May 2020

The Pandemic Exposes Dangers of the Informal Economy

And It Is Not Just Developing Countries That Are in Trouble

The novel coronavirus has wreaked havoc on the global economy, shuttering businesses, disrupting supply chains, and causing millions of people to lose their jobs. But the pandemic has been especially devastating for the world’s two billion or so informal workers, who constitute roughly 60 percent of the global labor force and often earn less than $2 per day. These workers, particularly in developing countries, face a looming economic calamity.

Unlike workers in the formal economy, who benefit from legal and social protections, informal workers earn their living without a safety net. They are mostly women and mostly self-employed, engaged in occupations as varied as street vending, domestic work, transportation, and garbage collection. Some also work as off-the-books day laborers in factories, farms, and other formal businesses that don’t extend full rights or protections to all of their employees. Measures taken by many countries to fight the pandemic—including lockdowns implemented without significant assistance for those whose jobs are affected—have threatened the livelihoods of informal workers and pushed them further into poverty, hunger, and homelessness. In just a few weeks, millions of informal jobs have been lost and millions more have been put at risk.

But the crisis in the informal economy is not affecting just poor countries—it is hurting rich ones, too. Nearly a fifth of all workers in the United States are informal, and they are particularly vulnerable to the health threat posed by the new coronavirus as well as to its economic consequences. The popular image of the informal American worker may now be a laborer in the technology-enabled “gig economy”—such as a driver for Uber or Lyft—but the shift toward a larger informal economy began under U.S. President Ronald Reagan. Regulations on employers loosened after 1980, allowing businesses to gradually offload risks onto subcontractors, day laborers, and other flexible workers. Lack of worker protections now makes the coronavirus crisis particularly acute in the United States: it is not just a health crisis or an economic crisis but a deeper social crisis decades in the making.

THE RISE OF THE INFORMAL WORKER

Throughout the developing world, the pandemic has exposed entrenched social inequalities. In India, where upward of 90 percent of jobs are informal, the International Labor Organization (ILO) estimates that over 400 million workers are likely to sink into deep poverty (defined as earning less than $2 per day) thanks to the nationwide lockdown announced on March 24. The existence of large informal economies in many poor countries also increases the risk that COVID-19, the disease caused by the novel coronavirus, will spread among the most vulnerable workers, who depend on daily earnings and cannot afford to stop working. Informal workers already face adverse health conditions, such as poor nutrition, limited access to sanitation, and chronic disease linked to air and water pollution. Unsurprisingly, informal workers have led protests demanding emergency public assistance in Colombia, Malawi, Uganda, and elsewhere. Some governments have taken small steps to support informal workers during the crisis. For example, in Peru, where almost three-quarters of jobs are informal, the government offered the poorest workers a one-time payment of about $100. But many countries have done little or nothing to help such workers weather the pandemic.

Informal workers are also at risk in the developed world. Since the 1980s, informal labor arrangements have become increasingly common in industrialized nations. As economies became more globalized and governments embraced neoliberalism, demand for cheap and disposable labor increased along with the supply of people willing to work informally, including immigrants and other vulnerable people barred from formal jobs. In the United States, the public blamed big government for the economic turmoil of the 1970s, leading to drastic cuts in welfare spending and the deregulation of numerous industries over the next four decades. In this regulatory vacuum, the informal economy grew: more and more jobs lacked employment security, health-care coverage, sick days, pensions, and severance packages. In other words, informality arose out of deliberate decisions by elected officials to dismantle welfare, ignore or remove hard-fought labor protections, skimp on affordable housing, and, more recently, prioritize financial firms over workers, reject universal health care, and neglect immigration reform.

The share of American workers engaged in informal work has crept steadily higher in recent decades. Between 2005 and 2015, the percentage of U.S. workers whose main jobs were informal rose from ten percent to 16 percent. By 2018, at least a third of the U.S. adult population had engaged in some form of informal work, according to the Federal Reserve. That same year, the ILO estimated that informal employment accounted for 30 million jobs in the United States—or 19 percent of the total labor force. These workers are ill-equipped to handle routine health problems, let alone a pandemic. They have no choice but to go to work, even if they are sick.

