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Towards a national database of the informal sector: pandemic response and future recommendations for Indonesia - Blog by Joanna Octavia

After only a few months, the global Coronavirus pandemic has affected workers worldwide in a profound way. Strict social distancing and lockdown measures around the world have halted daily activities, presenting a threat to the livelihoods of billions of workers who rely on their daily earnings in the informal sector.

The International Labour Organisation (ILO) estimates that almost 1.6 billion informal workers or nearly half of the global workforce are significantly affected by pandemic measures.

In Indonesia, 55% of the workforce or around 70 million people work in the informal sector. Unregistered, unregulated and unprotected by secure employment contracts and social safety nets, informal workers are some of the most vulnerable in the labour market.

Who are the informal workers in Indonesia and what support is available to them?

Informal workers in Indonesia are spread across sectors and occupations, including but not limited to construction, street vending, domestic work, and motorcycle taxi driving. Following the pandemic outbreak, a majority of these workers are at risk of losing their livelihoods as a result of their insecure working conditions. GARDA, an Indonesian organisation for online motorcycle taxi drivers, noted that their incomes have fallen by 80% due to the pandemic.

Furthermore, salaried informal workers such as domestic workers and those employed “off the books” by businesses face the possibility of being asked to stop coming to work with the risk of receiving no compensation for their termination. Different to formal sector workers, 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.

Whilst the Indonesian Government has deployed a range of social assistance benefits to help Indonesians weather through the crisis, informal workers are lumped together with the poor and very poor. However, many informal workers earned just enough before the pandemic and will not be able to benefit from assistance programmes 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.

Moreover, studies on informality in Indonesia suggest that a large proportion of those working in the urban informal sector are economic migrants. One repercussion of always constantly being on the move is the possibility of not being documented by the local administrative office, which maintains the data of potential assistance beneficiaries within their locality.

The limited information we have on the informal sector has resulted in a plethora of problems during this pandemic, in particular when addressing questions such as: (1) who are the informal workers?, (2) where do they work?, and lastly (3) how do we reach them in a way that is more systematic and effective?

What needs to be done in the short-term?

In the short term, the government must track and measure how vulnerable groups of workers are being impacted. This means taking active steps to cross-check data between agencies, offices and initiatives to develop a national database of informal workers. The data collected should include not only identification details, work history and financial conditions but they should also contain information on occupation and working arrangement.

  • Targeted support measures: The data could be used to design and implement support measures tailored to the conditions of informal workers. In addition to the assistance offered by government, donations from individuals or civil society groups could then be effectively allocated and distributed to them if such data is made available.

  • Redeployment into in-demand roles: Another way that the data can be used is to redeploy informal workers. While some industries are disrupted as a result of the pandemic, some, such as medical services, ecommerce and logistics, are growing. There is opportunity to retrain workers of all levels for the available jobs or reskill them to meet evolving market needs. Both the government and private sector, including social enterprises, should engage grassroot organisations to explore these possibilities.

 What can be done in the longer term to support informal workers?

street vendorIn the longer term, the pandemic highlights the urgent need for government to protect those operating and working in the informal sector through regulatory change. Workers may choose to stay informal for many reasons but the persistence of the sector indicates that it should not be considered as a stopgap measure.

  • State recognition: The governing Law on Manpower No. 13 of 2003 does not recognise informal workers, including own-account workers and workers without formal working arrangements, specifying workers as only those who possess a formal working relationship with an employer.

Furthermore, to ensure that the Law on Manpower is extended to all workers, there needs to be a recognition of the different types of informal workers by their working arrangements or employment relationship in order to clarify the obligations that each stakeholder has towards the worker in the law.

  • Consideration of new forms of work: Regulations that correspond to the changing landscape of employment relations in Indonesia should be considered. The role of digital platforms as a mediator between customers and own-account workers extends beyond the relationship between employers and workers as defined in the Law on Manpower.

tuktukGiven that workers attach different levels of importance to the work that they do in the informal sector, and that informal work is experienced differently across platforms, it is imperative that the government designs supporting regulations that would not only protect workers but also provide business certainty for the customers and respect the flexibility enabled by some platforms.

  • Cohesive workforce development map: Lastly, it should be remembered that the urban informal sector in Indonesia does not exist in a vacuum. Other factors, including efforts to upskill and reskill, jobs mismatch, digital divide and poor infrastructure in other parts of the country, need to also be taken into account when designing a workforce development roadmap.

Governments at both the national and regional levels should consider growing economic centres outside of Indonesia’s large cities and explore other growth opportunities to narrow the regional divide.

Joanna is also a Visiting Fellow at CSIS (Centre for Strategic and International Studies)Indonesia. The original commentary is downloadable from the CSIS website here.

Wed 10 Jun 2020, 16:05 | Tags: Covid-19, international