in Indonesia is an immigrant, meaning that beneficiary registries might not be the most updated. In the long term, the government of Indonesia also needs to consider revising the Law on Manpower No.13 of 2003 to recognize informal workers, and consider on making supporting regulation to accommodate for new work arrangements in various occupations.

The government of Indonesia have a policy dialogue with the expertise of grassroot organisation, such as JRMK (Jaringan Rakyat Miskin Kota), and some informal worker cooperatives and associations. The scale of informal workers organization has increased rapidly in recent years due to the digitalization era. To redeployed and upgrading the informal workers’ skills, the government of Indonesia could also take advantage from the expertise
provided by other relevant stakeholders, such as Trade Union Resource Center or employer organizations and the SINDIKASI union for media and creative freelancers.

Lastly, The distribution of social assistance programs should be managed well, observing the values of good governance, transparency, and accountability. Proper horizontal and vertical synergy (communication, coordination, and collaboration) should be implemented. The horizontal synergy is closely related to cooperation among institutions at the same level (state to state or local to local). The vertical synergy refers to cooperation among institutions at different levels (state to local). Also, active participation of the community also needs to be taken into account, so it can be optimum. Self-registration in the context of self-reporting can be a form of community participation. It can be facilitated by empowering the existence of the smallest government units in society (Rukun Tetangga (RT), Dusun, and Lingkungan).

*Student of Administration Science University of Brawijaya year 2016