They are also disproportionately people of color, immigrants, and women. Economic and racial inequality has profoundly affected the way Americans experience the coronavirus crisis. Data from the U.S. Centers for Disease Control and Prevention and from local public health agencies show that African Americans and Latinos are more likely to die from COVID-19 than non-Latino whites, challenging the notion that the disease is a “great leveler.” And death figures for these groups are most likely understated, given that vulnerable minority populations often lack access to testing and health care. Pundits are quick to point to individual “underlying conditions” such as obesity, high blood pressure, and diabetes as an explanation for these disparities. But among the biggest risk factors for COVID-19 are social and economic inequality, which have been exacerbated by the informalization of the economy.

Many at-risk informal workers have suddenly been classified as “essential,” keeping the economy going during the pandemic even though they lack basic labor protections. These include restaurant workers, farmworkers, caretakers, cleaners, and delivery workers—none of whom can work from home. Thanks to this labor, more fortunate Americans can telework safely without having to expose themselves to the virus. What remains of the formal economy depends heavily on goods and services produced and delivered by informal workers.

Such workers have limited access to the health care and other benefits needed to weather the pandemic and keep themselves and others safe. Even those whose employment is technically on the books, such as Uber drivers and Instacart shoppers, face a raft of disadvantages because they are classified as independent contractors. Many struggle to win unemployment benefits because their employers fail to pay insurance premiums or report wage data to state agencies.

It remains unclear how the major relief and emergency measures passed by Congress, allocating over $2 trillion for paid sick leave, unemployment benefits, and food assistance, will help informal workers, because these measures contain onerous eligibility requirements and significant loopholes. But they likely won’t help the millions of informal workers who are unable to document wages and hours of work prior to the pandemic or who are ineligible for food stamps and sick leave because of their immigration status. What is clear is that the pandemic has deepened the precariousness of informal work in the United States, just as it has in India and other developing countries. Many workers don’t know how they will pay for their next meal, let alone their rent, making it more likely that they will continue working regardless of the risk.

TIPPING POINTS

Major crises sometimes expose the root causes of societal and economic problems, encouraging reform and change. The Great Depression set in motion the New Deal, which created the foundation of a new social contract that was further solidified in the years following World War II. The New Deal put in place social safety nets and laid the groundwork for more collective bargaining, facilitating the growth of the middle class, expanding social and legal protections of workers, and formalizing economic security for most working people.

Since the Great Depression, however, subsequent economic crises have had the opposite effect. They have allowed legislators to gut existing welfare programs, relax government regulations, demonize immigrants, and bail out large corporations that often rely on informal workers to fill their most menial jobs. The five major recessions since the early 1970s have eroded much of the country’s social safety net, driving many workers into the informal economy. In fact, net job growth in the decade after the Great Recession of 2008 was driven almost entirely by jobs created in the informal economy. The United States has created “bad jobs” much faster than “good jobs,” and American workers are suffering as a result. The employment figures much touted by U.S. President Donald Trump prior to the pandemic masked the fact that 44 percent of workers, or 53 million people, earned low wages, as defined by researchers at the Brookings Institution. Many of these workers were informal, laboring without legal and social protections.  

It doesn’t have to be this way. The coronavirus pandemic seems to have generated an upsurge of solidarity. A number of organizations, such as the One Fair Wage Emergency Fund, the Restaurant Workers’ Community Foundation, the National Domestic Workers Alliance, and the Undocumented Workers Relief Funds, have stepped up to protect informal workers and fill the gaps left by government programs in various U.S. cities. Although the work of these organizations is extremely important, it is not enough. If Americans want to minimize the most pernicious effects of the current crisis and better prepare for future crises, they must expand the social safety net and extend protections to informal workers.

