Informal Sector Key to Maintaining Social Stability amid the Pandemic

    LightCastle Analytics Wing
    LightCastle Analytics Wing

    As per Bangladesh Bureau of Statistics’ Labor Force Survey 2016, 86.2% of employees aged 15 or older belongs to the informal sector. Given the level of employment generated by the informal sector, the growth and stability of the informal sector is critical for maintaining social cohesion and inclusive economic growth.

    Source: ILO
    Source: ADB
    Source: ADB

    Immediate Ramifications in the informal sector because of Covid-19

    As the pandemic finally hit the nation, precautionary measures in the form of supply hoarding, hygiene maintenance and social distancing were taken up by civilians, particularly in urban areas. The informal sector was the hit the hardest as citizens refrained from coming out of their homes, leading to lower income levels for the economically marginalized segments like hawkers and rickshaw pullers.

    The major immediate ramifications for the informal industry of Bangladesh are as follows:

    1. The biggest impact will be in the urban informal service sectors particularly the informal transport sector. With more than 500,000 rickshaw pullers and more than 25,000 CNG drivers in Dhaka alone, the informal workers in the transport sector will take the biggest hit due to the lock-down. Media reports have mentioned average daily income for transport workers have gone down by two third.
    2. The next big hit will be for restaurants and small tea stalls as government looks to enforce lockdown till 4th of April. Considering the extent of the virus contagion, the closure might be extended further.
    3. As all formal business take an economic hit, this will trickle down and affect the informal workers involved with these businesses even further.
    4. The informal workers in the agricultural sector are gradually getting impacted due to supply chain disruptions. Prices of poultry and livestock products like milk and eggs have started declining, which will hit the income levels of farmers and agriculture sector workers.
    5. Lastly, the most concerning issue at hand is the lack of awareness about Covid-19 among the informal workers. Concepts of safe hygiene and social distancing can only be comprehended if the context and effectiveness of such measures are clarified. However, the majority of the workers are unaware of the repercussions that Covid-19 can have on their health and their community.

    Long term consequences in the informal sector because of Covid-19

    Once the nation recovers from this crisis, businesses will start operating at its usual pace. However, the informal sector will take the biggest hit among all the sectors in the country. Government has promised to support the economically vulnerable and plans to sell subsidized rice (BDT 10/kg) through VGF scheme and provide cash handouts to the ultra-poor segment. However, systemic level support is imperative for bringing about sustainable changes in the lives of the informal sector workers.

    Author: Sanjir Ali, Business Consultant, LightCastle Partners

    The LightCastle team has been analyzing the macro and industry level picture and possible impacts wrought about by the Covid-19 crisis. Over the following days, we’ll be covering the major sectors shedding light on the possible short and long term ramifications of the global pandemic. Read all the articles in the series.

    LightCastle Analytics Wing

    LightCastle Analytics Wing is the research division of LightCastle Partners. It is tasked with producing periodic reports on the different sectors of the economy, analyzing trends in markets and making methodical, thorough and intelligent analysis to improve strategy and drive business growth.