Covid-19's Gender Problem in Informal Southeast Asia
August 19, 2020
By Julianna Lai
In much of Southeast Asia, the Covid-19 pandemic's economic ills are inherently gendered. Women are more likely to engage in uncontracted work in sectors hardest hit by the pandemic: food, accommodations, essential domestic work, and manufacturing. As governments scramble to bail out small- and medium-sized businesses, unregistered firms and informal workers within registered firms are excluded from labor statistics, and thus largely unreachable by official relief channels.
In a typical recession, the informal sector can absorb losses in formal employment. The current crisis, however, puts informal laborers at greater risk because they often work and live in unfavorable conditions for social distancing. With no means of teleworking, many are simply forced out of work when lockdowns are imposed. Uncontracted daily wage-earners are also less likely to have savings or alternative income stopgaps in an economic downturn.
Unregistered workers make up an estimated 78 percent of the total working population in Southeast Asia, while women comprise the majority of the informal sector in Myanmar, Laos, Cambodia, the Philippines, and Indonesia. Women from these five countries also account for a significant portion of the domestic workforce in the rest of the Asia Pacific, over three-quarters of which is informally employed or has vulnerable contractual status. Caregiving, the vast majority of which is performed by women, was already underpaid or unpaid prior to the pandemic. The Covid-19 crisis has further exposed the essential and undervalued nature of household labor.
The Philippines and Indonesia are chief providers of caretakers in Hong Kong and elsewhere, but until recently, travel restrictions limited economic opportunities for mostly female foreign domestic workers. Even after borders have reopened, the Indonesian Migrant Workers Union, for example, has reported dozens of undue dismissals and wage theft as employers can no longer afford hired help or are afraid that helpers will carry the virus.
Some sectors badly impacted by Covid-19 are almost entirely informal, as is the case with domestic work and street vendor industries. Other sectors operate with varying degrees of formality, but, crucially, employees are considered to have informal jobs if their employment is unprotected by law and comes with no welfare or benefits, even if their firms are formally registered.
Cambodia's garment industry is an example of the latter category. The country’s largest employer and economic cornerstone—garment manufacturing—reveals the worst of Covid-19's economic side effects. According to ASEAN’s estimates, over 90 percent of total employment in Cambodia is informal. The garment sector employs the most unregistered women workers after agriculture. As the pandemic wreaks havoc in supply chains and induces consumer anxiety, wholesale and retail trade and industry have been hamstrung by a 50 percent decrease in global clothing demand. Some Southeast Asian clothing factories have not received orders or even price inquiries from major European Union customers since March. Neglecting their financial responsibilities, numerous Western fashion brands have even backed out of already-completed orders.
As a result, about one-third of Cambodia’s clothing factories have shut and much of the 90-percent female workforce has been sent home. Prime Minister Hun Sen originally pledged furloughed garment workers 20 percent of national minimum wage for six months, asking factory owners to cover 40 percent. Not only have owners been unable to meet this request, the Cambodian Labor Confederation reported in May that just 15,000 of 150,000 known suspended garment workers had been receiving the monthly stipend promised to them. The application process is arduous, and there is little indication that the government has improved its compensation process. The Labor Ministry only reported paying “more than 8,000” suspended workers in July.
In nearby Myanmar, where around 58,000 of over half a million garment workers have been let go, the government has said it will cover 40 percent of lost salaries for factory workers—but only for those registered with the state Social Security Board. Given that the board covers just 37 percent of the formal sector, registration for the informal workforce will be a significant barrier.
Shadow economy workers, often having very limited access to welfare, are less equipped to face public health crises. In Cambodia, for example, only 6 percent of informally employed workers have access to at least one form of social security. Out of the five Southeast Asian informal economies which overrepresent women, only the Philippines offers public healthcare to unregistered domestic workers.
Hun Sen’s government has adopted a generally negligent attitude toward the informal sector. In April, bureaucrats disqualified all informal enterprises—which make up 95 percent of Cambodian SMEs—from government relief. A spokesperson for the Ministry of Economy and Finance said that the exclusion is meant to encourage informal firms to register formally. But the World Bank estimates that Cambodia’s unemployment rate will reach levels as high as 20 percent. As the formal sector continues to contract, the informal economy is expected to balloon even further, thereby depressing wages of unregistered workers. The implications in places where women are mainly employed informally could be enormous for gendered financial disparities.
The International Monetary Fund has estimated that immediate transfers to cover basic subsistence for informal workers for just two months could cost developing countries 2-5 percent of annual GDP. Not only are governments fiscally unequipped to meet these needs, but Cambodia’s mishaps show that the logistics of delivery could be the more daunting obstacle.
Setting aside fiscal constraints, however, the current crisis presents an opportunity to expand social security to the informal economy. The pandemic has exposed the outsized role women play in care work and in industries most negatively affected by the pandemic. Governments would be wise to ensure women are not left even farther behind in the coming months.
Julianna Lai is a research intern with the Southeast Asia Program at CSIS.