The highly politicized protests to end state-imposed stay-at-home orders in Florida, Michigan, Oklahoma, and other states may be intemperate and even reckless, but they reflect deep economic insecurities among middle- and low-income Americans. Unfortunately, these demonstrations attack the wrong target. It is not the lockdowns that have caused economic insecurity but the informalization of the economy that has taken place in recent decades. To build a stronger country and healthier society, the United States must start using its coronavirus relief programs to require and provide greater protections for all working people, formalizing the informal economy by recognizing its significance.

PASCALE JOASSART-MARCELLI is Professor of Geography and Director of the Urban Studies Program at San Diego State University.

By : Pascale Joassart-Marcelli

Date : May 18, 2020

Source : Foreign Affairs 

https://www.foreignaffairs.com/articles/united-states/2020-05-18/pandemic-exposes-dangers-informal-economy

How the power to delay death has allowed inequality to flourish

Two years ago my second child was born with a condition which meant he could not breathe unaided. I thought he was going to die. My perspective on the world changed in those early days of his life, as he used a breathing device and then a ventilator, and then received a tracheostomy at two weeks old.

Facing your own mortality, or that of someone close to you, is life changing. But recognising our mortal vulnerabilities is also a fundamentally important part of human nature.

Not facing up to them – until we are forced to by a crisis like coronavirus – is not good for society. Yet for many years in many Western societies there has been a collective reluctance to face our mortality and the reality of our fallible physiological condition.

Psychologists and sociologists have examined this sense of denial of death since the 1960s, a period without world wars or pandemics which has witnessed incredible advances in medical technology. Over that time, people have lived longer and longer lives.

The average age of death in the UK is now 79 for men and 83 for women. Those who die prematurely or before their parents are considered as out of sync with the natural order of things.

But now a global pandemic is happening. So what can we hope to learn from it?

As an academic who has worked on death and society for almost two decades, I barely know where to start. But I do feel that the pandemic provides us with a perfect opportunity to reassess how we value life, death and what happens in between – particularly with regard to social and economic equality.

A couple of weeks ago the BBC news presenter Emily Maitlis was widely praised for drawing attention to the deep societal inequalities that coronavirus has exposed. My favourite antihero Jonathan Pie also predicted how COVID-19 would lay bare the enormous economic inequalities inherent in the UK, where “the rich are protected and the poor and vulnerable aren’t”.

Controlling life and death has meant that the workplace – where we sell our labour – has changed radically in the past 60 years. Since the birth control revolution of the 1960s, millions of women have entered the labour market (while typically remaining responsible for the lion’s share of child rearing). And a gradual economic shift towards a service economy and away from production and manufacturing has led to much less hazardous workplaces – and fewer work-related deaths – for most in the UK.

This means that the average person can now expect to spend 50 years of their life working. That’s five decades spent trying to generate sufficient income to cover living costs, and if possible, some savings for a retirement spanning another 20 or so years.

Older and wiser?

These changes to working lives, and the financial imperative to earn enough to live, have perpetuated economic inequalities. Those born into affluent families race up the occupational hierarchy and housing ladder compared to those born into poverty.

Highly educated and relatively wealthy people feel more equipped to self-advocate for their healthcare and can better afford high-quality, nutritious food. They inevitably live longer than their poorer counterparts, as during their working lives they live in larger accommodation with outside space, eat better, and have more stable and secure employment.

Medical and public health advancements have therefore contributed to the growth of the gap between the richest and the poorest in society. And coronavirus has shown in stark terms how, despite extraordinary measures to cover some people’s wages during lockdown, those at the bottom of society simply cannot afford to be unwell.

So in terms of what we can learn from COVID-19, as we reflect on the social and economic cost of this pandemic, we will need to assess how we view and accept our own mortality and that of others.

This requires a sensible debate about life expectancy and poverty. About whether we need, or want, to continue to constantly strive for longer and longer lives – and at what cost. The more people who live into their 90s and beyond, the greater the financial pressure on the workforce, and the more socio-economic inequality thrives.

Moments where we fully realise that we are not invincible, individually and collectively, are profound. As I did when my son was born, facing the very real possibility of death can forever alter how you see the world.

While delaying death can be regarded as a medical and public health success, and something of a modern luxury, it has allowed social and economic inequality to grow unfettered. Such inequity has to stop. Let this be a life-changing moment for all of us.

By                    :           Kate Woodthorpe (Senior Lecturer in Sociology, University of Bath)

Date                 :           May 7, 2020

Source             :           The Conversation

https://theconversation.com/how-the-power-to-delay-death-has-allowed-inequality-to-flourish-136371

Past pandemics redistributed income between the rich and poor, according to Stanford historian

Throughout recorded history, pandemics have been effective levelers of social and economic inequality – but that might not be the outcome this time around, says Stanford historian Walter Scheidel.

Throughout history, pandemics and plagues have been powerful changemakers: redistributing income and reducing inequality, according to research by Stanford historian Walter Scheidel. As the world struggles against the current coronavirus crisis, could social and economic transformations follow as before?

Here, Scheidel takes on this question, looking at how disease outbreaks in the past disrupted the status quo and catalyzed change. For example, The Black Death, the bubonic plague that tore through Europe and the Middle East from 1347 onward, led to collective bargaining and an end to feudal obligations. But these transformative changes came at a devastating cost – a third of all people in Europe and the Middle East lost their lives, Scheidel notes.

Scheidel, the Dickason Professor in the Humanities and a Catherine R. Kennedy and Daniel L. Grossman Fellow in Human Biology in the School of Humanities and Sciences, is the author of The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century, an in-depth look into what he called “the four horsemen” of major economic leveling: mass mobilization warfare, transformative revolution, state collapse and plagues.

How have pandemics changed history? What makes them such a powerful changemaker?

Throughout recorded history, the most dramatic and violent ruptures were also the most effective levelers of social and economic inequality: the collapse of states, the world wars, the great communist revolutions. The worst pandemics belong in the same category. In pre-modern societies, they sometimes killed so many people that labor became scarce and the demand for land fell. This enabled workers to charge higher wages while landowners earned less: for a while, the rich became less rich and the poor less poor. In addition, the experience of plague undermined confidence in secular and religious authorities, encouraging commoners to question existing hierarchies and explore alternatives.

Can you provide an example?

This dynamic is well documented for The Black Death, a catastrophic pandemic of plague that ravaged Europe and the Middle East from 1347 onward. Maybe a third of all people lost their lives, and in some places even more. In Western Europe, as the surviving workers earned higher incomes, they could afford better food and clothing. Meanwhile, nobles and elite landlords found it hard to maintain their extravagant lifestyles. They tried to push back, but with mixed results. In England, they failed to enforce ordinances meant to compel workers to stay put and keep working for low pre-plague wages. Rural workers resented efforts to uphold these rules, which blatantly favored employers, and also called for the abolition of feudal obligations. Even though a peasant uprising was put down, the wealthy ended up bargaining with the shrunken labor force in order to secure employees and tenants.

In Eastern Europe, by contrast, the upper class maintained a united front against the peasantry, forcing it to submit to onerous labor obligations. This shows that, by itself, the plague was not enough to level: local political power structures played a critical role in shaping overall outcomes.

Coronavirus has already upended much of society, and in ways that appear to increase, rather than lower, inequality. How does that mesh with your thesis?

Even in the worst-case scenario, the current pandemic will be far less lethal than the great plagues of the past, and therefore less disruptive. In the short term, it is almost certain to reinforce existing disparities. A divide has opened up between white-collar workers who are able to conduct their business from home and are less likely to lose their jobs and others who are either at the mercy of short-term relief programs or face greater risk of viral exposure in many of the jobs that remain. African-Americans face higher rates of morbidity and mortality. Some students struggle to participate in online education because their households lack the necessary resources. The inequalities that account for these diverse experiences have long been with us but now make themselves even more painfully felt than usual. Further down the line, while the affluent have reason to hope that their portfolios will recover much as they did after the financial crisis of 2008, more vulnerable groups will have a hard time with persistent unemployment, precarity, debt and perhaps even less affordable health care.

Does the current crisis have the potential to turn into a “great leveler” for society?

This very much depends on the severity of the crisis. If science lives up to expectations and allows us to contain the virus within a reasonable amount of time, and if the global economy avoids a full-fledged depression, we will most likely return to some version of business as usual, with some tweaks at the margins. In that case, economic inequality will remain high or even grow, for the reasons I mentioned before. Society may well end up even more polarized. But if outcomes are worse than we expect – if the virus proves intractable or the economic meltdown is more persistent – misery and discontent could rise to an extent that makes more radical departures from the status quo seem attractive or even unavoidable. Government may be forced to intervene more aggressively in the private sector, and a sufficiently large share of the electorate may come to support redistributive programs that revamp health care, strengthen worker protections and impose a heavier tax burden on the wealthy to help foot the bill. This would not be the first time in our nation’s history this has happened: in the 1930s, the New Deal responded to unprecedented hardship in ways that put America on a trajectory toward significantly lower income and wealth inequality – even if it took World War II to boost and solidify this trend.

Which of these outcomes do you think is more likely, and why?

Right now, preservation of the status quo seems more likely. The forces that seek to maintain plutocratic and corporate dominance are very powerful and influential. But there is also a more counterintuitive reason. Here in Silicon Valley, we like to think of science and technology as relentless drivers of open-ended innovation. Yet in this case, science is poised to act as a brake on societal change: The more rapidly labs and pharmaceutical companies come up with effective treatments and vaccines, the less disruptive the crisis will be and the sooner we can revert to some version of normalcy. This deliverance is what we are all waiting for, and rightly so: It would be rather strange to hope for even greater misery to unleash transformative change. But we must not forget that any return to normalcy will also help preserve the great structural inequalities that weigh down America.

By : Melissa De Witte

Date : April 30, 2020

Source : Stanford News

https://news.stanford.edu/2020/04/30/pandemics-catalyze-social-economic-change/

The American Dream Is Alive and Well

We have bigger issues than inequality.

Imagine you could wave a magic wand and double the incomes of the bottom 20 percent of Americans. Would you do it? I imagine your answer is yes.

Now, suppose that in order to increase the incomes of people at the bottom by a factor of two, you had no choice but to increase the incomes of the top 20 percent by a factor of 2.5. Would you still wave the wand? If so, you may be less concerned about inequality than you think.

Inequality is the gap between people at the top and those at the bottom. Over the past decade, the national debate is mostly concerned with inequality of income, but other inequalities — in consumption and wealth, for example — are also frequently discussed. I think the magnitude of attention the top-bottom gap receives is misplaced, in part because of the thought experiment we discussed above.

Many people, myself included, would wave the wand in the second scenario because they would want to increase incomes of those at the bottom. In doing so, they would also be increasing inequality, because incomes at the top would increase by more than those at the bottom. But for those of us who care more about the absolute condition of those at the bottom than about the size of the rich-poor gap, waving the wand is the right choice to make.

Indeed, the size of the income gap — income inequality — is not high on my list of economic and social challenges facing the United States. Of course, the most immediate concern is the coronavirus pandemic and the economic policy and public health responses to it. But the longer-term trend in inequality is not nearly as important to economic prosperity and the health of society as some other critical problems. Those include the relatively slow rate of productivity growth the U.S. has experienced for many years, challenges in imparting education and skills to all Americans, the long-term decline in male employment and reduced economic dynamism, to name a few. And they include the absolute condition of low-income Americans, regardless of the size of the gap between them and households at the top.

Am I unusual in this regard? Do Americans really care as much about inequality as the attention by media and liberal politicians suggest? It may seem absurd to ask that question, but bear with me. During the 1990s, the income gap between households at the top and those at the bottom increased substantially. Inequality of market income — which includes labor, business and capital income — increased by 8 percent from 1991 to 2000, according to the nonpartisan Congressional Budget Office. The top-bottom gap in household income after taxes and government transfers increased by 11 percent. And yet income inequality received relatively little attention at that time.

Compare that period to the decade from 2007 to 2016 — the most recent period with budget office income data — when the attention inequality received exploded. Over this period, the rich-poor gap in market income grew by less than 2 percent. Inequality of post-tax-and-transfer income — the most comprehensive measure of the flow of resources available to households — actually fell by 7 percent. So as concern about inequality was exploding, measured inequality growth was stagnant or falling.

What could explain this? There’s a lot going on here, of course. But I would argue that part of the answer must be that inflation-adjusted wages for typical workers grew 44 percent more in the 1990s than in the 10 years beginning in 2007. It may be that concern about inequality is driven more by how people are faring in the labor market than the actual size of the rich-poor gap.

The last few years have witnessed much discussion about whether inequality suggests that capitalism itself is broken. Given that income inequality has been stagnant or declining over the most recent decade, the timing of that conversation is odd. Moreover, as of January — the month before the coronavirus pandemic began dealing a crippling blow to the economy — weekly earnings for workers in the bottom 10 percent were growing faster than those at the median, the unemployment rate for workers without a high-school diploma was further below its long-term average than the rate for college graduates, and the rewards from economic growth were flowing to vulnerable workers, including those with disabilities and criminal backgrounds.

The pandemic has changed this, of course. The economy is shrinking at a devastating rate, unemployment is soaring, and small businesses are in peril. But as they have shown time and again, American workers are resilient and are accustomed to facing — and overcoming — economic challenges.

Over the past three decades, despite three recessions, including the Great Recession, inflation-adjusted average wages for nonsupervisory workers increased by one-third. From 1990 to 2016, Congressional Budget Office data show that the median household saw inflation-adjusted market income increase by 21 percent, while post-tax-and-transfer income grew by 44 percent. Households in the bottom 20 percent saw that measure of income grow by two-thirds during this period. These numbers reflect significant increases in purchasing power for typical workers and households.

The American dream that our children will do better than ourselves is alive and well. Using the Panel Study of Income Dynamics, a data set that tracks families over time and across generations, I calculate that inflation-adjusted household income for three-quarters of people in their 40s today is higher than their parents’ income when their parents were of similar age. Eighty-six percent of people raised in the bottom 20 percent have higher household incomes than their parents did. Around eight in 10 men in their 40s today who were raised in the bottom 20 percent earn more money in the job market than their fathers did at a similar age.

This pandemic crisis will inflict tremendous economic suffering on millions, and its lingering effects will be with us for years. But history suggests that over the long term, the upward march of economic progress for workers and households will continue. Capitalism isn’t broken. The game isn’t rigged. Hard work does pay off. Workers do enjoy the fruits of their labor.

This is not a call for complacency. Even before the pandemic, it was obvious that the United States needs better policy to advance economic opportunity for low-income and working-class households. As I said earlier, the size of the rich-poor gap is not high on my list of concerns. But don’t be confused — we need to do more to help workers at and near the bottom.

Increasing federal earnings subsidies for low-income households — like the earned-income tax credit — would help to fight poverty and increase work force participation. Building skills through better education and work-based learning programs, like apprenticeships, can help workers to command higher wages in the labor market. Reforming unemployment insurance to offer re-employment bonuses this spring and summer in states that lift lockdown orders could help people hit by the pandemic to get back to work. These are just three examples among the many ideas that should be discussed.

These policies would reduce inequality. But that’s a side effect, not the goal. The goal is to help more people earn their own success, realize their potential — and live flourishing lives.

Michael R. Strain (@MichaelRStrain) is director of economic policy studies and Arthur F. Burns Scholar at the American Enterprise Institute, and a columnist for Bloomberg Opinion. He is the author of “The American Dream Is Not Dead: (But Populism Could Kill It)”.

By : Michael R. Strain

Date : May 18, 2020

Source : The New York Times

https://www.nytimes.com/2020/05/18/opinion/inequality-american-dream.html